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* Industry
BUDGET-22: DAVOS SPEECH INDICATES INFRA ON PM-FM'S MIND, INDUSTRY CHIPS IN ITS
OWN SUGGESTIONS
Industry leaders are happy after Prime Minister Narendra Modi's speech at the
World Economic Forum (WEF) in Davos, where he dwelt on India's infrastructure
development mission in detail, informing the world leaders that an investment of
$1.3 trillion is being made, especially on connectivity infrastructure.
* IANS
* January 24, 2022, 07:55 IST
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New Delhi, Industry leaders are happy after Prime Minister Narendra Modi's
speech at the World Economic Forum (WEF) in Davos, where he dwelt on India's
infrastructure development mission in detail, informing the world leaders that
an investment of $1.3 trillion is being made, especially on connectivity
infrastructure.
Through innovative financing tools like asset monetisation, a target to generate
$80 billion has been set and India has also launched the 'Gati Shakti National
Master Plan' to bring every stakeholder on the same platform for promoting
development. Under this National Master Plan (NMP), work will be done on
infrastructure planning, development, and implementation in an integrated
manner. This will give a new impetus to seamless connectivity and movement of
goods, people, and services.
Budget 2021-22 seems set to reflect the government's commitment to boost
economic growth by investing in infrastructure development. This was
substantiated by an increase in capital expenditure by 34.5 per cent (Rs
1,42,151 crore) over BE 2020-21. In the last three Budgets, the Ministry of Road
Transport and Highways' demand for grants shows the total Central expenditure on
the sector was Rs 78,248.72 crore in Budget 2019-20, which was later increased
up to Rs 10,1823.22 crore in Budget 2020-21, and Rs 11,8101.00 crore in Budget
2021-22.
The Prime Minister's 'Gati Shakti National Master Plan' echoes the sentiments of
industry and trade bodies.
Asked about the expectation from the government in the infrastructure sector in
the upcoming budget, the Confederation of Indian Industry (CII) says that the
government should focus more on strengthening logistics and related
infrastructure, rationalise the time across all major ports and customs,and
encourage membership to the authorised economic operator (AEO) programme, which
carries several benefits for industry.
On infrastructure, the CII says that the government should promote digitisation
of court procedures, facilitate publication of model contract templates and
promote Alternative Dispute Resolution (ADR) mechanism, create dedicated benches
of the NCLT for matters related to IBC, revamp cost of electricity supply from
the grid to reduce costs, and standalone captive generators should not be
penalised with electricity duty.
The Federation of Indian Chambers of Commerce and Industry (FICCI) seeks that
the government resolve the issue of non-fund credit to the infrastructure
sector. It says that industry has a problem with non-fund-based credit. The
major problem relates to bank guarantees, in the way such BGs are required by
clients, the way they are issued by banks, and most importantly, the way they
are extinguished. This is adding unnecessarily to project costs and will be the
single biggest obstacle to rapidly completing construction under the NIP.
Typically, 20 per cent of the project cost is locked up in BGs that extend into
over 4 to 10 years. Hence, if the NIP is targeting Rs 40 trillion in FY 21 and
FY22, the BGs of Rs 8 trillion would have to be taken by the private sector only
in 2 years. It is time to go for revolving bank guarantees or insurance surety
bonds, it said.
Along with this, the FICCI requested the government to issue a quarterly bidding
calendar for the National Infrastructure Pipeline as well as the National
Monetisation Pipeline as this will help the private sector in active
participation.
ASSOCHAM thinks that the launch of the PM Gati Shakti programme is a landmark
policy and execution enabler for providing ultra-speed to crucial infrastructure
projects as India would see a cohesive approach to a holistic development with
the Gati Shakti multi-modal connectivity, through a common technology-driven
platform, not only bringing 16 different Central ministries to a common goal and
vision but also taking the state governments on board. That is going to make a
critical difference to the speed and cost-effectiveness of the projects, it
said.
ASSOCHAM Secretary General said the Gati Shakti programme would infuse a great
sense of urgency to the $1.5 trillion National Infrastructure Pipeline across
different sectors, be it railways, ports, airports, waterways, and gas
pipelines. Its execution would lead to a huge reduction in transaction costs and
improvement in ease of doing business, as it is addressing a critical issue of
quality infrastructure. Besides, at this point in the global economic paradigm,
more and more progressive nations are focussing on raising spending on
infrastructure as that has a great multiplier for the rest of the economy.
