India’s GDP grows 1.6% in fourth quarter, contracts 7.3% in FY 20-21
Amid the coronavirus pandemic, India’s gross domestic product (GDP) grew at 1.6% in the January-March quarter of fiscal year 2020-21, but witnessed a contraction of 7.3 per cent for the entire fiscal year.
This is the first full-year contraction in the Indian economy in the last four decades since 1979-80, when GDP had shrunk by 5.2%. This is also the second straight quarter of expansion since India exited a rare recession.
India’s GDP figures showed the growth at 3% in Q4 of FY20, while growth for FY20 came at 4%, an 11-year low.
Sector wise Q4 FY20 GVA Growth Analysis:
- “Manufacturing sector”- accelerated to 6.9% in Q4 FY20 compared to a contraction 4.2% a year ago.
- “Farm Sector”- down at 3.1%, compared to 6.8% a year ago.
- “Construction Sector”- grew by 14.5% from 0.7% a year ago.
- “Mining Sector”- shrank by 5.7 per cent, as against a contraction of 0.9% a year ago.
- “Electricity, gas, water supply and other utility services Sector”- grew by 9.1%, against 2.6% expansion a year ago.
- “Trade, hotel, transport, communication and broadcasting services Sector”- contracted by 2.3% from 5.7% growth earlier.
- “Financial, Real estate and Professional services Sector”- grew by 5.4% from 4.9% growth a year ago.
- “Public administration, defence and other services Sector”- growth fell to 2.3% from 9.6% a year earlier.
RBI Governor-led Shaktikanta Das Monetary Policy Committee, in its first bi-monthly monetary policy review for FY21, retained its GDP growth projection at 10.5% for FY21.
The economy, which was facing a slowdown even before the pandemic, now confronts a crash of consumer demand – constituting over 55% of the economy – as household incomes and jobs have declined. Unemployment soared to a near one-year high of 14.73% in the week ending May 23, according to the Centre for Monitoring Indian Economy, a Mumbai-based private think tank
Finance Minister Nirmala Sitharaman, who said on Friday that “no decision has been taken for another stimulus package”, has limited space due to a fall in tax collections and rising public debt.
11 year low growth in GDP, one-year high unemployment of 14.73%, no signs of stimulus package from government due to falling tax collections & rising public debt, seems to worsen the situation going forward for next year. Though GDP growth in Q4 has given hopes & experts are still positive while making optimistic Growth projections for the upcoming year.
Government approves four firms under PLI scheme for bulk drugs
The government has given approval to four waitlisted firms under the Production Linked Incentive (PLI) scheme for domestic manufacturing of bulk drugs.
The companies which have been given approval are — Solara Active Pharma Science Ltd, Rajasthan Antibiotics Ltd, Dhatri Lab Pvt Ltd and Vital Laboratories Pvt Ltd.
It envisages setting up greenfield plants in four different target segments with a total outlay of Rs 6,940 crore for the period 2020-21 to 2029-30.
The “PLI scheme” was launched by Department of Pharmaceuticals for promotion of domestic manufacturing of critical bulk drugs- KSMs/APIs. With this, a total of 46 applications with committed investment of Rs 5,355.44 crore and expected employment generation of about 11,210 have been approved by the government so far under the PLI Scheme for Bulk Drugs. Setting up of these plants will make the country self-reliant to a large extent in respect of these bulk drugs
“Solar active Pharma science Ltd.” is the only listed company out of the 4 approved companies. Due to the approval by the government under PLI scheme for domestic manufacturing, we can expect the positive growth in share prices of Solar active Pharma science Ltd in the longer term.
PSU banks plan Rs. 8,500-9,000 crore of QIPs
Public sector banks are expected to launch qualified institutional placement (QIP) offerings worth ₹8,500-9,000 crore in the next quarter amid a rebound in equity markets, according to sources in the know.
“Indian Bank”, “Bank of Maharashtra”, and “Canara Bank” expected to launch their offerings between July and September.
