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IWAI takes up construction of Navigational Lock at Farakka
Nov 30,2016

The Inland Waterways Authority of India (IWAI) has awarded the work for the construction of a new state of the art navigational lock at Farakka in West Bengal on 24th November, 2016 to a reputed company at a cost of Rs 359 crore, under Jal Marg Vikas Project (JMVP) which is being implemented in National Waterway-1 (River Ganga).

A navigational lock is a device used for raising and lowering ships/vessels between stretches of water of different levels on river and canal waterways. The existing lock gate at Farakka which has been operational since 1978, is old and inefficient. Since the modernisation of the existing lock will entail closing down the lock gate for to 8-10 months, it has been decided to first build a new navigational lock and subsequently the modernisation of the existing lock would be undertaken. With the existing lock it takes about 2 hours or more for a vessel to pass upstream or downstream of Farakka. With the new lock it will take only 38 minutes for a vessel to pass through. If movement of a vessel is followed by movement of another vessel in the reverse direction, the operating time will be 23 minutes only. The new lock is proposed with modern state of the art features like electro hydraulic operations of Mitre Gates and Radial Gates on filling culverts and remote control operations of all the gates from a central control room.

The Farakka navigational lock is the third major work on National Waterway-1 to be awarded in record time. The contract for construction of Multi-Modal Terminal (MMT) at Varanasi and Sahibganj were awarded in May and October 2016 respectively.

The Jal Marg Vikas Project is being implemented with technical and financial assistance of the World Bank at an estimated cost of Rs. 5369 crore for plying of vessels with capacity of 1500-2,000 tons. Phase-I of the project covers the Haldia-Varanasi stretch which includes development of fairway, Multi-Modal Terminals, strengthening of river navigation system, conservancy works, modern River Information System (RIS), Digital Global Positioning System (DGPS), night navigation facilities, modern methods of channel marking etc.

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INR 4000 crore Welding Industry Set to Grow to INR 5700 crore by 2021
Nov 30,2016

The two flagship programmes of the government - Make in India and Skill India got a big boost at the maiden CII Welding conference. Speaking during the session Y S Trivedi, Sr Vice President and Member of the Board - Heavy Engineering IC, Larsen & Toubro stressed, n++The amount of weld in a nuclear reactor and submarine is less than 2 and 8 percent respectively, yet these welds decide the fate of the INR 12,000 crore submarine as well as determines whether a nuclear power plant lasts 10 years or 60. If we have to transform India into a global manufacturing hub we need to pay attention to welding.n++ Further he commended that welding holds immense potential for employment and skill development initiative and has a major role to play in the nations growth.

Talking of the present welding industry, Chetan Ligade, Director, BDB India said that the sector today stands at INR 4,000 crore out of which INR 2,800 falls under consumables and INR 1,200 crore under welding equipment market. Driven by infrastructure, the welding industry is slated to pick up rapidly in the next few quarters and by 2021 the consumable market will grow to INR 4,200 crore and equipment market to INR 1,500 crore. On this occasion a special report on Indian welding industry was released.

Elaborating on the importance of R&D in manufacturing sector D G Padmanabham, Director, International Advanced Research Centre for Power Metallurgy and New Materials (ARCI), emphasized, n++In the west, 70% of R&D funding comes from the industry and 30% from the government whereas in India only 10% comes from the industry. This needs to change. When industry funds a project it drives R&D with purpose, focus, application and absorption. Hence, industry R&D interaction has to be strengthened.n++ Sharing his experience on industry government collaboration he averred that the success rate has been always very high when there is co-operation and collaboration.

A Shivkumar, Conference Chairman and Former Chief Executive, EWAC Alloys said, n++The stakeholders in the welding sector such as researchers who work on materials, manufacturers, people who execute it like welders and the final beneficiary the consumer - are not connected and aligned to a common agenda. At CII we aim to bring all stakeholders together to create a common agenda and goal to meet challenges and make opportunities available to them in the future.n++

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Fitch: Indian ABS Buffers Cover Near-Term Demonetisation Impact
Nov 30,2016

Fitch Ratings believes that demonetisation could lead to a short-term liquidity stress in Indian auto ABS transactions. The stress is likely to be limited to a few months, in which case it would not result in pressure on ratings.