--IANS
nimesh/vd
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Dhananjay Sinha, managing director and chief – strategist of JM Financial
Institutional Securities Ltd, believes that for 10 odd years, there has been
a complete dearth of investments in India, which is the longest decline in
the country's investment cycle. Though there are phases where there is high
level of enthusiasm from the private sector, but overall the private capex
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INDIA'S ECONOMY HAS SOME BRIGHT SPOTS, A NUMBER OF VERY DARK STAINS: RAGHURAM
RAJAN
"My greater worry about the economy is the scarring to the middle class, the
small and medium sector, and our children's minds, all of which will come into
play after an initial rebound due to pent up demand. One symptom of all this is
weak consumption growth, especially for mass consumption goods," Rajan told PTI
in an e-mail interview.
* PTI
Click Here to Read This Story
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The Indian economy has "some bright spots and a number of very dark stains" and
the government should target its spending "carefully" so that there are no huge
deficits, noted economist and former RBI Governor Raghuram Rajan said on Sunday.
Known for his frank views, Rajan also said the government needs to do more to
prevent a K-shaped recovery of the economy hit by the coronavirus pandemic.
Generally, a K-shaped recovery will reflect a situation where technology and
large capital firms recover at a far faster rate than small businesses and
industries that have been significantly impacted by the pandemic.
"My greater worry about the economy is the scarring to the middle class, the
small and medium sector, and our children's minds, all of which will come into
play after an initial rebound due to pent up demand. One symptom of all this is
weak consumption growth, especially for mass consumption goods," Rajan told PTI
in an e-mail interview.
Rajan, currently a Professor at the University of Chicago Booth School of
Business, noted that as always, the economy has some bright spots and a number
of very dark stains.
"The bright spots are the health of large firms, the roaring business the IT and
IT-enabled sectors are doing, including the emergence of unicorns in a number of
areas, and the strength of some parts of the financial sector," he said.
On the other hand, "dark stains" are the extent of unemployment and low buying
power, especially amongst the lower middle-class, the financial stress small and
medium-sized firms are experiencing, "including the very tepid credit growth,
and the tragic state of our schooling".
Rajan opined that Omicron is a setback, both medically and in terms of economic
activity but cautioned the government on the possibility of a K-shaped economic
recovery.
"We need to do more to prevent a K shaped recovery, as well as a possible
lowering of our medium term growth potential," he said.
The country's GDP is expected to grow over 9 per cent in the current financial
year that ends on March 31. The economy, which was significantly hit by the
pandemic, had contracted 7.3 per cent in the last fiscal.
Ahead of the Union Budget, Rajan said that budgets are supposed to be documents
containing a vision and he would love to see a five- or ten-year vision for
India as well as a plan for the kinds of institutions and frameworks the
government intends to set up.
On whether the government should go for fiscal consolidation or continue with
stimulus measures, Rajan pointed out that India's fiscal situation, even coming
into the pandemic, was not good and this is why the finance minister cannot
spend freely now.
While the government must spend where necessary at this time to alleviate the
pain in the most troubled areas of the economy, he said, "We must target the
spending carefully so that we do not run huge deficits."
Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget
2022-23 in Parliament on February 1.
Regarding the rising inflationary trends, Rajan said inflation is a concern in
every country, and it would be hard for India to be an exception.
According to him, announcing a credible target for the country's consolidated
debt over the next five years coupled with the setting up of an independent
fiscal council to opine on the quality of the budget would be very useful steps.
"If these moves are seen as credible, the debt markets may be willing to accept
a higher temporary deficit," he said, adding that to convince markets that "we
will be responsible, we should strengthen the institutional support to future
fiscal consolidation."
Further, Rajan said that one way to expand budgetary resources is through asset
sales, including parts of government enterprises and surplus government land.
"We need to be strategic about what we can sell, and how we can improve the
economy's performance through those sales... Once we decide to sell, though, we
should move fast, something we have not done so far," he opined.
Regarding the upcoming budget, Rajan said that he would be happy to see more
tariff cuts and far fewer tariff increases, and far fewer sops or subsidies to
specific industries. "Particularly, (I) would welcome an independent assessment
of the Production Linked Incentive schemes".
