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PHD Chamber welcomes end of logjam in GST implementation
Feb 02,2017

While appreciating the efforts undertaken by the Honble Finance Minister and empowered GST Council, Mr. Gopal Jiwarajka, President, PHD Chamber of Commerce and Industry said that the end of logjam in GST implementation will boost not only the sentiments of businesses but also benefit people at large.

Industry will get a boost with the removal of cascading impact of taxation and improvement in ease of doing business, said Mr. Jiwarajka

GST will enhance production possibilities, attract FDIs and increase employment opportunities in the economy, he added.

GST will roll out from July 1 2017. The success of the Centre and the states to work out a formula for distribution of power between them to assess taxpayers is encouraging, said Mr. Jiwarajka

GST council has decided to split assessees above a turnover of Rs 1.5 crore in the ratio of 50:50 between the Centre and the states, he added.

The turnover of Rs 1.5 crore or less, 90 per cent of the assessees will be assessed by the states and 10 per cent by the Centre, said Mr. Jiwarajka.

GST implementation would be a major game changer for the economy for accelerating the economic growth, he said.

Going ahead, we hope that every citizen of the country is well aware of GST before its implementation, added Mr. Jiwarajka.

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Total allocation for Infrastructure Development stands at Rs. 3,96,135 crores in 2017-18
Feb 01,2017

The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley while presenting the General Budget 2017-18 in Parliament today informed that the total allocation for infrastructure development in 2017-18 stands at Rs. 3,96,135 crores. In the road sector, the Budget allocation has been stepped up for Highways from Rs. 57,976 crores in BE 2016-17 to Rs. 64,900 crores in 2017-18. Further, 2,000 kms of coastal connectivity roads have been identified for construction and development to facilitate better connectivity with ports and remote villages.

The Finance Minister,Shri Arun Jaitley in his Budget Speech, stated that the total length of roads, including those under Pradhan Mantri Gram Sadak Yojana (PMGSY), built from 2014-15 till the current year is about 1,40,000 kms which is significantly higher than previous three years. Further, Shri Jaitley informed that a specific programme for development of multi-modal logistics parks, together with multi modal transport facilities, will be drawn-up and implemented that will make our economy more competitive.

Speaking on upgradation of Civil Aviation infrastructure, Shri Jaitley said that the Select airports in Tier 2 cities will be taken up for operation and maintenance in the PPP mode. Further, Airport Authority of India Act will be amended to enable effective monetization of land assets. The resources, so raised, will be utilized for airport upgradation. For transportation sector as a whole, including rail, roads, shipping, the Budget provides Rs. 2,41,387 crores in 2017-18. This magnitude of investment will spur a huge amount of economic activity across the country and create more job opportunities, the Finance Minister said in his Budget speech.

Calling Telecom sector as an important component of the infrastructure eco-system, Shri Jaitley noted that the recent spectrum auctions have removed spectrum scarcity in the country. This will give a major fillip to mobile broadband and Digital India for the benefit of people living in rural and remote areas. Further, for the BharatNet Project, the allocation has been stepped up to Rs.10,000 crores in 2017-18 and 1,55,000 kms of Optical Fiber Cables have been laid. Shri Jaitley informed that by the end of 2017-18, high speed broadband connectivity on optical fiber will be available in more than 1,50,000 gram panchayats, with wifi hot spots and access to digital services at low tariffs. A DigiGaon initiative will be launched to provide tele-medicine, education and skills through digital technology, he added.

For strengthening our Energy sector, the Government has decided to set up Strategic Crude Oil Reserves. In the first phase, 3 such Reserve facilities have been set up and in the second phase, it is proposed to set up caverns at 2 more locations, namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take the countrys strategic reserve capacity to 15.33 MMT. Further, the Finance Minister, in his Budget speech, proposed to create an integrated public sector oil major which will be able to match the performance of international and domestic private sector oil and gas companies. In solar energy, the second phase of Solar Park development is proposed to be taken up for additional 20,000 MW capacity, Shri Jaitley added.

The Finance Mini9ster Shri Jaitley further stated that the Government is creating an ecosystem to make India a global hub for electronics manufacturing. Over 250 investment proposals for electronics manufacturing have been received in the last 2 years, totaling to an investment of Rs.1.26 lakh crores. A number of global leaders and mobile manufacturers have set up production facilities in India, hence the Finance Minister said that allocation for incentive schemes like M-SIPS and EDF have been exponentially increased to an all-time high of Rs. 745 crores in 2017-18. Further, a new and restructured Central scheme, namely, Trade Infrastructure for Export Scheme (TIES) will be launched in 2017-18 to focus on our export infrastructure in a competitive world.

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Budget Allocation for Tribal Affairs Ministry goes up by more than Ten per cent
Feb 01,2017

Allocation for the Ministry of Tribal Affair has gone up by more than Ten per cent in the Union Budget presented in Parliament today. The budget allocation for the Ministry of Tribal Affairs has gone up from Rs. 4827 crore in the year 2016-17 to Rs. 5329 crore in the Union budget 2017-18.