India began to withdraw high-denomination bank notes - that account for 86% of the value of currency in circulation - earlier this month. The withdrawal has created a cash crunch that Fitch expects to hold back economic activity in the near term.

Fitch expects a liquidity squeeze in Indian auto ABS to result from a substantial drop in collections from small commercial vehicle (CV) operators - especially used-CV operators - in November and December. Cash collections typically account for 20%-50% of total collections by Indian CV loan originators within Fitch-rated ABS transactions. The cash-collection percentage is especially high on loans for used CVs, as well as for new small CVs, light CVs and tractors. Smaller CV operators usually receive their income and pay expenses in cash. We expect the cash crunch caused by demonetisation to affect both the income of these borrowers and their repayment capabilities in the short term, due to the delaying of non-critical economic activities by their customers.

Furthermore, the impact of demonetisation on economic activity could lead to a temporary drop in demand for services involving CVs, creating stress on the repayment capabilities of CV loan borrowers. We also see a moral-hazard risk of capable borrowers also defaulting on their monthly repayments, given the potential for a general increase in tolerance of delinquencies due to this disruption.

Delinquencies are likely to remain high for several months in 2017, as small borrowers are likely to take time to make up for missed payments. Fitch will continue to monitor closely the repayment behaviour of underlying borrowers in the next few months.

Average collection for Fitch-rated Indian ABS transactions was around 107% of scheduled investor payout obligations, as of the last reported collection month. In a scenario of a sharp decline of 30% in collections, all Fitch-rated Indian ABS transactions could manage timely payment of interest and principal for at least nine months, and on average for 24 months, with support from available external CE.

Nevertheless, there could be an impact on the ratings of recent, less-seasoned transactions if delinquencies continue to rise sharply for more than a few months.

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Corporatize Indian Agriculture: Dr. Ajit Kumar
Nov 30,2016

Vice Chancellor, National Institute of Food Technology Entrepreneurship and Management, Dr. Ajit Kumar pitched for corporatization of farming sector to integrate agriculture and farmers with prosperity and well being as this could be the single Mantra to double the farmers income as is being intended by the government of the day under Prime Minister Mr. Modi.

He also recommended that close to a lakh of Indian traditional dishes across the country should be standardized for its quality and hygienic values to make them globally popular as the National institute of food technology entrepreneurship and management has already identified thirteen such dishes for which equipment and tools will be put in place for their wider commercial circulation.

Dr. Kumar said that privatization of agriculture was not the solution for doubling farmers income as the experiment has hardly yielded the desired results.

n++What ought to be experiment in the modern times is encouragement for corporatization of Indian agriculture as the government cannot be expected to alone explore the unexplored and un-negotiated territories and patches including landscapes of Indian agriculture with its own investments and technological tools. Therefore, corporatization could be an answer to serve this un-chartered territory to bring in prosperity among farmers and farming community by leasing out their land to corporates as with their investments, the Indian agriculture could see better daysn++, said Dr. Kumar.

According to him, the another strategy that could follow for betterment of farmers should be to equip all the villages with primary and secondary food storages in which their farm produce could be stored and farmers are equipped and linked with such facilities for gaining in higher returns for their produce.

Principal Secretary, Industries & Commerce, New & Renewable Energy & CEO, Invest Punjab, Mr. Anirudh Tewari also endorsed the views expressed by Dr. Ajit Kumar adding that Punjab is the attracting hub for industries that wish to explore its agriculture sector as the State provide for more than 14% of incentives in terms of infrastructure to such investors as compared to other parts of the country.

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GIC Estimates Size Of Non-Life Insurance Growing Five Times By 2026, Says Its Secretary General
Nov 30,2016

Secretary General, General Insurance Council, Mr. R Chandrasekaran forecast the size of non-life and liability insurance would grow five times by next decade as non-life and liability insurance is gradually growing a risk mitigation exercise in India.

Inaugurating a Seminar on Financial Risks & Liability Insurance : Current Scenario and Way forward organized by the PHD Chamber of Commerce and Industry, Mr. Chandrasekaran emphasized that with proper policy, ongoing innovations and regulations in place, the non-life and liability insurance which is currently estimated at a size of 3%, however, will stay put at this number for another 4-5 years and subsequently frogleap.