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AMAZON CONFIRMS SAMARA CAPITAL READY TO INVEST RS 7,000 CR IN FRL TO ACQUIRE
ASSETS
On January 19, Amazon had approached the independent directors of FRL
reiterating its willingness to assist the Mumbai-based company in addressing its
financial concerns.
* PTI
Click Here to Read This Story
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NEW DELHI: Amazon has written to independent directors of Future Retail Ltd
(FRL), confirming that Samara Capital "remains interested and committed" to
invest Rs 7,000 crore for buying all retail assets of the debt-ridden company
and asked the retail firm to furnish existing due diligence reports to Samara by
Sunday, according to sources.
On January 19, Amazon had approached the independent directors of FRL
reiterating its willingness to assist the Mumbai-based company in addressing its
financial concerns. In response, the independent directors had asked Amazon to
confirm by January 22 that it will infuse Rs 3,500 crore into the cash-strapped
retailer in order to repay FRL's lenders by January 29, 2022.
Amazon - in its reply on January 22 - said "we confirm that based on your letter
dated January 21, 2022, Samara Capital has once again reiterated to us that they
remain interested and committed to lead and take forward the term sheet dated
June 30, 2020, signed amongst Samara, FRL and the Promoters of FRL…”
The term sheet contemplates a purchase consideration of Rs 7,000 crore, as per
the letter, a copy of which was seen by PTI.
"Pertinently, the Samara Term Sheet provides for an acquisition of all retail
assets of FRL, including the "small store formats" comprising the 'Easy Day',
'Adhaar' and 'Heritage' brands, through an Indian owned and controlled entity
structure led by Samara and supported by Amazon," said the e-commerce major in
the letter.
Amazon said the transaction envisaged in the Samara Term Sheet would ensure
availability of funds in FRL at the earliest, through an asset sale and an
equity infusion, which would be a direct antidote to FRL's indebtedness.
Emails sent to Amazon and Future group did not elicit any response.
Amazon, in its latest letter, asserted that its engagement will not affect the
binding nature of the injunctions passed in the Arbitration Proceedings and by
Indian Courts, and said the new transaction will have the understanding that
"the transaction with the Mukesh Dhirubhai Ambani (Reliance Industries Limited)
group (MDA Group) will not proceed and not be acted upon; and all assistance
would be done through legally compliant structures".
Future and Amazon have been locked in a bitter legal tussle after the US
e-commerce giant dragged Future Group to arbitration at the Singapore
International Arbitration Centre (SIAC) in October 2020, arguing that FRL had
violated their contract by entering into a deal for the sale of its assets to
billionaire Mukesh Ambani's Reliance Retail on a slump sale basis for Rs 24,713
crore.
Earlier this month, Future Retail had said it had missed the due date for
payment of Rs 3,494.56 crore to banks and lenders as it could not sell assets
due to its ongoing litigation with Amazon, impacting its monetisation plans.
Notably, in December, fair trade regulator Competition Commission of India (CCI)
had suspended the 2019 approval for Amazon's deal to acquire a 49-per cent stake
in Future Coupons Pvt Ltd (FCPL), FRL's promoter, while slapping a penalty of Rs
202 crore on the e-commerce major.
The CCI order has been challenged by Amazon before the National Company Law
Appellate Tribunal, which has issued notice to the fair trade regulator and
FCPL. The NCLAT has directed to list the matter on February 2 for the next
hearing.
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UNION BUDGET: INDIAN STARTUPS SEEK FRIENDLY POLICIES, TAX INCENTIVES
To further aid small businesses and empower entrepreneurs, the Union Budget
2022-23 should introduce additional startup-friendly policies and tax
relaxations to enable spending on innovation, ease-of-doing business and
reducing compliance costs, a slew of homegrown startups said.
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New Delhi, To further aid small businesses and empower entrepreneurs, the Union
Budget 2022-23 should introduce additional startup-friendly policies and tax
relaxations to enable spending on innovation, ease-of-doing business and
reducing compliance costs, a slew of homegrown startups said.
New reforms, policy assistance and support mechanisms for establishing a focused
approach in solving unmet financial needs through technology will significantly
benefit the economy, they stressed.