Allocation for the welfare of Scheduled Tribes across all Ministries has also witnessed an increase of more than 30 per cent. The allocation which was Rs. 24,005 crore in the year 2016-17 has gone up to Rs. 31,920 crore in this years budget. The allocation for National fellowship and scholarship for higher education of ST students has been raised by 140 per cent. The allocation under this head in the year 2016-17 was Rs. 50 crore which has been increased to Rs. 120 core in this years budget.

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Cabinet approves Extension of tenure of loans under the Credit Linked Subsidy Scheme (CLSS) of Pradhan Mantri AwasYojana (PMAY) from 15 to 20 years
Feb 01,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given ex-post facto approval to the proposals for

(i) Extension of tenure of loans under the Credit Linked Subsidy Scheme (CLSS) vertical of Pradhan MantriAwasYojana (Urban) Mission from 15 to 20 years (to be renamed as CLSS for EWS/LIG. It will be named as CLSS for economically weaker sections of society / Lower Income Group;

(ii) Introduction of a new Credit-Linked Subsidy Scheme for MIGn++ for targeting the MIG category;

(iii) Allowing the Primary Lending Institutions (PLIs) that have signed MoU with the Central Nodal Agencies (CNAs), under the CLSS vertical of PMAY(Urban) (now CLSS for EWS/LIG), the option to extend the mandate of their MoU to CLSS for MIG with appropriate changes as applicable;

(iv) For rationalizing/introducing the processing fees payable to the PLIs for the loans sanctioned under these schemes;

(v) Allocation of Rs. 1000 crore initially in the budget for 2017-18 at the BE stage for the proposed CLSS for MIG and

(vi) Issue of the operational guidelines for CLSS for MIG with approval of the Minister-in-charge.

Objectives

a. Increase the off-take in EWS and LIG segments under existing Pradhan Mantri Awas Yojana (Urban) - Housing for All Mission;

b. Outreach to the Middle Income Group (MIG);

c. Make procedures easy for the Primary Lending Institutions (PLIs);

d. Provide an incentive to PLIs for increased participation in the housing and urban development sector;

e. Make available funds through necessary funds through Budgetary provisions and

f. Clearly define the procedure /implementation of programmes.

The outreach of the schemes will ensure greater participation amongst the EWS, LIG and MIG segment of the society to provide Housing for All by 2022, thereby ensuring equity and inclusiveness.

The interest subsidy to be disbursed to the beneficiaries will be credited to their home loan accounts after the PLIs have satisfied the eligibility criteria through their due diligence processes.

The proposed interest subsidy scheme for the MIG is an innovative approach to address the needs of housing of this category.

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Cabinet approves Introduction of The Indian Institutes of Information Technology (Amendment) Bill, 2017 in Parliament
Feb 01,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for introduction of The Indian Institutes of Information Technology (Amendment) Bill, 2017 in Parliament.

The amendment Bill provides for inclusion of Indian Institute of Information Technology Design and Manufacturing (IIITDM), Kurnool along with the other IITs in the Principal Act. Subsequently, IITDM Kurnool will be declared as an institute of National Importance with the power to award degrees to students

The expenditure for the operationalization of IITDM Kurnool is incurred from the Plan funds of the Ministry of Human Resource Development.

The emerging needs of the industry and the economy, as a whole for skilled technical manpower is expected to be met from the talent pool of trained personnel of the Institute. The Institute shall be open to all persons irrespective of gender, caste, creed, disability, domicile, ethnicity, social or economic background.

Background

The Indian Institutes of Information Technology Act, 2014 confers the status of Institutions of National Importance on the IIITs and also provides for matters connected with administering these IIITs. Subsequently, the Government has approved creation of a new NIT at Kurnool in Andhra Pradesh as embodied in the Andhra Pradesh Reorganization Act, 2014. Due to addition of a new IIIT, amendment has to be made in the IIIT Act, 2014. With this, IIITDM. Kurnool will be the fifth Member as a Centrally Funded IIIT.

Academic session has commenced in IITDM Kurnool in two branches of study in 2015-16.

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FICCIs Economic Outlook Survey projects GDP growth of 6.8% for 2016-17
Feb 01,2017

The latest round of FICCIs Economic Outlook Survey puts forth an annual median GDP growth forecast of 6.8% for 2016-17. This is 0.5 percentage points lower than the estimate of 7.3% put across in the last round. The Central Statistical Organization had projected a GDP growth of 7.1% for 2016-17 earlier this year.

The survey was conducted in the months of December 2016 and January 2017 and drew responses from leading economists representing industry, banking and financial services sector.

According to the survey results, agriculture sector is expected to witness an uptick in the fiscal year 2016-17. The monsoon has been good which is expected to support agricultural production. However, growth in both industry and services sector is anticipated to moderate. Industry and services sector are expected to grow by 5.7% and 8.5% respectively in 2016-17.

The decision of the Government to demonetize high value currency notes has had an impact on the cash dependent sectors and is expected to cause a slowdown in industrial and services sector growth, according to the participating economists.