These QIP offerings are going to boost the PSU Banking sector. Such offering is also expected to provide cushion for further declines in the performance of the PSU banks. The launch of Rs 8,500-9,000 crore of QIPs can be considered as the relieving news for the investors. And the stocks of Indian Bank, Bank of Maharashtra, and Canara Bank should be kept on watchlist as with the execution of expected launch of offering between July & September has fair amount of chance to increase market shares.
Auto companies prepare financial packages to help dealerships
Several of India’s leading automakers are working on or rolling out incentive packages to support their dealers who have been hit hard by lockdowns in states to check the spread of the Covid-19 pandemic.
These incentives being planned or offered by “Maruti Suzuki”, “Tata Motors”, “Renault India”, “Toyota Kirloskar Motor”, “Daimler India Commercial Vehicles” and “Honda Motorcycle” & “Scooter India” include financial support to offset interest cost on inventory during the lockdown, extension in credit periods, insurance cover, salary support and vaccination expenses.
Companies are also working at quick resolution of claims to facilitate cash flow at dealerships, as retail outlets gradually open up with several state governments expected to ease restrictions over the next few weeks, as the number of Covid-19 cases falls.
These incentives are expected to help the dealers, who were badly affected by the pandemic, to improve their operation and sales & in-turn these are expected to help the auto companies to achieve growth in the net revenues.
Banks begin process of restructuring of loans up to Rs 25 cr
To provide support to small businesses hit by the second coronavirus wave, banks have initiated the process of restructuring pf loans up to Rs 25 Crore in line with the Covid-19 relief measures announced by the RBI earlier this month. Many lending institutions have got board approval for the resolution framework and eligible borrowers are being contacted For example, “Bank of India” has already sent messages to its eligible customers, meanwhile “Punjab & Sind Bank’s” debt recast plan has been approved by the board.
With this the Banking Sector can be expected to perform good at least for THEnext Quarter, though chances can’t be neglected to see the sector again in trouble 2-3 Quarters down the line.
Has RBI really endorsed crypto transactions in India?
Hours after major Indian banks, including State Bank of India (SBI) and HDFC Bank sent emails to customers warning against using their services to trade in crypto currencies, the Reserve Bank of India (RBI) has clarified that banks cannot cite the 2018 circular for such communications. This is because the circular was quashed by the Supreme Court of India on a petition filed by Internet and Mobile Association of India in March, 2020.
Clearly, the clarification doesn’t mean that the RBI is endorsing crypto trading. The regulator, in fact, has not taken any position on the validity and legality of cryptocurrency transactions in India. It has only avoided a potential legal hazard—inviting contempt of the apex court by maintaining silence when a clutch of banks has used its old, invalid circular to keep the crypto lobby away. The RBI has only asked banks not to shoot from its shoulder. The language indicates high caution. Banks will not have the backing of the regulator and will have to deal in crypto at their own risk.
Pepperfry expects to join unicorn club soon, to launch IPO after booking profit
Online furniture company Pepperfry would be in the unicorn club – companies with a valuation of more than USD 1 billion – by the time its initial public offer hits the market,
The company has raised USD 235 million till date from Norwest Venture Partners, Goldman Sachs, Bertelsmann Investments India (BII).
Pepperfry announced plans to add 200 offline studios on FOFO (franchise owned franchise operated) across tier 2 and tier 3 towns. Studios contribute 30 per cent in the overall business. With new studios coming up, their contribution in business should be going to upwards of 40 per cent. The stores will come up with at least 100 new cities. The company has already opened over 70 studios across 40 cities in the last six years out of which 32 are based on the FOFO model.
Currently the online business model contribute to 70% in overall business, which is the main reason that amid the coronavirus pandemic, the company’s business is still in good position and it is further expected to grow once planned addition of 200 offline studios on FOFO model starts contributing to the overall business.
Work From Home (WFH) leads to surge in demand for office furniture rentals: Industry experts
Corporates and independent consumers are renting ergonomic curated products to make working from home more efficient, especially in metro cities, resulting in surge in furniture rentals, according to industry players.
Many companies have also tied up with “Fabrento” for providing a comfortable office set up to their employees, as told by Fabrento founder Sidhant Lamba.