"We've seen a substantial spike in the adoption of digital payments in the last
one year. I'm hoping that in the upcoming Budget, the government will think of
alternatives to the Zero MDR (merchant discount rate) policy, as that will help
promote e-payments and drive significant digital adoption among businesses,"
said Harshil Mathur, CEO and Co-founder, Razorpay.
In last year's Budget, Finance Minister Nirmala Sitharaman had announced Rs
1,500 crore to further accelerate digital payments' growth in the country.
Mathur said that it would also be desirable for the government to increase
contribution to the Fund of Funds for Startups (FFS).
"Hassle-free loan disbursements, automation of tax and compliance, paper-less
approvals, and incentives to adopt digital banking practices will also be
welcome changes that can support the growth of MSMEs," he added.
To incentivise startups, the government had last year extended the eligibility
for claiming tax holidays for startups by a year to March 31, 2022.
It also extended the capital gains exemption for investment in startups by a
year to March 31, 2022, to boost funding.
The country has also seen numerous startups incentivising their employees in the
past year with buying back ESOPs.
"Deferring tax payments when exercising the option, plus waiving tax for some
ESOP receipts, will also be a laudable change in the new budget," said Mathur.
According to Ravish Naresh, CEO and Co-founder, Khatabook, they are hoping for a
progressive Budget, especially aimed at promoting homegrown startups focused on
problem-solving for India.
"New reforms, policy assistance, and support mechanisms for establishing a
focused approach in solving unmet financial needs through technology will
significantly benefit the economy," Naresh told IANS.
"In addition, the government's continued focus on enhancing digital
infrastructure in the country will ensure progress towards equality in digital
access in FY22-23," he added.
In the last year's Budget, the government had said it will facilitate setting up
of a world-class fintech hub in Gujarat International Finance Tec (GIFT) city.
The government also proposed a portal to collect relevant information on gig
workers to help formulate social security schemes for them.
Vidit Aatrey, Founder and CEO of homegrown social commerce platform Meesho, said
that a singular focus on augmenting offline MSMEs with online distribution could
be a game-changing economic transformation opportunity.
"We would like to see the government focus on policies that will create a level
playing field for offline and online sellers with less than Rs 40 lakh
turnover," Aatrey told IANS.
"Simplifying GST compliance requirements for online sellers will also enable
millions of small businesses to leverage the potential of e-commerce and
contribute to India's growing digital economy," he added.
In addition to this, the startups hope that the government incentivises capital
formation in the area of logistics and cold chains through policies and
infrastructure development.
Akash Gupta, Co-founder and CEO, Zypp Electric, said that they are optimistic
that the government will announce new initiatives to encourage local EV
manufacturing, facilitate easy finance and create an innovative EV ecosystem.
"We urge the government to reduce GST on EV purchases and rentals from 5 per
cent to 2 per cent. A reduced GST would allow consumers to smoothly shift to
EV," Gupta told IANS.
Indian startups raised a record $24.1 billion in 2021, a two-fold increase over
pre-Covid levels, while $6 billion were raised via public markets with 11
startup IPOs, a Nasscom-Zinnov report said last week.
The Indian tech startup base continues to witness steady growth, adding over
2,250 startups in 2021, which is 600 more than 2020.
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NITI AAYOG MOOTS PRIORITY SECTOR LENDING FOR EVS
It suggested that the central bank may consider various EV segments and use
cases based on five parameters: socio-economic potential, livelihood generation
potential, scalability, techno-economic viability, and stakeholder
acceptability.
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Niti Aayog has proposed inclusion of electric vehicles in the Reserve Bank of
India's priority-sector lending guidelines, saying the move will help give a
significant push to retail lending for EVs.
Banks and non-banking financial companies (NBFCs) in India have the potential to
achieve an electric vehicle (EV) financing market size of ₹40,000 crore by 2025
and ₹3.7 lakh crore by 2030, the official think tank said in a report on EVs
released on Friday.
"However, retail finance for EVs has been slow to pick up," said the report
prepared along with Rocky Mountain Institute (RMI) and RMI India.
It suggested that the central bank may consider various EV segments and use
cases based on five parameters: socio-economic potential, livelihood generation
potential, scalability, techno-economic viability, and stakeholder
acceptability.
Priority-sector lending (PSL) aims to expand financial access and support
employment opportunities in India.
"Financial institutions have an important role to play in accelerating the
adoption of EVs in India and supporting the decarbonisation of road transport,"
said Amitabh Kant, chief executive officer of Niti Aayog.