The survey results also brought to fore the divided view amongst economists on the time frame for normalcy to return in the economy following the demonetisation move. Although some believed that things will start rolling back to the way they were in the pre-demonetization days by the end of the current quarter (March 2017), others felt that it could take at least two more quarters for things to fully settle (June 2017). Once the re-monetization phase is complete and currency is back in circulation, GDP growth would see a recovery.

Economists pointed out that Indias economic growth was being propelled by government spending and private consumption and the latter has been hit due to the demonetization move. This will affect recovery in investments and overall growth. Economists felt that the government will continue the focus on additional spending especially in infrastructure projects to give a push to the economy.

With regard to digitization, economists felt that the transition from cash to digital payments will be harder in the rural areas. It was suggested that instead of promoting plastic currency, the Aadhar enabled payment system would facilitate a smooth transition in the rural areas and should be the focus for government efforts.

Further, on the price front, inflation is expected to remain benign. Consumer Price Index based inflation has a median forecast of 4.7% for 2016-17, with a minimum and maximum range of 3.8% and 5.1% respectively.

Economists were also asked to share their assessment about the bi-monthly monetary policy to be announced in the first week of February 2017. A majority of the respondents expected the ReserveBank of India to maintain status quo with regard to repo rate on account of domestic and global factors. It was felt that upside risks to inflation remain as the global commodity prices are firming up and the central bank would continue to closely watch the inflation level.

The economists opined that the forthcoming Union Budget 2017-18 is likely to be expansionary and some fiscal stimulus is on the way from Governments side. It was pointed out that the Reserve Bank would like to take a detailed account of the stimulus and the borrowing targets before taking a decision to cut the repo rate.

Further, some major banks have recently revised down their lending rate which has given room to the Reserve Bank to undertake a halt. On the global front, policy stance of developed nations such as the United States will be critical.

However, economists anticipate the accommodative stance of the RBI to continue with a probable rate cut of 25 bps in first half of the financial year 2017-18.

The participating economists were asked to share their top expectations from the Union Budget 2017-18. The respondents unanimously felt that the budget should revamp the income tax framework for both individuals and corporates. This will help lend some support to consumer spending which has been hit post demonetisation.

Also, allocations towards agriculture in form of increased expenditure on irrigation and higher spend on MNREGA are seen, which will give a thrust to rural demand.

A majority of respondents indicated more incentives being announced for promoting digital transactions. It was also suggested that additional benefits should be bestowed upon Fintech companies in a bid to move towards a cashless economy. Respondents also hoped that the budget would look at addressing the impact of demonetisation on the informal sector which is largely cash dependent. It is important to ensure that there are enough incentives for the informal setups to move into the formal system.

Government is also expected to continue the focus on infrastructure, MSME, real estate and housing sector. Real estate sector has been displaying a muted performance and has been further affected by demonetisation. The sector is likely to get special focus in the budget and new schemes and policies to revive the real estate sector and the housing segment - especially affordable housing may be on the anvil.

Some of the other expectations indicated by the participating economists were - greater infusion of capital in public sector banks and announcement of further measures to strengthen asset quality of the public-sector banks.

The economists opined that the forthcoming budget would focus on giving an impetus to growth (which is inclusive) and provide fillip to gross fixed capital formation by enhancing complementarities between public and private investment.

Steps would also be taken towards reviving and deepening of the corporate bond market.

Also, they expect the government to further boost its efforts to increase employment through its flagship programmes such as Make in India and Skill India. Economists also expect the government to unveil incentives to promote exports.

Majority of the economists also believed that guidelines will be laid for the roll out of the Goods and Services Tax.

Top Global Trends for 2017 as indicated by participating economists

Upsides

1.Fiscal incentives to stimulate consumption demand 2. Pick up in investment demand 3. Higher global growth with US economy expected to pickup 4. Higher trade growth

Downside Risks

1. Policy uncertainty in major advanced economies and growing protectionist sentiment 2. Rising global commodity prices 3. Tightening of Monetary Policy by Federal Reserve 4. BREXIT and further weakening of Europe 5. Continued economic slowdown in China and other emerging market economies

Key upside and downside risks for India as indicated by participating economists

Upsides

1. Stable macroeconomic fundamentals - moderate inflation, range bound current account deficit and fiscal deficit 2. Structural reforms such as GST and law on Insolvency & Bankruptcy 3. Shift towards digitization 4. Effective policy reform towards a transparent tax structure 5. Continued government spending on infrastructure investments

Downside Risks

1.Weak domestic investments 2. High Non-Performing Assets of Public Sector Banks 3. Risk of rising trade deficit owing to higher crude prices 4. Higher capital outflows as interest rate differential between US and India narrows

5. Rupee remaining weak and volatile

6. Impact of demonetisation

a) liquidity shortage

b) weak consumption demand

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Cabinet approves Amendment in the Constitution (Scheduled Castes) Order, 1950 to modify the list of Scheduled Castes of the State of Odisha
Feb 01,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for amendments in (i) the Constitution (Scheduled Castes) Order, 1950 to modify the list of Scheduled Castes of the State of Odisha, and (ii) the Constitution (Pondicherry) Scheduled Castes Order, 1964 so as to change name of the Union Territory from Pondicherry to Puducherry in the Order. The Bill namely Constitution (Scheduled Castes) Orders (Amendment) Bill, 2017 incorporating the above changes will be introduced in the Parliament.