“City Furnish” company has witnessed 40 per cent increase in demand for WFH solutions like study tables and chairs, announced by founder and CEO Neerav Jain.
In the Furniture Sector, such online rental marketplaces like Fabrento & City Furnish are expected to see high consumer demand and good profit-making opportunities for the next 6 months till WFH continues.
PLI scheme for promoting ACC battery manufacturing :
Govt approves Rs. 18100Cr in PLI scheme for manufacturing Advanced Chemistry Cell (ACC) battery with the objective of promoting Make in India initiative.
The proposal aims to achieve manufacturing of 50 gigawatts of battery storage, he said, adding, these incentives will be available to those companies having higher production and sales capability.
Advanced Chemistry Cell (ACC) are the new generation of advanced storage technologies that can store electric energy either as electrochemical or as chemical energy and convert it back to electric energy as and when required, an official statement said.
All the demand for the ACCs is currently being met through imports in India.
The National Programme on Advanced Chemistry Cell (ACC) Battery Storage will reduce import dependence and also support the Atmanirbhar Bharat initiative.
Related Article: PRODUCTION LINKED INCENTIVE SCHEME (PLI scheme)
CEO from Unilever Sudhir Sitapati hire by Godrej Consumer
On Wednesday Godrej’s consumer share price surged by 21.87%. Godrej has underperformed most of its peers in the past few years, which may change as the new leader brings in a new strategy that may entail some hard decisions,
Sitapati, who has spent nearly 22 years with the Indian unit of Anglo-Dutch giant Unilever, was instrumental in building the company’s foods and refreshments business as one of the largest in the country, which also included the merger and integration of GlaxoSmithKline Plc’s Indian consumer-health unit with Hindustan Unilever.
Subscription for Sovereign Gold Bond open from May 17
The first tranche of Sovereign Gold Bonds 2021-22 will be open for subscription for five days from Monday 17th and end on 21st May and bonds issued on 25th May.
The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor of the bond will be for 8 years with an exit option after the 5th year to be exercised on the next interest payment dates.
First user gain in 15 months lifts Voda stock
Rallied over 13 per cent in early trade on Wednesday in a weak market, as the telco reported monthly user gains for the first time in 15 months.
While that user gain held out a ray of hope for investors, analyst after analyst has downgraded the stock and cut price targets, as uncertainty loomed over its much-awaited fundraising plans.
Zydus Cadila Sell India Animal Business:
Cadila Healthcare’s (Zydus Cadila’s) wholly-owned material subsidiary Zydus Animal Health and Investments (ZAHL) is set to sell its animal healthcare business to a consortium led by Multiples Alternate Asset Management for nearly Rs 3,000 crore.
The deal is to sell one of the two business undertakings of ZAHL on a slump-sale basis as a going concern, for Rs 2,921 crore on a cash-free and debt-free basis, subject to certain closing date adjustments and other conditions.
Elon Musk Sends Bitcoin Tumbling With Stunning U-Turn On Payments
Wednesday, Musk cited concerns about the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions,” while signaling that Tesla might accept other cryptocurrencies if they are much less energy-intensive. He also said the company won’t be selling any of the Bitcoin it holds.
The largest cryptocurrency dropped as much as 15% in Asian trading, sliding below $50,000, before paring some of the drops. It was down about 8% to $50,190 as of 10:53 a.m. in Tokyo. There were reports of outages at digital-token exchanges as people rushed to sell.
The Production linked incentive (PLI) scheme is a scheme that aims to give incentives to companies on incremental sales (base year is 19-20) from products manufactured in India. It aims to encourage local companies to set up and expand existing manufacturing units thus cutting down reliance on imports from other countries, mainly China. It will also invite foreign companies to set up manufacturing units in India.
Purpose of the Scheme
1. To introduce non tariff measures that would make imports expensive.
2. To focus more on the domestic market by producing locally and exporting to other countries
3. To offer production incentives and encourage investments both from within and outside.
Sectors covered in the PLI Scheme
The initial beneficiary of the PLI scheme was the Pharmaceutical industry where 53 drugs were made eligible for the scheme amounting to Rs 6940 Cr in March 2020. Then, As a part of the National Policy on Electronics, on April 1, 2020, the IT Ministry had notified a scheme which would give incentives of 4-6% to electronics companies that manufacture mobile phones and other electronic components amounting to Rs 40,951 Cr.