"RBI's PSL mandate has a proven track record of improving the supply of formal
credit towards areas of national priority. It can provide a strong regulatory
incentive for banks and NBFCs to scale their financing to EVs," he said.
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BUDGET EXPECTATIONS, Q3 RESULTS AND MORE. HERE'S A LOOK AT THIS WEEK'S TOP NEWS
This week, the BFSI sector proposed their demands for the upcoming Union Budget,
and India Inc began to report their Oct-Dec results. Here's a recap of the top
news this week.
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Expectations from Union Budget, World Economic Forum summit, quarterly results
and developments regarding LIC IPO were among the top developments this week.
Markets also witnessed a highly volatile week due to fears over the spread of
Omicron.
Here's a recap :
Budget 2022
What’s on the wishlist of NBFCs?
Non-bank financial companies expect the government to continue pumping in
liquidity this financial year, as it will boost the sector’s employment, and
direct disposable income and consumption. Housing finance companies expect the
government to focus on affordable and rental housing, while gold loan NBFCs want
the priority sector status.
Tax breaks, GST, premiums. Here are top demands of general insurers
General insurers believe that health insurance is not an option, but it has
become a necessity in these trying times. Leaders have urged that the government
should reduce GST rates from 18% to 5% on health insurance premiums as it will
encourage people to opt for better health coverage.
Tax sops on FDs, more leeway to foreign banks. Here's banking sector's wishlist
The banking sector has a host of demands and suggestions for the Union Budget,
including tax sops on fixed deposits and spending for financial inclusion and
digital banking. Tax incentives on fixed deposits, enhancing I-T deduction limit
on bad loans, aligning with Reserve Bank of India's norms and income tax laws,
are among the wishlist of bankers from the upcoming Union Budget.
Crypto
Govt may consider levying TDS/TCS on crypto trading
The government could consider levying TDS/TCS on sale and purchase of
cryptocurrencies above a certain threshold, and that such transactions should be
brought within the ambit of specified transaction for the purpose of reporting
to income tax authorities.
Should tackle crypto challenges with common approach, says PM Modi
Comparing digital currency to inflation and climate change, Prime Minister
Narendra Modi called for a worldwide action on cryptocurrencies at the World
Economic Forum summit, held on Monday. Challenges of cryptocurrency as digital
assets need to be dealt with a common approach and similar mindsets, said Prime
Minister Narendra Modi on Monday at a WEF Summit.
Cryptocurrencies crash 40% from peak, face more volatility
Bitcoin and other leading crypto coins experienced a significant drop in share
price after investors began global rate tightening, dumping mining equipment as
China announced fresh regulations and Tesla founder Elon Musk making a U-Turn on
cryptocurrencies.
Quarterly Results
HDFC Bank Q3 Results: Profit jumps 18% YoY to Rs 10,342 cr on strong revenues
HDFC Bank reported a net profit of Rs 10,342.2 crore in October-December
quarter; registering an increase of 18 per cent year-on-year as strong growth in
the private lender’s net revenues boosted its bottom line.
Bandhan Bank Q3 profit rises 36 pc to Rs 859 cr
Bandhan Bank reported a 36 per cent rise in net profit at Rs 859 crore for the
third quarter ended December 31, 2021. The private sector lender had posted a
net profit of Rs 633 crore in the same period of the previous fiscal year.
ICICI Securities Q3 results: Net profit up 42% to Rs 380 cr
ICICI Securities reported a 42 per cent growth in profit after tax at Rs 380
crore for the December 2021 quarter. The company had posted a PAT of Rs 267
crore in the corresponding quarter of the preceding fiscal, ICICI Securities
said in a statement.
Bajaj Finance shares jump nearly 4 pc after Q3 earnings
Shares of Bajaj Finance jumped nearly 4 per cent after the company reported an
85.5 per cent rise in consolidated net profit for the third quarter of the
current fiscal. The stock spurted by 3.82 per cent to touch its 52-week high of
Rs 8,043.50 on the BSE.
ICICI Lombard General Q3 profit remains flat at Rs 318 cr
ICICI Lombard General Insurance reported a marginal 1.2 per cent growth in net
profit at Rs 318 crore for December quarter 2021-22. It had posted a net profit
of Rs 314 crore in the year-ago period, the non-life insurer said in a
regulatory filing.