Proposal of Sualgiri, Swalgiri caste, as per approved Modalities, was found to be eligible for its inclusion as a synonym of Sabakhia caste at SI. No. 79 in the list of Scheduled Castes of Odisha. Further, the name of Union territory of Pondicherry has been changed to Puducherry vide the Pondicherry (Alteration of name) Act, 2006 w.e.f. 01.10.2006. Accordingly, an amendment is needed in the Constitution (Pondicherry) Scheduled Castes Order, 1964 to this effect.

The Government approved Modalities in June 1999, as amended in June 2002, for considering proposals in regard to modifications in the lists of Scheduled Castes and Scheduled Tribes. According to the approved Modalities, amending legislation to the concerned Constitution Order is proposed only in respect of such proposals of the concerned State Government/Union Territory Administration, which have been agreed to both by the Registrar General of India (RGI) as well as the National Commission for Scheduled Castes (NCSC).

The Constitution of India provides certain privileges / concessions to the members of Scheduled Castes which are notified under the provisions of Article 341 of the Constitution of India. First list of Scheduled Castes in relation to a State or Union Territory is to be issued by a notified Order of the President after having consultation with the State Government concerned. Any subsequent inclusion in or exclusion from the list of Scheduled Castes can be effected through an Act of Parliament as envisaged under clause (2) of Article 341.

Six Presidential Orders were issued between 1950 and 1978 for specifying Scheduled Castes in respect of various States/Union territories. These Orders have been amended from time to time by Acts of Parliament enacted as per Article 341(2) of the Constitution between 1956 and 2016.

After the Bill becomes an Act, members of the community included in the list of Scheduled Castes will be able to derive benefits meant for Scheduled Castes under the existing schemes. Some of the major schemes of this kind include Post Matric Scholarship, National Overseas Scholarship, Rajiv Gandhi National Fellowship, Top Class Education, Concessional Loans from National Scheduled Castes Finance and Development Corporation, Hostels for SC Boys and Girls etc. In addition to above, they are also entitled to the benefits of reservation in services and admission to educational institutions.

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Cabinet approves Amendments in (i) the Constitution (Scheduled Castes) Order, 1950 to modify the list of Scheduled Castes of the State of Odisha
Feb 01,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for amendments in (i) the Constitution (Scheduled Castes) Order, 1950 to modify the list of Scheduled Castes of the State of Odisha, and (ii) the Constitution (Pondicherry) Scheduled Castes Order, 1964 so as to change name of the Union Territory from Pondicherry to Puducherry in the Order. The Bill namely Constitution (Scheduled Castes) Orders (Amendment) Bill, 2017 incorporating the above changes will be introduced in the Parliament.

Proposal of Sualgiri, Swalgiri caste, as per approved Modalities, was found to be eligible for its inclusion as a synonym of Sabakhia caste at SI. No. 79 in the list of Scheduled Castes of Odisha. Further, the name of Union territory of Pondicherry has been changed to Puducherry vide the Pondicherry (Alteration of name) Act, 2006 w.e.f. 01.10.2006. Accordingly, an amendment is needed in the Constitution (Pondicherry) Scheduled Castes Order, 1964 to this effect.

The Government approved Modalities in June 1999, as amended in June 2002, for considering proposals in regard to modifications in the lists of Scheduled Castes and Scheduled Tribes. According to the approved Modalities, amending legislation to the concerned Constitution Order is proposed only in respect of such proposals of the concerned State Government/Union Territory Administration, which have been agreed to both by the Registrar General of India (RGI) as well as the National Commission for Scheduled Castes (NCSC).

The Constitution of India provides certain privileges / concessions to the members of Scheduled Castes which are notified under the provisions of Article 341 of the Constitution of India. First list of Scheduled Castes in relation to a State or Union Territory is to be issued by a notified Order of the President after having consultation with the State Government concerned. Any subsequent inclusion in or exclusion from the list of Scheduled Castes can be effected through an Act of Parliament as envisaged under clause (2) of Article 341.

Six Presidential Orders were issued between 1950 and 1978 for specifying Scheduled Castes in respect of various States/Union territories. These Orders have been amended from time to time by Acts of Parliament enacted as per Article 341(2) of the Constitution between 1956 and 2016.

After the Bill becomes an Act, members of the community included in the list of Scheduled Castes will be able to derive benefits meant for Scheduled Castes under the existing schemes. Some of the major schemes of this kind include Post Matric Scholarship, National Overseas Scholarship, Rajiv Gandhi National Fellowship, Top Class Education, Concessional Loans from National Scheduled Castes Finance and Development Corporation, Hostels for SC Boys and Girls etc. In addition to above, they are also entitled to the benefits of reservation in services and admission to educational institutions.