According to him, a great deal of public exercise and campaigning is called for to arise public awakening for larger participation of stakeholders in this non-life segment to enable it realize its latent potential.

Supportive regulations and policies are also needed for the growth of non-life insurance which would come about as this is what has happened for life insurance to pick up in India in the past, indicated Mr. Chandrasekaran and also urged the PHD Chamber to carry such conferences across other Tier-1 and Tier-2 cities of India.

In his opening remarks, Vice President, PHD Chamber, Mr. Anil Khaitan also hoped that with changing India, its liability and non-life insurance will also grow faster than anticipated as the Chamber is confident of its estimated growth and diversification.

Speaking on the occasion, Chairman, Insurance Committee of the Chamber, Mr. Yogesh Lohiya also exuded confidence saying that with skilling, digital and Make in India picking required pace, the non-life insurance sector is poised for higher growth. What is required is a massive campaign to promote this branch of insurance.

Managing Director, Nilam Sharma, Ms. Nilam Sharma in her presentation detailed out her perception on Directors and Officers relating to non-life insurance and their role to diversify and expand this sector.

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Government takes various steps to check prices of pulses
Nov 30,2016

In the Report of the Working Group on Foodgrains-Balancing Demand and Supply for the 12th Five Year Plan, the estimated demand of pulses in the year 2014-15, 2015-16 and 2016-17 are 22.68 MMT, 23.62 MMT and 24.61 MMT respectively. steps taken by the Government to reduce the prices of pulses are given below.

n++ Export of all pulses is banned except kabuli channa and up to 10,000 MTs in organic pulses and lentils.

n++ Import of pulses are allowed at zero import duty.

n++ Stock limit on pulses extended till 30.9.2017.

n++ MSP raised for kharif pulses of 2016-17 for Tur, Urad and Moong as well as for Rabi pulses of Gram and Masoor for season 2016-17.

n++ Government has approved creation of buffer stock of pulses for effective market intervention. Buffer of around 6.18 lakh MT of pulses has already been procured out of the target of 20 lakh tonnes.

n++ Government has released around 38,974 MT of pulses from the buffer stock (consisting of Tur and Urad) to States/UTs at subsidized rates for retailing by them at not more than Rs 120/- per kg to improve availability and stabilize prices. In addition, 6884 MT of Chana has been allocated to states at subsidized rate for retailing.

n++ Securities & Exchange Board of India (SEBI) has banned new contracts in Chana to dampen speculative activities in Chana and in respect of running contracts in Chana disallowed taking fresh positions to reduce speculative activities.

n++ Strict vigilance by Directorate of Revenue Intelligence to prevent importers from mis-using the facilities of Customs Bonded Warehouse facility.

n++ Setting up of a Group of Officers for regular monitoring and exchange of information on hoarding, cartelization etc.

n++ About 1.40 lakh tonnes pf pulses seized from 14612 raids and disposed of 1.28 lakh tonnes either by auction or other means permitted under EC Act, 1955.

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Clean Consumer Fora and Clean Market Scheme to launch from 2017-18
Nov 29,2016

Under the Swachh Bharat Mission, emphasis is being given for setting up of permanent mechanism through new programmes or schemes for sustainability of Swachhta. In pursuance of this, the Department of Consumer Affairs has decided to launch two schemes, namely, (i) Clean Consumer Fora and (ii) Clean Market from 2017-18.

The salient features of the schemes are as under:

Clean Consumer Fora : A number of consumers visit the Consumer Fora every day in connection with their complaints. There should be adequate facilities for the consumers in each Consumer Forum. Including adequate toilets, especially for the disabled. Under the scheme, financial assistance will be provided for construction/upgradation of toilets, at least three toilets- one for men, one for women and one for disabled, for the use of the consumers visiting the Consumer Fora in connection with their complaints.

Clean Market: Unhygenic conditions at market places pose health hazards to the consumers. Under the scheme, the Voluntary Consumer Organizations (VCO) will be associated and asked to adopt a market place where they can carry out awareness activities on Swachhta and also cleanliness of the market place including provision of sanitation facilities for consumers and street vendors, in association with the market association and local authorities. Financial assistance will be provided to a VCO in each State/UT.