The other sectors that are covered are:
Source – CARE Ratings
• ACC battery manufacturing represents one of the largest economic opportunities of the twenty-first century for several global growth sectors, such as consumer electronics, electric vehicles, and renewable energy. The PLI scheme for ACC battery will incentivize large domestic and international players in establishing a competitive ACC battery set-up in the country.
• India is expected to have a USD 1 trillion digital economy by 2025. Additionally, the Government’s push for data localization, the Internet of Things market in India, projects such as Smart City and Digital India are expected to increase the demand for electronic products. The PLI scheme will boost the production of electronic products in India.
• The automotive industry is a major economic contributor in India. The PLI scheme will make the Indian automotive Industry more competitive and will enhance the globalization of the Indian automotive sector.
• The Indian pharmaceutical industry is the third-largest in the world by volume and 14th largest in terms of value. It contributes 3.5% of the total drugs and medicines exported globally. India possesses a complete ecosystem for the development and manufacturing of pharmaceuticals and a robust ecosystem of allied industries. The PLI scheme will incentivize the global and domestic players to engage in high-value production.
• Telecom equipment forms a critical and strategic element of building a secured telecom infrastructure and India aspires to become a major original equipment manufacturer of telecom and networking products. The PLI scheme is expected to attract large investments from global players and help domestic companies seize the emerging opportunities and become big players in the export market.
• The Indian textile industry is one of the largest in the world and has a share of ~5% of global exports in textiles and apparel. But India’s share in the manmade fiber (MMF) segment is low in contrast to the global consumption pattern, which is majorly in this segment. The PLI scheme will attract large investment in the sector to further boost domestic manufacturing, especially in the MMF segment and technical textiles.
• The growth of the processed food industry leads to better prices for farmers and reduces high levels of wastage. Specific product lines having high growth potential and capabilities to generate medium- to large-scale employment have been identified for providing support through the PLI scheme.
• Large imports of solar PV panels pose risks in supply-chain resilience and have strategic security challenges considering the electronic (hackable) nature of the value chain. A focused PLI scheme for solar PV modules will incentivize domestic and global players to build large-scale solar PV capacity in India and help India leapfrog in capturing the global value chains for solar PV manufacturing.
• White goods (air conditioners and LEDs) have a very high potential for domestic value addition and making these products globally competitive. A PLI scheme for the sector will lead to more domestic manufacturing, the generation of jobs, and increased exports.
• Steel is a strategically important industry and India is the world’s second-largest steel producer in the world. It is a net exporter of finished steel and has the potential to become a champion in certain grades of steel. A PLI scheme in Specialty Steel will help in enhancing manufacturing capabilities for value-added steel leading to an increase in total exports.
How Can India Benefit?
India will be well-positioned as a global hub for the manufacturing of Telecom and Networking Products. Incremental production of around Rs. 2 Lakh crore is expected to be achieved over 5 years. India will improve its competitiveness in manufacturing with increased value addition. It is expected that the scheme will bring more than Rs. 3,000 crore investment and generate huge direct and indirect employment. Through this policy, India will move towards self-reliance, thus realizing the goal of Atmanirbhar Bharat. The provision of higher incentives to MSME will encourage domestic telecom manufacturers to become part of the global supply chain.
The PLI is definitely a big boost to the manufacturing in India with some sectors to benefit specifically. The companies must deliver on both, the investment and sales to derive the benefit. Jobs will be created, local manufacturing will be boosted, India’s dependency on imports will reduce and exports will sharply rise. The base year of 2019-20 will be of advantage for the companies.
The only concern is that the performance parameters are stiff (For example, in case of the product of mobiles (value of above Rs 15,000) in the first year, companies must invest Rs 250 crore and show an incremental output of Rs 4,000 crore to claim the 6% benefit.)
If these norms and criterias are eased, the benefit derived would be greater.
There are a few companies that will directly benefit from this scheme and these would be shared in our sectoral reports at a later date.