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Housing Finance Economics to Face Roadblocks Due to Falling Bank Interest Rates
Feb 01,2017

The large-ticket housing loan segment (primarily ticket size above INR5 million) is likely to face disruption, as housing finance companies (HFCs) would be forced to realign their strategies in view of a sharp reduction in lending rates by banks, says India Ratings and Research (Ind-Ra). This may affect business growth for HFCs, on account of increased competitiveness of banks. This could act as a double blow for HFCs already reeling from the slowdown in core housing loan portfolio growth. About 20% of the housing portfolio of large HFCs could be higher than INR5 million in ticket size.

The competition between HFCs would have implications for profitability, especially in view of limited manoeuvrability of such companies with regard to the expansion of leverage or high-yield non-core portfolio. Moreover, playing on the yield curve (short-term borrowing to save on tenor premium while lending largely remains long-term) would expose HFCs to liquidity and refining risks.

The fall in lending rates by banks is likely to incentivise borrowers to shift their portfolio from high-cost HFC loans to bank loans. Housing loans from banks do not involve prepayment charges, if borrowing is undertaken on a floating rate.

Ind-Ra believes that the impact of the fall in lending rates on small-ticket loan providers is unlikely to be significant, as borrowers are generally less price-sensitive. Furthermore, HFCs in this segment have a superior pricing power due to limited competition from banks.

Ind-Ra also believes that housing loan segment, albeit the best-performing asset class in the last 15 years, could come under some pressure, if underlying loan collaterals witness material price correction.Loans where underlying property is under construction would especially be vulnerable.

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Banks Raise INR180 billion in Additional Tier 1 Bonds in FY17
Feb 01,2017

Indian banks raised INR180 billion in perpetual bonds or Additional Tier-1 (AT1) bonds in FY17, while for public sector banks (PSBs) the capital raised goes towards meeting Basel III regulatory requirements, for private banks the capital raised is focused towards fueling their growth aspirations, says India Ratings and Research (India Ratings). India Ratings believes the softening of yields have given an impetus to the development of the AT1 markets. India Ratings rated around 65% of the AT1 issuances in FY17 based on its objective criteria based approach.

India Ratings has an objective criteria to rate AT1 bonds. The criteria is designed premised on the three ways in which an investor in an AT1 instrument can make a potential loss. It uses the notching down from the standalone rating profile approach. The three pillars of the AT1 ratings criteria are:

n++ Discretion of the Issuer - compulsory notch to differentiate from a senior instrument

n++ Principal Write-down - relative capital requirement over FY19

n++ Coupon Omission- minimum number of years of coupon service through FY19, on the projected AT1 borrowing

For AT1 instruments, the agency considers the discretionary component, coupon omission risk and write-down/conversion risk as key parameters to arrive at the final rating. The agency recognises the unique going-concern loss absorption features that these bonds carry and differentiates them from the banks senior debt, thus factoring in a higher probability of an ultimate loss for investors in these bonds.

Effectively the risks associated with an AT1 instrument are: 1) the issuing bank has the discretion to skip coupon payment, 2) the bank has to maintain a common equity tier I ratio of at least 5.5% (till FY19), failing which the bonds can be write-downs (temporary or permanent) and 3) in some cases there could be a clause to convert it into equity as well.

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Nominal GDP estimated to grow at 10.0 per cent during 2015-16 as against 10.7 per cent during 2014-15
Feb 01,2017

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has released the First Revised Estimates of National Income, Consumption Expenditure, Saving and Capital Formation for the financial year 2015-16 (with Base Year 2011-12) as per the revision policy. Second Revised Estimates for the year 2014-15 and Third Revised Estimates for the years 2012-13 and 2013-14 have also been released as per the calendar of revision of base year. Estimates for the year 2011-12 remain unchanged.

The First Revised Estimates for the year 2015-16 have been compiled using industry-wise/institution-wise detailed information instead of using the benchmark-indicator method employed at the time of release of Provisional Estimates on 31st May, 2016. The estimates of GDP and other aggregates for the years 2012-13 to 2014-15 have also undergone revision due to use of latest available data on agricultural production; industrial production especially those based on the provisional results of Annual Survey of Industries (ASI): 2014-15 and final results of ASI: 2013-14; government expenditure (replacing Revised Estimates with Actuals for the year 2014-15) and also more comprehensive data available from various source agencies and State/UT Directorates of Economics and Statistics.

The salient features of the estimates at aggregate level are indicated below:

Gross Domestic Product

Nominal GDP or GDP at current prices for the year 2015-16 is estimated as Rs. 136.75 lakh crore while that for the year 2014-15 is estimated as Rs. 124.34 lakh crore, exhibiting a growth of 10.0 per cent during 2015-16 as against 10.7 per cent during 2014-15.