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Government agencies procured more than 2 lakh tonnes Arhar and 82 thousand tonnes Moong
Nov 29,2016

The Government has approved creation of buffer stock of pulses upto 20 lakh tonnes including Arhar. For the buffer stock of pulses, the tentative targets fixed for procurement of Arhar and Moong are 2.65 lakh tonnes and 1.03 lakh tonnes respectively. The Procuring agencies have procured around 204,030.859 tonnes of Arhar and 82,859.59 tonnes of Moong.

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Fitch: Oil Prices May See Little Growth Before 2018
Nov 29,2016

High inventories and the potential for US shale production to respond quickly to any market tightening mean oil prices may flatline in 2017 before gradually moving higher over the next few years, Fitch Ratings says.

We expect supply and demand to be broadly balanced in 1H17, with a move to a more pronounced deficit from 2H17. But the still-high commercial inventories may delay any significant price response. We have therefore maintained our base-case assumption, used when rating energy-sector corporates, that both Brent and WTI will average USD45/barrel in 2017. We have also maintained our USD55/barrel assumption for 2018 and introduced a 2019 price expectation of USD60, reflecting our belief that it may take longer to fully return to our long-term equilibrium price of USD65/barrel.

But there is significant uncertainty about the future path of oil prices. Unprecedented capex cuts could translate into a far sharper fall in output than the consensus expectation, while there is also potential for demand growth to slow if economic growth disappoints or for supply to be higher than expected if US shale comes back strongly as prices rise.

Our price assumptions do not factor in any impact from a possible OPEC production cut agreement during its meeting scheduled for 30 November. This is because even if a deal is agreed, its ability to have a lasting impact on prices is unclear and will depend on the size of the cuts and the willingness of members to stick to them.

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Fitch: Political Risk Looms Large for Global Sovereigns in 2017
Nov 29,2016

Global sovereigns face elevated levels of political risk and uncertainty in 2017, says Fitch Ratings, embodied by the unexpected election of President-elect Donald Trump in the US and the UKs Brexit vote in June. These risks are reflected in a trend away from political orthodoxy that reduces the predictability of policy direction in advanced countries in 2017. Combined with a general trend towards looser fiscal policy and greater trade protectionism, this carries risks to sovereign creditworthiness among both advanced economies and emerging markets (EM), although the overall outlook for Fitchs sovereign ratings in 2017 is stable.

While the large majority (82 of 114) of Fitchs sovereign ratings retain Stable Outlooks as we head into 2017, risks are clearly tilted to the downside, given the distribution of 25 Negative and only three Positive Outlooks. The threat of increased trade protectionism and a stronger dollar will maintain downward pressure on EM sovereigns macroeconomic performance and ratings, with 20 remaining on Negative Outlook as we move towards year-end. Key EM sovereign rating sensitivities will include the extent to which policy responses can mitigate the negative effects of subdued commodity prices, weaker trade flows and the potential for renewed dollar strength.

Fitch expects global GDP growth to increase to 2.9% in 2017, from 2.5% in 2016, driven largely by a pick-up in the US combined with a cyclical recovery in some of the largest EMs, which should more than offset continuing weakness in the eurozone and Japan. Our forecast of an acceleration in 2017 US growth to 2.2%, from 1.5%, reflects partly our assessment of the impact of President-elect Trumps proposed reflationary policies, including corporate and personal income tax cuts combined with a focus on infrastructure investment. We expect this fiscal stimulus (totalling 0.5-0.75% of GDP) to produce a near-term boost to growth, but the president-elects rhetoric on trade policy increases downside risks to growth in the medium term.

Following the seismic political shocks of 2016, Fitch expects political risk to remain a key issue for sovereign creditworthiness in advanced economies in 2017, posing risks to medium-term economic growth prospects that would likely be negative for sovereign ratings. Euroscepticism and populism could affect European cohesion in the coming months, with the Italian constitutional referendum in early December to be followed by Dutch, French and German national elections in 2017. Any further significant political shocks triggered by electoral events in Europe could prove hugely damaging for the European project, although such a scenario is not Fitchs base case.

