Tag: India latest news

Cost of war | The Indian Express

Post author By Z+ Insurance
Post date March 5, 2022
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The macroeconomic environment has changed considerably from the time Finance Minister Nirmala Sitharaman presented the Union budget, and the RBI released its inflation forecast for the upcoming fiscal year. On Thursday, crude oil prices hovered around $120 a barrel for the first time in years. While prices have moderated mildly thereafter, for the Indian economy which imports around 80 per cent of its requirements, higher crude oil prices will have adverse consequences. Higher prices will impact growth, will be inflationary, and will exert upward pressure on the current account and fiscal deficit. Considering that crude oil prices are currently significantly higher than those factored in the Union budget and the RBI’s calculations, navigating this uncertain economic environment will require deft management by monetary and fiscal authorities.

Since November last year, when the price of the Indian crude oil basket stood at $80.64, oil marketing companies have refrained from revising pump prices, even though global prices have been on the rise. But, once the assembly elections are concluded, fuel prices at the pump are likely to be hiked. However, steep hikes will be needed — as per a report by ICICI securities, a Rs 12 per litre hike will be needed just to break even. This will be inflationary. Needless to say, fuel price hikes will upend the central bank’s optimistic assessment of the inflation trajectory. As per RBI’s recent assessment, inflation was expected to trend down from 5.7 per cent in the fourth quarter of 2021-22 to just under 5 per cent in the first half of 2022-23. This will complicate the choices before the monetary policy committee. Higher prices will also reduce discretionary spending by households. Governments may respond by lowering fuel taxes to absorb part of the burden. However, this will weigh down their revenues and spending. Thus, growth will thus take a hit. Higher oil prices will also push up imports, increasing the current account deficit at a time when global financial conditions are tightening. Recent data shows that the merchandise trade deficit has already widened to $21.2 billion in February, up from $17.9 billion, with much of the surge driven by oil. The rupee is already coming under pressure. This will only add to the inflationary pressures.

The indirect consequences of the deterioration in the economic environment are also beginning to show. There are reports that LIC’s initial public offering may be postponed to the next financial year due to prevailing market uncertainty. While the full effects of the oil price shock will be visible with a lag, when taken together with the third wave of the pandemic, it suggests further downside risks to economic growth in the fourth quarter, which as per the National Statistical Office’s latest estimate was already expected to slow down to 4.8 per cent from 5.4 per cent in the previous quarter.

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Tags crude oil, Finance Minister Nirmala Sitharaman, India, India latest news, Indian economy, indian express, Lic, LIC IPO, RBI, Russia, Russian invasion, Ukraine, union budget

Delhi News

Daily briefing: RBI says inflation over comfort range of 6%, no need for alarm; 33 years after losing polls, ‘Raja of Amethi’ enters ring again

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Retail inflation rose to a seven-month high of 6.01 per cent in January, mainly on account of high food inflation, which jumped to a 14-month high of 5.43 per cent, along with an unfavourable base. Economists said the high inflation was now turning structural, with price rise being seen in non-food segments. “The critical element will be in March when the elections conclude as this is the time there can be a fresh round of increase in fuel prices,” Madan Sabnavis, Chief Economist, Bank of Baroda, said.

Meanwhile, domestic stock markets plummeted three per cent Monday, the biggest fall in 10 months, as mounting fears of a Russian attack on Ukraine triggered a global share sell-off and prompted oil prices to hit a seven-year high.

Only in The Express

For the first time since its inception in 1963, Kendriya Vidyalayas announced a change in dress code for its students across the country. Among the changes were new patterns for scarf and turban. The National Institute of Fashion Technology (NIFT) and the Union Ministry of Textiles even helped create the new uniform.

From the front page

The Kendriya Vidyalayas’ uniform came up during the Karnataka High Court hearing on the hijab ban in some government educational institutions. Petitioners sought permission to wear headscarves in colours that match their school uniform like in Kendriya Vidyalayas.

As schools till Standard X reopened across Karnataka, the instructions for Muslim girls were clearly laid out by many institutions — remove the hijab if you want to attend classes. Reports coming in from many places stated that Muslim students were stopped at the gates and refused entry if they did not remove their hijab. Many teachers and staffers were also asked to remove their hijab or burqa before entering the premises.

Must Read

The Punjab Assembly elections, which were to be held on February 14, were postponed to February 20 to avoid a clash with Guru Ravidas Jayanti, an annual three-day fair held in Varanasi. Members of the Ravidassia community, who made the trip to Uttar Pradesh, share their electoral preferences.