Real GDP or GDP at constant (2011-12) prices for the years 2015-16 and 2014-15 stands at Rs. 113.58 lakh crore and Rs. 105.23 lakh crore, respectively, showing growth of 7.9 per cent during 2015-16 and 7.2 per cent during 2014-15.  

Industry-wise Analysis 

The changes in the Gross Value Added (GVA) at basic prices in different sectors of the economy at current and constant (2011-12) prices are presented in Statements 4.1 and 4.2 respectively. At the aggregate level, nominal GVA at basic prices increased by 8.6 per cent during 2015-16 as against 10.7 per cent during 2014-15. In terms of real GVA, i.e., GVA at constant (2011-12) basic prices, there has been a growth of 7.8 per cent in 2015-16, as against growth of 6.9 per cent in 2014-15.  

The shares of different sectors of the economy in terms of overall GVA during 2011-12 to 2015-16 and corresponding annual growth rates are mentioned below: 

SectorPercentage share in GVA at current pricesPercentage change in GVA at constant (2011-12) prices over the previous year2011-122012-132013-142014-152015-162012-132013-142014-152015-16Primary 21.7521.3621.5020.7619.831.25.21.82.6Secondary29.2828.6327.9027.3927.203.94.36.17.8Tertiary48.9750.0150.6051.8552.978.37.79.59.8All100.00100.00100.00100.00100.005.46.26.97.8Aggregate GVA (Rs. in lakh crore)at current pricesat constant pricesTotal 81.0792.05103.66114.70124.5285.4890.7997.09104.70

The growth in real GVA during 2015-16 has been higher than that in 2014-15 mainly due to higher growth in Gagriculture, forestry & fishing (0.8%), Gmanufacturing (10.6%), Gtrade, repair, hotels & restaurants (11.6%), Gtransport, storage, communication & services related to broadcasting (9.1%) and Greal estate, ownership of dwelling & professional services (12.6%), as may be seen from Statement 4.2. During 2015-16, at constant prices, the growth rates of primary (comprising agriculture, forestry, fishing and mining & quarrying), secondary (comprising manufacturing, electricity, gas, water supply & other utility services, and construction) and tertiary (services) sectors have been estimated as 2.6 per cent, 7.8 per cent and 9.8 as against a growth of 1.8 per cent, 6.1 per cent and 9.5 per cent, respectively, in the previous year. 

Net National Income

Nominal Net National Income (NNI) at current prices for the year 2015-16 stands at Rs. 120.83 lakh crore as against Rs. 109.61 lakh crore in 2014-15, showing an increase of 10.2 per cent during 2015-16 as against an increase of 10.7 per cent in the previous year.  

Gross National Disposable Income

Gross National Disposable Income (GNDI) at current prices is estimated as Rs. 139.29 lakh crore for the year 2015-16, while the estimate for the year 2014-15 stands at Rs. 126.91 lakh crore, showing a growth of 9.7 per cent as against 10.4 per cent in the year 2014-15.  

Saving

Gross Saving during 2015-16 is estimated as Rs. 44.05 lakh crore as against Rs. 40.98 lakh crore during 2014-15. Rate of Gross Saving to GNDI for the year 2015-16 is estimated as 31.6 per cent as against 32.3 per cent, estimated for 2014-15.  

The highest contributor to Gross Saving is the household sector, with a share of 59.2 per cent in the year 2015-16. However, the share has declined from 62.0 per cent in 2014-15 to 59.2 per cent in 2015-16. This decline can be attributed to decline in household savings in physical assets, which has declined from Rs. 15.78 lakh crore in 2014-15 to Rs. 14.84 lakh crore in 2015-16. On the other hand, the share of Non-Financial Cor

Indias Air Passenger Volumes to Reach 310 million by FYE18, Aided by Economic Growth and Policy Impetus
Feb 01,2017

The overall air passenger volumes (pax) have been consistently increasing and are likely to reach 310 million by FYE18, says India Ratings and Research (Ind-Ra). This will be driven by the aspirations of the middle class to travel in flights and a reduction in price differential between air travel and rail journey, including the recently increased cancellation fees for train tickets.

The slowdown in economic growth during the first half of the current decade had minimal impact on pax growth. However, the 2008 global economic crisis and fuel and currency crises in FY13 had a pronounced impact on air traffic growth. The gradual increase in private final consumption expenditure has been buttressing Indias pax growth since early FY14. Ind-Ras sensitivity on economic growth also underlines the strong underlying fundamentals and continued growth in pax volumes.

Airports are an integral part of the aviation sector; hence, any impairment of airport functions exerts stress on the stake holders such as airlines, fuel suppliers and travellers. Large gateways such as Mumbai and Delhi airports and mid-market airport hubs such as Bangalore and Hyderabad airports have displayed strong volume resilience, despite unfavourable macroeconomic trends.