With advanced economies failing to regain pre-crisis growth rates, the debate on global macroeconomic policy has shifted, with commentators, policy-makers and supranational institutions all calling for a move towards fiscal loosening and away from the reliance on ultra-loose monetary policy that has become the cornerstone of macro policy in recent years. This shift in policy emphasis is likely to be led by the US in view of the proposed reflationary domestic policy agenda and the prospects for higher interest rates. While it is likely to provide a near-term boost to growth, the fiscal impact of the Trump plan would likely be negative for US sovereign creditworthiness over the medium term, as tax cuts alone cannot generate enough growth to make up for the loss in revenue, leading to a deterioration in debt dynamics.

In Europe, fiscal loosening is already being pursued to some extent as austerity fatigue and a focus on political issues such as Brexit, the migrant crisis and security concerns have diverted attention away from fiscal consolidation. This has manifested itself in many eurozone governments moving away from a strict interpretation of the European fiscal rules, typically without sanction by the European Commission. This is likely to be growth-supportive in the near term but further undermines fiscal credibility. High public debt ratios remain one of the key rating weaknesses for western European sovereigns, meaning that few have material fiscal space within their existing rating categories.

Economic recovery in the largest EM countries should gain momentum in 2017 as crises in Brazil and Russia ease. Meanwhile, we expect the slowdown in Chinas growth rate to continue on a gradual path, reducing to 6.4% in 2017 from 6.7% in 2016. In Fitchs view, China will remain committed to its growth target of approximately 6.5%, particularly given the political transition of five of the seven members of the Politburo Standing Committee scheduled for 2H17.

The threat of less open trade relationships between the US and key trading partners, including China, combined with a stronger dollar would be generally negative for EM countries, and particularly so for smaller open economies. A trade war between the US and China would have adverse consequences for GDP growth and inflation in both countries, and could lead to depreciation of the RMB and financial market risk aversion, which would likely spill over to other emerging markets.

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Direct Transfer of Fertilizer Subsidy to be introduced
Nov 29,2016

The Government has decided to introduce Direct Benefit Transfer (DBT) system for fertilizer subsidy payments. Under the proposed system, 100% subsidy on various fertilizer grades shall be released to the manufacturers and importers on the basis of actual sales made by the retailer to the beneficiaries. Initially, the modified subsidy procedure under DBT system will be introduced on pilot basis in 16 select districts and after its due stabilization, the new payment system would be rolled out in all states in the second phase. The proposed DBT will address the issues relating to diversion and smuggling of urea.

The DBT being implemented in fertilizer subsidy payment is slightly different from the normal DBT being implemented in LPG subsidy. Under the DBT in fertilizer sector, the subsidy will be released to the fertilizer companies instead of the beneficiaries, after the sale is made by the retailers to the beneficiaries on submission of claims generated in the web-based online Integrated Fertilizer Monitoring System (iFMS) by fertilizer companies. After implementation of DBT, it is expected that diversion/smuggling of fertilizers will be reduced to a large extent and the Government will save subsidy to the that extent. However, no assessment has been made to calculate the savings.

The proposed DBT for release of fertilizer subsidy to fertilizer companies has no direct relation with landholding of the farmers. The fertilizers will be available to all on no denial basis.

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Fitch: Economic Nationalism and Fiscal Reflation Dominate 2017 Global Economic Outlook
Nov 29,2016

The surge in populism and anti-establishment sentiment witnessed in the Brexit vote and Donald Trumps victory in the US presidential election seem likely to push structural policies in the direction of economic nationalism, entailing a reduction in trade openness and international labour migration, says Fitch Ratings in its latest global economic outlook (GEO). At the same time, electoral expressions of discontent are pushing leaders in the advanced economies to embrace easier fiscal policies.

In the long term, there is little doubt that increased trade protectionism and weaker migration flows would dampen growth in the advanced economies. However, in the short run, it is likely that the shift towards fiscal reflation will be the dominant factor, said Brian Coulton, Chief Economist at Fitch.

We have revised our global growth forecasts for 2017 upwards as the US is now expected to see a significant fiscal boost, albeit far smaller than that set out in President-elect Trumps campaign proposals. Fitchs US growth forecasts have been revised upwards modestly, by 0.2pp in 2017 and 0.1pp in 2018, to 2.2% and 2.3%, respectively.