Bank of Maharashtra Q3 profit more than doubles to Rs 325 cr
State-owned Bank of Maharashtra (BoM) reported an over two-fold increase in net
profit at Rs 325 crore for the third quarter ended December 2021, helped by a
decline in bad loans.
BFSI Movements
RBI OKs appointment of former CAG Vinod Rai as independent chairman of Unity SFB
The Reserve Bank of India has approved the appointment of Vinod Rai, former
Comptroller and Auditor General (CAG) of India, as the Independent Chairman of
Unity Small Finance Bank Ltd, according to a statement by the bank.
BharatPe's Grover takes voluntary leave till March amid Kotak Group audio clip
row
Bharatpe co-founder Ashneer Grover has been in the middle of a controversy,
after an audio clip of his purported phone conversation with a Kotak Group
employee was leaked earlier this month. He has taken voluntary leave till
March-end, according to a statement released by the company on Wednesday.
Exide Life appoints Sanjay Vij as the ED and Principal Officer
Exide Life has announced the appointment of Sanjay Vij as the Executive Director
and Principal Officer. On January 1, 2022, HDFC Life Insurance Company Limited
announced the completion of the acquisition of Exide Life Insurance Company
Limited, subsequent to receiving all relevant regulatory approvals, an Exide
Life statement noted.
Other takeaways
Sebi tightens rules governing utilisation of IPO proceeds
Tightening rules for initial public offering (IPO), Sebi has put a cap on the
usage of the issue proceeds for unidentified future acquisitions and restricted
the number of shares that can be offered by significant shareholders.
Vijay Mallya to become a 'homeless' man
Embattled businessman Vijay Mallya, who lost a legal battle to hold on to his
plush London home after a British court refused to grant him a stay of
enforcement in a dispute with Swiss bank UBS, may be a homeless man now, at
least on paper.
IBA seeks ECLGS extension till March 2023, additional credit for borrowers
The Indian Banks’ Association (IBA) has sought an extension of the Rs 4.5 lakh
crore Emergency Credit Line Guarantee Scheme (ECLGS) for micro, small and medium
enterprises (MSMEs) by at least another year through March 2023 to provide some
relief to the Covid-hit industry.
RBI sees India global bond inclusion this year
The Reserve Bank of India expects the inclusion of Indian sovereign bonds in
global bond indices this year. "Going forward, a strong pipeline for IPOs in
2022 and the likely inclusion of sovereign bonds in global bond indices may
support FPI inflows," RBI said in its State of the Economy report.
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'BANKS, NBFCS IN INDIA HAVE POTENTIAL TO ACHIEVE EV FINANCING MARKET SIZE OF RS
40K CR BY 2025'
Banks and non-banking financial companies (NBFCs) in India have the potential to
achieve an electric vehicle financing market size of Rs 40,000 crore by 2025 and
Rs 3.7 lakh crore by 2030, according to a report released on Friday.
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New Delhi, Banks and non-banking financial companies (NBFCs) in India have the
potential to achieve an electric vehicle financing market size of Rs 40,000
crore by 2025 and Rs 3.7 lakh crore by 2030, according to a report released on
Friday. Government think-tank Niti Aayog and the Rocky Mountain Institute (RMI)
India in a joint report, titled 'Banking on Electric Vehicles in India',
outlined the importance of priority sector recognition for retail lending in the
electric mobility ecosystem.
"Banks and non-banking financial companies (NBFCs) in India have the potential
to achieve an electric vehicle (EV) financing market size of Rs 40,000 crore
(USD 5 billion) by 2025 and Rs 3.7 lakh crore (USD 50 billion) by 2030.
"However, retail finance for EVs has been slow to pick up," it said.
The report also stressed the need for the inclusion of lending by banks and
NBFCs for buying EVs in the Reserve Bank of India's (RBI) priority-sector
lending (PSL) guidelines.
Priority sector lending aims to expand financial access and support employment
opportunities in India.
To meet these goals, the report suggested that the RBI might consider various EV
segments and use cases based on five parameters -- socio-economic potential,
livelihood generation potential, scalability, techno-economic viability, and
stakeholder acceptability.
It indicated that electric two-wheelers, three-wheelers and commercial
four-wheelers can be early segments to prioritise under PSL.