The new civil aviation policy has given clarity on the methods to determine aero revenue. 70% non-aero revenue that is outside the purview of the tariff setting mechanism will prove to be a significant contributor to EBITDA margin improvement. Commercial revenues (such as retail, car parking, rental cars and ground transportation) have collectively evolved to become the leading components of revenues to cover airports expenses and debt service. The ability of airports to stabilise these diversified revenue streams (aeronautical charges) or generate excess cash from them for asset preservation or increase operating margins could enhance their debt service coverage ratios or reduce leverage ratios.

Airport Economic and Regulatory Authority indicated a normative capital expenditure cost for the construction of new terminals and runways in June 2016. Previous construction costs for Ind-Ra rated airports were higher than the indicative costs and could bring in a disparity in the structural design and quality of construction. While greenfield airports (Bangalore and Hyderabad) were running at their full capacities, the order introduces an ambiguity among developers.

Although some airports are facing refinancing risks, Ind-Ra rated airports have refinanced their loans comfortably either through capital market instruments or through bank loans. Given the robust performance in the past, investors have shown interest in airport assets. However, Ind-Ra expects domestic airports to raise bonds in the domestic capital market as against international issuances earlier.

Brownfield expansions by airports are not on the cards till FY18; therefore, their debt/EBITDA is likely to reduce. However with the rapid growth in pax, utilisation is likely to reach the created capacity ahead of the original projected timelines. Hence, airports will be compelled to take up expansion plans ahead of the time.

To make air travel affordable for the masses, the government has introduced Regional Air Connectivity Scheme (RCS) with concessions on aviation turbine fuel, reduced air ticket prices, and exemption from airport charges. Ind-Ra expects the government in the FY18 budget to announce some contributions for RCS viability gap funding. However, slot non-availability for new aircraft in major hubs will be a constraint in operationalising RCS.

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Ind-Ra: Auto Sales Fuelled by Aspirational Utility Vehicle Volumes
Feb 01,2017

Surging volumes of compact utility vehicles (UVs) revs up growth for passenger cars in FY17, says India Ratings and Research (India Ratings). In the agencys assessment, the key contributors to higher demand for UVs are shifting preferences among buyers to aspirational products such as UVs and more options available in the segment. In addition, buyers having opted for larger UVs are migrating towards compact UVs given the regulatory challenges - such as the ban on registration of new large diesel passenger vehicles (PVs) in the National Capital Region which has hurt large diesel UVs in particular. In addition, the proliferation in the compact UV models which are available at attractive price points and availability of both petrol and diesel variants have also fuelled demand.

For the April to December 2016, UV volumes grew by 33%, compared with a mere 2.5% for cars. The overall growth rate of 8.6% for passenger vehicles (PV) for this period was pushed into the fast track by UVs. The surge in UV sales volumes can in turn be attributed to the success of the new compact UV models namely, Grand Vitara, S-Cross and Vitara Brezza from Maruti Suzuki India (MSIL) and Creta from Hyundai Motor India (HMIL). In line with the increased volume contribution from UVs, the share of UVs in total domestic PV volumes has increased to almost 25% in April to December 2016 from 21% in FY16.

Due to the intensely competitive nature of the domestic auto industry, the launch of new models on a regular basis has become a driving strategy for companies aspiring for high volumes and significant market share. It is observed that on the launch of a new model, sales volumes tend to spike initially, before other factors such as sustained on-road performance and consequent consumer perceptions determine monthly volumes over an extended period. The new launches in the UV segment in the past one year particularly by MSIL have supported volume growth in the segment in FY17.

Buyers shifting preferences to UVs from cars is evident from the reduction in the proportion of car sales to PV segment volumes to 69.3% in April to December 2016 (from 73.4% in the corresponding period of the previous year). This has been offset by a similar increase in contribution of UVs to the segment volumes to 24.8% (April-December 2016) from 20.2% yoy. The biggest beneficiaries of the surge in UV sales, MSIL and HMIL which reported 124% and 70.5% yoy growth in volumes respectively in UV sales in April to December 2016, also reported 0.7% and -4.1% yoy changes in their car sales volumes in the same period. In comparison, Mahindra & Mahindra Limited (M&M; IND AAA/Stable) which does not have a material presence in the car segment reported an increase in UV volumes at a modest growth rate of 4.4%.

The UV product portfolio of MSIL and HMIL mostly comprises compact UV models targeted primarily at urban buyers and their sales were therefore not impacted by the recent demonetisation drive, which is likely to have impacted sales of semi-urban and rural centric vehicles to a greater extent. This is considering the relatively higher proportion of cash dealings in transactions in these locations. Considering that the rural-centric Bolero model has traditionally accounted for over 30% of M&Ms UV volumes, M&Ms sales was impacted due to demonetisation. In general, UVs entail higher margins than cars and companies generating high revenue growth through UVs are expected to see improvement in operating margins in FY17.

The next trigger for the auto industry is the union budget FY18, India Ratings believes there could be a reduction in excise duty on large UVs in the upcoming budget, considering that under Goods and Service Tax (GST) the highest tax rate applicable is 28%, while large UVs (>1500cc engine capacity and length > 4m) attract excise duty of 30%. However the impact on overall UV sales would be moderate, since the highest volumes are being generated from the compact UV segment. Also any changes in the income tax slabs, resulting in a lower tax outgo for buyers will support demand for PVs.