An important implication of the shift towards fiscal easing is that central banks are no longer alone in providing macro policy stimulus. While we have not changed our central view that the Fed will hike rates in December and follow up with two further hikes in 2017, this increases confidence that the normalisation of US monetary policy will progress at a faster pace than over the last year, added Coulton.

Global bond yields have increased sharply since the US election. With headline inflation rates set to rise across the board in early 2017 and the potential for a reversal of globalisation to push up prices in the advanced countries over the medium term, there has been a renewed focus on inflation risks. However, changes to the macro policy outlook are most pronounced in the US and with the ECB likely to announce an extension of asset purchases for six to nine months beyond March 2017, this has partly been reflected in renewed dollar strengthening.

In emerging markets, the macro picture has brightened during 2016 as recessions in Russia and Brazil have started to bottom out and commodity prices have recovered. Furthermore, Chinas efforts to stabilise the economy following the slowdown last year have been more successful than anticipated. We have revised our China forecast for 2016 to 6.7% from 6.5% in Septembers GEO and 2017 up to 6.4% from 6.3%. Policy is now turning less accommodative in China, with a number of measures designed to cool the housing market, but the impact on GDP growth through 2017 is likely to be gradual.

Overall, against a backdrop of generally better-than-expected GDP growth outturns in 3Q16, our global growth forecasts have been revised up by 0.1pp in both 2016 and 2017. Global growth is expected to pick up to 2.9% in 2017 from 2.5% this year as US investment recovers, fiscal policy is eased and recessions come to an end in Brazil and Russia. The revision to global growth in 2017 is entirely explained by a 0.2pp upward revision in growth in the advanced economies. For emerging markets, the increase for China is more than offset by a weaker outlook for Mexico and India. Emerging market growth in 2017 has been revised down by 0.1pp to 4.8%.

This central scenario is accompanied by sizeable and increasing downside risks. First, the populist surge could exacerbate fragmentary tensions within the eurozone, with non-mainstream anti-EU parties gaining in popularity ahead of a series of key elections. Second, in the event of the US imposing punitive trade restrictions on China, retaliatory actions could see a trade or currency war develop. This would be highly damaging for global market sentiment and would reduce world growth.

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Cash Flow Recovery Concern for Corporates with Relatively Weak Asset Quality
Nov 29,2016

India Ratings and Research (Ind-Ra) says that 111 of the top 500 corporate borrowers, which held INR7.4trn of the overall debt of INR30.2trn at FYE16, are unlikely to generate higher return on capital employed (ROCE) than weighted average cost of capital (WACC), even in a high economic growth scenario. The agency attributed this to an incremental build-up of relatively high non-productive assets during FY11-FY16. Such corporates witnessed a decline in the proportion of their fixed assets to total assets to 52% in FY16 from 71% in FY11. As a result, the credit metrics of these corporates are likely to marginally improve in the near term.

85 Corporates with Relatively Weak Asset Quality Unlikely to ReviveInd-Ra analysed the balance sheets of borrowers for the period FY11-FY16. The agency observed that INR4trn of the INR12.4trn debt as at FYE16 of the 240 Vulnerable corporates was held by entities with a relatively high proportion of non-productive assets and weak cash flows. Debt servicing could remain a challenge for such corporates. Hence, these entities must engage in deep debt restructurings and reduce their debt significantly for long-term sustainability. Banks exposed to such entities may find it difficult to fit these corporates into the Scheme for Sustainable Structuring of Stressed Assets (S4A). Largely, corporates from infrastructure and construction, sugar, consumer durables, engineering and equipment, airlines and trading have a relatively high proportion of non-productive assets and a structural mismatch in cash flows.

155 Corporates with Relatively Better Asset Quality to Gain from Economic Recovery

Ind-Ra believes that corporates with a relatively high proportion of productive assets but with cash flow mismatches have a better chance of servicing their debts. Such corporates accounted for INR8.4trn debt of the overall Vulnerable debt. Ind-Ra believes such corporates could fall under the ambit of S4A scheme. Although haircuts may still be inevitable in many of them, quantum could be significantly lower. Such entities are likely to generate higher ROCE than WACC as the economy recovers. With an economic recovery, sectors such as oil and gas, metals and mining, power and textile are likely to rebound.

