Daily Financial News Analysis – 13th Dec’19

Table of Contents

Factory Output + Inflation

Factory output contracted 3.8% in October 2019
September: 4.3% contraction
October 2018: 8.4% expansion
Retail inflation continued to surge in November, fuelled by soaring food prices, as prolonged rains dampened vegetable supplies.

Industrial production contracted for the third month.
Festival season failed to provide any boost.
This is a double whammy for the struggling economy.
The continuing decline in industrial production puts the onus of reviving growth on the government.
RBI will likely keep monetary policy unchanged as inflation accelerates.
The RBI is mandated to keep inflation at 4% with the lower bound at 2% and the upper limit at 6%.
The MPC voted to keep the key lending rate unchanged as it slashed the gross domestic product (GDP) growth forecast to 5% from 6.1%, while maintaining an “accommodative” policy stance.

India’s economy is expected to grow at 4.3 per cent in the fourth quarter of this fiscal.
REASON: concerns over crisis in the NBFC sector
The Japanese financial services major also believes that the first quarter of 2020 will see a “weak” uptick in GDP growth at 4.7%.
It expects 4.9 per cent GDP growth in 2019.
Contrary to the market’s current optimism that growth has likely bottomed, Nomura believes it will slide further.
The Reserve Bank is likely to slash key policy rates in the second quarter of 2020.
Burden of growth heavy lifting now seems to be shifting to fiscal policies.

CHIEF MINISTER Uddhav Thackeray on told Richard Branson, chairman of Virgin Hyperloop, that he would study the Mumbai-Pune Hyperloop superfast transport project and then take further decisions.
Branson met Uddhav at Matoshree to “seek cooperation” and gauge the new administration’s interest in the $ 10 billion project.

Mumbai-Pune Hyperloop promises to cut the travel time between Mumbai and Pune to less than half and hour.
A team of Virgin Hyperloop gave a presentation on the project to the chief minister. They sought cooperation from the CM for the project.
The new government has been reviewing all big ticket infrastructure projects to check their current status, whether it is needed and to find a way forward to fast-track the same.
The Fadnavis government had accorded infrastructure status to the hyperloop project.
The entire project involves construction across a length of 117.5 km and a 11.8-km test track, being developed in the first phase.
The Pune Metropolitan Region Development Authority will oversee the implementation of the first phase, which is expected to take about two to three years to complete.

Finance Minister Nirmala Sitharaman on Thursday assured the Centre will honour its commitment.
1. But she did not say by when the dues will be cleared.
Since August, states are not being paid compensation for loss of revenue from implementation of GST.
States surrendered powers to collect taxes on goods and services after local levies got subsumed into the Goods and Services Tax (GST) from July 1, 2017.
Legislation guarantee: to be paid for any loss of revenue in the first 5 years of GST implementation.
The compensation is paid keeping 2015-16 revenues of the states as the base and guaranteeing 14 per cent addition on top of it every year.
FM said the compensation is paid to the states out of cess levied on five products.
GST cess collection in 2017-18 — the first year of GST implementation — was ₹62,596 crore, out of which ₹41,146 crore was released to states.
The balance ₹15,000 crore was accumulated, she said, adding in the subsequent year, GST collection was ₹95,081 crore and ₹69,275 crore was released to states.
In the current fiscal, ₹55,467 crore was collected till October 31, 2019 and ₹65,250 crore paid to states.
On the issue of states not getting their due share from Integrated GST, which is levied on the transfer of goods from one state to another.
The minister said no state claimed I-GST dues in 2017-18 but in the subsequent year it has been paid.

Mobile handset industry employs over 6.7 lakh persons.
The Director General of Foreign Trade (DGFT) on December 7 reduced export incentive from 4% to 2%.
Industry has expressed concern over reduction of export incentives.
1. it will lead to massive job losses.
Discussion is going on between ICEA and Govt from last 3 months or so.
To replace the Merchandise Exports from India Scheme with a WTO-compliant scheme.
1. Capacity expansion will halt
2. Hiring will halt
3. Investors will find this mover erratic
4. Mobile handset exports grew over eightfold to Rs 11,200 crore in 2018-19 and exceeded imports for the first time.
Handset exports during April-July 2019 reached around Rs 7,000 crore.
The industry body said the export incentives were partially addressing severe disabilities that India faces compared to Vietnam and China.