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Manufacturing economy rebounds from rupee-demonetization downturn: Nikkei India Manufacturing PMI
Feb 01,2017

Indian manufacturing output increased during January on the back of rising order books. Greater production needs encouraged companies to purchase more inputs, but failed to generate jobs in the sector. On the price front, input cost inflation climbed to its highest mark since August 2014, while output charges were raised for the eleventh successive month.

Having deteriorated in December for the first time in one year, the health of Indias manufacturing economy improved in the opening month of 2017. The headline Nikkei India Manufacturing Purchasing Managers IndexTM (PMI)TM was up from 49.6 to 50.4 in January.

The main factors contributing to the above-50.0 PMI reading were growth of both new orders and output. Rates of expansion were only slight, but reversed the contractions noted in December. Anecdotal evidence highlighted a return to normal market conditions and a subsequent improvement in demand. In contrast to the upturn in total new business, new export orders fell again. Having eased since the previous month, the rate of reduction was marginal.

Intermediate goods was the bright spot in January, with rates of expansion in both new work and production outstripping those seen in the consumer goods sector. Meanwhile, investment goods dipped into contraction.

Survey data pointed to an increasing degree of pressure on the capacity of manufacturers operations as backlogs rose at a quicker rate than in December. In spite of this, companies kept their payroll numbers unchanged in January.

Holdings of finished goods decreased in January, amid evidence from survey participants of orders being fulfilled directly from stocks. The rate of depletion was marked, and the quickest since last May. Concurrently, pre-production inventories declined slightly, but at a pace that was the fastest in over three years.

Manufacturers attempted to replenish their input stocks by purchasing greater quantities of raw materials and semi-finished items in January. That said, the overall rate of growth was only slight and well below its long-run average.

Rates of input cost inflation accelerated in each of the three tracked sectors, led by intermediate goods. Across the manufacturing economy as a whole, input cost inflation climbed to a 29-month peak. Where cost burdens rose, there were mentions of higher prices paid for metals, chemicals, plastics, textiles and paper.

As part of ongoing efforts to protect margins, Indian manufacturers raised their own selling prices for the eleventh successive month in January. However, the rate of inflation remained only marginal.

Newly-released future output data, which have been collected since April 2012, showed a pick-up in manufacturers confidence during January. Promotional activities and better economic conditions are anticipated to underpin production growth over the coming 12 months.

Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at IHS Markit and author of the report, said:

n++The Indian manufacturing economy recovered from the one-off downturn that hit the sector in December following the withdrawal of high-value banknotes. January saw only modest increases in order books, production and buying levels, but the quick rebound will be welcome news to policymakers.

n++Improving confidence among firms bodes well for the outlook, with the expansion in manufacturing output likely to pick up pace in coming months. IHS Markit forecasts a 6.9% rise in GDP for FY16, with growth anticipated to accelerate to 7.4% in FY 2017.n++

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Income Tax Department (ITD) launches Operation Clean Money
Feb 01,2017

Income Tax Department (ITD) has initiated Operation Clean Money. Initial phase of the operation involves e-verification of large cash deposits made during 9th November to 30th December 2016. Data analytics has been used for comparing the demonetisation data with information in ITD databases. In the first batch, around 18 lakh persons have been identified in whose case, cash transactions do not appear to be in line with the tax payers profile.

ITD has enabled online verification of these transactions to reduce compliance cost for the taxpayers while optimising its resources. The information in respect of these cases is being made available in the e-filing window of the PAN holder (after log in) at the portal https://incometaxindiaefiling.gov.in. The PAN holder can view the information using the link n++Cash Transactions 2016n++ under n++Compliancen++ section of the portal. The taxpayer will be able to submit online explanation without any need to visit Income Tax office.

Email and SMS will also be sent to the taxpayers for submitting online response on the e-filing portal. Taxpayers who are not yet registered on the e-filing portal (at https://incometaxindiaefiling.gov.in) should register by clicking on the Register Yourself link. Registered taxpayers should verify and update their email address and mobile number on the e-filing portal to receive electronic communication.

A detailed user guide and quick reference guide is available on the portal to assist the taxpayer in submitting online response. In case of any difficulty in submitting on line response, help desk at 1800 4250 0025 may be contacted.

Data analytics will be used to select cases for verification, based on approved risk criteria. If the case is selected for verification, request for additional information and its response will also be communicated electronically. The information on the online portal will be dynamic getting updated on receipt of new information, response and data analytics.

The response of taxpayer will be assessed against available information. In case explanation of source of cash is found justified, the verification will be closed without any need to visit Income Tax Office. The verification will also be closed if the cash deposit is declared under Pradhan Mantri Garib Kalyan Yojna (PMGKY).

The taxpayers covered in this phase should submit their response on the portal within 10 days in order to avoid any notice from the ITD and enforcement actions under the Income-tax Act as also other applicable laws.

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