Moving forward, the engagement of other ministries and industry stakeholders
will be important to ensure that the guidelines designed can effectively enhance
EV investment in India, the report added.
To maximise the impact of the inclusion of EVs, the report also recommended a
clear sub-target and a penalty mechanism for the priority sector lending to
renewable energy and EVs.
Furthermore, it suggested recognition of EVs as an infrastructure sub-sector by
the Ministry of Finance and the incorporation of EVs as a separate reporting
category under the RBI.
Multipronged solutions such as these are needed not only for EV penetration and
businesses but also for the financial sector and India's 2070 net-zero target,
the report said.
Commenting on the report, Niti Aayog CEO Amitabh Kant said financial
institutions have an important role to play in accelerating the adoption of EVs
in India and supporting the decarbonisation of road transport.
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IN CHARTS: INDIA COULD ADD ANOTHER 45 STARTUP UNICORNS IN THE NEXT 12-18 MONTHS
Forty three local startups joined the elite unicorn club last year amid a
funding frenzy.
* Sunainaa Chadha
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NEW DELHI: India may add as many as 45 startup unicorns companies that have the
potential to achieve a $1 billion-plus valuation ) in the next 12-18 months,
according to data analyzed by PGA Labs.
The analysis includes data of over 100 growth-stage startups for the period
between Oct-Dec 2021. These startups are from diverse sectors such as FinTech,
HealthTech, Logistics, Gaming, Retail Tech, Enterprise Tech, AgriTech, Egrocery
and SaaS.
Forty three local startups joined the elite unicorn club last year amid a
funding frenzy.
Out of the 45 Soon to be Unicorns' aka 'Soonicorns' list, the highest is from
the FinTech sector, followed by Logistics, and then AgriTech.
Fintech leads the sectoral pack, with the potential to add 15 unicorns.
Logistics and agritech are the other segments that are likely to add the highest
number of unicorns in the next few months.
Bengaluru is still a startup heaven with most Unicorn activity followed by
Delhi-NCR and Chennai.
The 45 soon to be unicorns include online pharmacy 1mg, online distribution
platform for financial products BankBazaar, SAAS platform for tutors Classplus,
Porter, the app based platform providing trucking services, telemedicine and
appointment booking platform Practo, BNPL platform Zestmoney, logistics
aggregator Shiprocket etc.
Honasa Consumer, the parent company of personal care brands such as Mamaearth
and The Derma Co, became the first Unicorn of 22 after it raised $52 million in
a round led by Sequoia at a valuation of $1.2 billion.
India is currently home to 81 unicorns as of now, with a total valuation of $274
billion. Of these, 43 unicorns with a total valuation of $89 billion emerged
just last year. “Over $10 billion was invested in the Indian startup ecosystem
in the October-December quarter alone,” according to a report by consultancy
firm PwC India.
In fact the consultancy firm estimates that India has 50 startups with the
potential to achieve the coveted unicorn status in 2022, and by the end of the
year, the list of the new-age companies valued at over $1 billion will be at
least 100.
“We can see that the base of the companies in the growth stage and late-stage
deals have improved significantly in CY21, depicting a stronger base of
companies having the potential to reach unicorn status,” the firm’s partner for
deals and startups Amit Nawka said.
In its list of 50 potential unicorns, 11 start-ups are in the fintech space,
including Lendingkart, Cleartax, Rupeek, Aye Finance and Mswipe; six start-ups
from SaaS, including Yellow.ai and MoEngage; and eight start-ups from
Logisticstech- Shiprocket, Zoomcar, Bounce and Dunzo- have the potential to turn
into unicorns, as these companies have raised over $100 million till date.
The unicorn funding round is usually for $100-150 million.
“Applying the same benchmark, companies that have raised more than $100 million
till date stand a fair chance of becoming a unicorn in the next funding round"
said the PwC report.
A December 2021 report by the Hurun Research Institute had said that India is
the third-largest home for unicorns globally, but trails the US and China by a
wide margin.
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ECONOMIC AGENDA FOR 2022: TOP FOCUS AREAS FOR THE COMING BUDGET
The government should direct its efforts towards placing India as a global
supply hub, as global manufacturing and trade begin to find new core areas
replacing China. In this context, the National Infrastructure Pipeline (NIP)
would play a significant role.