26 Corporates with Relatively Weak Asset Quality to Continue to Receive Lender Support

Ind-Ra expects lower shareholder returns to be generated by 26 Non-Vulnerable corporates with low volatility in cash flows but a relatively high proportion of non-productive assets. These entities accounted for INR3.4trn of the INR17.8trn debt held by Non-Vulnerable corporates. The debt servicing ability of these corporates would remain intact, as many of them benefit from strong parentage. Ind-Ra believes equity investment would be the most desirable option for these entities to deleverage and improve their capital structure. Sectors such as real estate and telecom have corporates with a relatively high proportion of non-productive assets and low, but, positive cash flow growth.

234 Corporates with Relatively Better Asset Quality to Drive Private Sector Capex

Corporates with strong profitability levels, healthy capital structures and a relatively higher productive asset base hold INR14.3trn debt of the overall Non-Vulnerable debt. These entities are likely to significantly benefit from an economic recovery. Ind-Ra believes these corporates would be the key driver of a revival in private sector investment. Corporates from sectors such as auto and automotive supplier, cement, chemical and pharmaceutical have low cash flow volatility and a high proportion of productive assets.

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Point of Sale (POS) Devices and Goods required for their manufacture exempted from Central Excise Duty till 31 March 2017
Nov 29,2016

The Government has demonetised the currency notes of Rs 500 and Rs 1,000 with effect from mid-night of 8th-9th November, 2016. Along with this, the Government has also laid increased emphasis on promoting digital payments.

Point of Sale (POS) devices are used for cashless transactions, both for making payments or disbursing cash. POS do not attract any basic customs duty. To further reduce the cost of such devices and thereby encourage digital payments, the Government has exempted such devices from Central Excise Duty. Consequently, these devices will also be exempt from Additional Duty of Customs [commonly known as CVD] and additional duty of customs [commonly known as SAD]. Simultaneously, to encourage domestic manufacturers of such devices, all goods required for the manufacture of POS devices have also been exempted from excise duty, and consequently from CVD and SAD. These exemptions will be valid till 31st March 2017.

Notification No.35/2016-Central Excise, dated 28th November, 2016 has also been issued in this regard.

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RBIs Liquidity Measures to Put Markets on the Backfoot
Nov 29,2016

The surge in inter-bank liquidity compelled the Reserve Bank of India (RBI) to announce surprise measures with a retrospective approach. The increase in the cash reserve ratio (CRR) maintained by banks for the past period will halt the softening of yields temporarily, says India Ratings and Research (Ind-Ra). The 10-year G-sec yield could trade at 6.25%-6.35% (6.23% at close on 25 November 2016) through the week, with a possibility of a near-term cap at 6.4%. The rupee is likely to trade at 67.95/USD-68.85/USD (68.47 /USD at close on 25 November 2016).

CRR Hike to Suck out INR3.5trn: Ind-Ra believes that the measures are taken with an aim to blot out the excessive liquidity in the system triggered by denotification of currency notes; however it will deprive banks of the discretionary allocation of the deposits, constraining their ability to utilise these deposits and increasing the carrying cost. The move will mop up a substantial amount of liquidity (current liquidity surplus at around INR5.3trn) without the need of collateral or a higher cost from RBI.

Bond Yields to Spike: Ind-Ra believes the latest measures will act as a significant sentiment dampener, and also change the demand-supply balance in the system. The impact will be more visible at the shorter end of the curve. After the current measures, the markets expectation of a rate cut in the upcoming monetary policy review could also face a downward revision, further weighing down on the bond market. This could lead to the widening of spreads between G-sec and corporate bonds, as near term investor appetite will remain weak.

Rupee Weakness to Stay: Ind-Ra believes, in the event of hardening US treasury yields and buoyant financial sentiment in US, emerging market currencies are in period of correction, and the rupee will not be an exception. Foreign investors have been pulling out money from both debt and equity segments - with total net outflows clocking USD4.4bn in November 2016. Globally, the next non-farm payroll data will be critical prior to the Feds policy review in December. With near consensus among market participants about the Fed rate hike in the upcoming December policy, rupee weakness will continue in the near term. However, if volatility surges, potential intervention by RBI will rein in the rupee weakness.

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