In Uttar Pradesh’s Sarojini Nagar, the BJP has put up a former Enforcement Directorate (ED) joint director who sought voluntary retirement to enter the political arena. Even as party members admit the strong anti-incumbency against the current MLA, they are projecting the former ED officer as ““Singham”. Calling him “encounter specialist”, the party has even been distributing a booklet, which details his “achievements”, particularly the raid on the residence of senior Congress leader P Chidambaram in the Aircel-Maxis deal case.

In the last Assembly election in Uttar Pradesh’s Amethi, his two wives faced off each other — his estranged first wife contested on a BJP ticket and second wife as a Congress candidate. Now, at 70, the erstwhile ‘Raja of Amethi’, Sanjay Sinh, will be contesting the state polls for the first time in 33 years as the BJP candidate.

Amid growing tension between the BJP-led Centre and the DMK government in Tamil Nadu, a phone call from Union Home Minister Amit Shah to wish Kanimozhi on her 54th birthday last month has now become a topic of fierce discussion within the party, sources said. Sources familiar with the developments said Tamil Nadu Chief Minister M K Stalin, Kanimozhi’s half-brother, had not taken kindly to the call.

And Finally

His father repairs footwear, his mother is a bangle seller. A clip of him in action stirred an IPL cricketer who shared it with his coach — and in a blink, his life changed. Today, Ramesh, aka “Narine Jalalabadiya”, finds himself in Kolkata Knight Riders, picked for Rs 20 lakh at the IPL auction.

Delhi confidential: Union minister Ashwini Vaishnaw appears on winning some hearts in the south. Before the Budget session got adjourned for the recess, Vaishnaw took help from a fellow Rajya Sabha MP to learn a bit of Tamil. He got DMK MP Tiruchi Siva to write down a few lines with their meanings so that he can learn a bit before the Budget session resumes.

In today’s 3 Things episode, we discuss the mega initial public offering of LIC, caste as a protected category in the US, and why people are not willing to join the Anti-Terrorism Squad.

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Tags hijab controversy, india headlines today, India latest news, india news, Indian express news, IPL news, karnataka hijab issue, top news today, up elections

Delhi News

Insuring India | The Indian Express

Post author By Z+ Insurance
Post date February 15, 2022
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After much uncertainty, the Life Insurance Corporation of India (LIC) has filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The initial public offering is for 31.6 crore shares or 5 per cent of the government’s stake. As per the DRHP, LIC’s embedded value — a measure of the consolidated shareholders value in an insurance company— has been estimated at Rs 5.39 lakh crore. While the offer price is yet to be disclosed, insurance companies typically tend to trade at a multiple of their embedded value. Thus the IPO will likely dwarf the recent Paytm offering, which had shattered the record for the largest offering. A successful fructification of the IPO by March would help the government achieve its scaled down disinvestment target of Rs 78,000 crore of which it has only been able to garner Rs 12,030 crore so far.

The size of the insurance behemoth is truly staggering. As of March 31, 2021, LIC had a 66.2 per cent market share in new business premiums, a 74.6 per cent share in individual policies issued, and a 81.1 per cent share of number of group policies issued for 2020-21. Though, increasingly LIC has been ceding space to private players — between 2015-16 and 2020-21, private sector life insurance players saw their premiums grow at 18 per cent, while LIC’s premium grew at 9 per cent — India is still an under-penetrated market. The country’s insurance density is much lower than that of other developing countries which indicates scope for growth.

The IPO comes at a time of tightening global financial conditions. Foreign investors have already pulled out billions this year. And though it is bound to generate interest, there are concerns about the capacity of the market to absorb such a large offering. Further, considering that in the past, LIC has often been used by the government to serve its own ends — for instance, it helped bail out the troubled IDBI bank — there are legitimate concerns that its investment decisions may continue to be guided by other motives. As the DRHP notes: The “corporation may be required to take certain actions in furtherance of the GoI’s economic or policy objectives. There can be no assurance that such actions would necessarily be beneficial to our Corporation.” While a listing on the exchanges will open LIC’s governance structures and investment decisions to public scrutiny, continued government interference in its decision making will affect the corporation’s prospects. The steep discounts that public sector companies trade at when compared to their private sector counterparts is a reflection of this pattern. Considering that LIC is a custodian of the policy holder’s money, the government must resist the temptation of using its coffers for its own purpose.

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Tags Draft Red Herring Prospectus, IDBI Bank, India, India latest news, indian express, ipo, life insurance corporation of india, sebi, Securities and Exchange Board of India

Delhi News

Magic (black) with numbers | The Indian Express

Post author By Z+ Insurance
Post date February 13, 2022
No Comments on Magic (black) with numbers | The Indian Express

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There was a time when Mr Narendra Modi — and on cue his Finance Minister — swore by the private sector. Like Agriculture and most of the Services, in industry too, Mr Modi’s preferred model was private sector-led growth. The State will step back and be content to be the regulator where regulation was necessary.

At some point of time, after demonetisation, Mr Modi appears to have changed his philosophy. As his faith in the private sector waned, he became a votary of the government-led model. With Budget 2022-23, the change is complete. This is a Budget driven by one engine: government capital expenditure. The rub, however, lies in the numbers.

Shifting Gears

The Finance Minister claimed that in 2021-22 the government had exceeded budgeted capital expenditure. As against a BE of Rs 5,54,236 crore, the RE number was Rs 6,02,711 crore. The surprise turned out to be unpleasant after one read the fine print. The latter amount included a sum of Rs 51,971 crore that was infused into Air India to repay past loans and liabilities before privatization! I did not know that repaying a loan would qualify as capital expenditure! Deducting this amount, the capital expenditure in 2021-22 was only Rs 5,50,840 crore — lower than the BE!

That is not surprising. The government’s capacity to spend money on the capital account is constrained by many factors: multiple levels of decision-making, huge paperwork, diffused accountability, and so on. These constraints will not go away because Mr Modi shifted gears.

There are more unpleasant surprises in the numbers. The Finance Minister generously announced that she will allow the states to borrow an additional sum of Rs 1,00,000 crore, interest free, if it was tied to capital expenditure. Soon it became clear that the states would borrow directly from the market and the Central government would bear only the interest. The nasty surprise was that the Finance Minister quietly tucked this sum into the 2022-23 BE of the Central government’s capital expenditure that printed at Rs 7,50,246 crore, and claimed that the Central government had enhanced its capital expenditure by 35 per cent over the previous year! By no stretch of argument would the additional borrowing by the state governments for their capital expenditure qualify to be Central government capital expenditure. This was deception of the worst kind. Deducting this amount, the Central government’s capital expenditure in 2022-23 BE would be only Rs 6,50,246 crore — a modest increase of Rs 1,00,000 crore over the true number of 2021-22 RE.

Losing Faith

The Modi government’s rhetoric of government capital expenditure-led growth is hyperbole. Further, the government does not have faith in the appetite of the private sector to invest more. The latter was exposed when the ambitious scheme to privatize public sector assets collapsed. Two years ago, the government decided to privatize BPCL, CCL and SCI. Last year, the government decided to privatize two public sector banks and one public sector insurance company. Also, last year, the Finance Minister announced a Grand Bargain Sale of monetizing public sector assets valued at Rs 6,00,000 crore. Not one of the proposals has seen the light of the day! The Railways invited bids to privatize 151 passenger trains on 109 routes — and got no bids! It was no surprise that against a disinvestment revenue target of
Rs 1,75,000 crore in 2021-22 BE, the government hopes to achieve Rs 78,000 crore — that is if the LIC IPO goes through before March 2022!

There are good reasons why the private sector is shying away from investment. The foremost reason is lack of demand. The capacity utilisation in many industries is around 50 per cent. Why would any one invest more when there is idle capacity? Besides, the business environment has become more difficult, not easier, and is filled with cronyism, suspicion and fear.

Ignoring Advice

Many economists have advised the following approach to pull the economy out of the current state of jobless and sluggish growth:

– Stimulate demand by putting more money in the hands of the poor and the middle class — transfer cash, cut indirect taxes:

– Revive the MSMEs that have shut down or have scaled down their business. Such revival will also bring back millions of jobs that were lost;

– Spend more on welfare. The excuse that “we don’t have enough money” will not wash because the top 10 per cent of the population has garnered 57 per cent of the national income and holds 77 per cent of the nation’s wealth. They must come forward and say, like the American billionaires, “tax us more”;

– Review the licence raj that has found its way back through multiple regulations and directions by the RBI, SEBI, the Income-Tax department, etc;

– Rein in the CBI, ED, SFIO and IT so far as businesses and banks are concerned.

I have no expectations that the government will listen to well-meaning advice. Leaving that aside, will the Finance Minister solve a puzzle that is troubling many economists. In 2022-23, will the nominal GDP grow by 11.1 per cent (as projected in the Budget papers) and the real GDP grow by 8 per cent (as predicted by the new CEO)? That would be heaven with inflation at only about 3 per cent!

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Tags Agriculture, Air India, Budget 2022, capital expenditure, demonetisation, India, India latest news, Indian economy, indian express, Indian Express opinion, narendra modi, P Chidambaram, Privatization, railways, RBI, sebi, union budget