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As per NSO’s first advance estimates, India’s real GDP growth in 2021-22 is
estimated at 9.2%, that is 30 basis points lower than the RBI and IMF ’s
projection at 9.5%. Eventually, due to the adverse economic impact of the
ongoing third wave of COVID, India may be able to show a real growth of nearly
9% in the current fiscal year. According to the advance estimates, at the end of
2021-22, the magnitude of GDP in real terms is estimated at Rs 147.5 lakh crore
that is only marginally higher than Rs 145.7 lakh crore in 2019-20. Thus, due to
the three waves of COVID that India has experienced, nearly two years of real
growth in economic activities have been wiped out. Since COVID’s deleterious
impact may continue for some more time, it may not be prudent to expect a real
growth that is tangibly higher than 7.0%.
Supporting growth while containing inflation
The key focus of the 2022-23 budget should be to support growth by reviving both
consumption and investment demand while containing inflation. While inflation
largely has external roots, India’s economic agenda should address the supply
side bottlenecks, focusing on continued infrastructure expansion particularly
for the health sector.
The government should direct its efforts towards placing India as a global
supply hub, as global manufacturing and trade begin to find new core areas
replacing China. In this context, the National Infrastructure Pipeline (NIP)
would play a significant role. It is time now to take up a mid-term assessment
of the NIP and recast its timelines and sectoral priorities in order to make up
for the existing deficiencies in relation to the original targets particularly
in the health sector. In this regard, the infrastructure investment undertaken
by the state governments and the public sector should be realistically
ascertained and shortfalls with respect to the original targets may be
identified. Continued infrastructure expansion is critical to strengthen the
ongoing growth momentum as well as to achieve our potential growth of 7.0% plus.
As per the advance estimates, in 2021-22, the magnitude of private final
consumption expenditure (PFCE) at constant prices is estimated to be lower by
INR2.4 lakh crore as compared to its 2019-20 level. To support consumption
demand, the government may consider introducing an urban counterpart to MGNREGA.
This would require developing a registration process for the urban unemployed, a
mechanism for updating this database, and linking this scheme to developing
urban infrastructure throughout India. This will not only generate income and
employment in the urban areas but also cater to significant deficiencies in city
infrastructure which may be identified at the local level. In addition, the
government should directly support some of the contact-intensive sectors such as
tourism, aviation, hospitality etc. which have been suffering due to COVID.
Budget prospects
In 2022-23, we expect the real GDP growth rate to moderate to 7%. With the
IPD-based inflation expected to range between 6-6.5%, a nominal GDP growth of
about 14% may be feasible. The weakening of base effects is expected to lead to
a lower annual gross tax revenues (GTR) growth of about 16%, implying a buoyancy
of little less than 1.2. This would still be much higher than the average GTR
growth at 5.6% during the pre-COVID period from 2017-18 to 2019-20.
With respect to non-tax receipts, while a National Monetization Pipeline (NMP)
was specified last year, it does not cover monetization of land assets owned by
government including defence and non-defence sectors as well as the public
sector. These assets can be suitably monetized, and the preferred mode of
monetization can be leasing of such land at commercial rates throughout India.
State-level public sector can also participate in this endeavour.
Signalling fiscal consolidation
The fiscal consolidation path as specified in the 2018 amendment of Centre’s
FRBMA has been missed by a significant margin especially due to the onset of
COVID, resulting in a sharp increase in the general government debt-GDP ratio
which is estimated to be nearly 88.0% by end-March 2022. The Fifteenth Finance
Commission (FC 15) had recommended the constitution of a High-powered
intergovernmental group to re-examine the sustainability parameters of debt and
fiscal deficit of the central and state governments. As per the FC 15, the
2022-23 fiscal deficit for the centre was benchmarked at 5.5% of GDP. In their
pessimistic scenario, it was kept at 6% of GDP. The government should now signal
a calibrated return to fiscal consolidation while ensuring at the same time that
the growth momentum is maintained. A reduction in fiscal deficit of about 1%
point of GDP from its expected level at 6.8% of GDP in 2021-22 may be
considered. Further, a medium-term stepwise reduction path signalling
government’s determination to restore sustainable deficit and debt levels
relative to GDP would be welcomed by the markets and economic stakeholders.
Evolving a medium-term counter COVID strategy
Revival of the economy in 2022-23 would critically depend on containing the
adverse economic impact of COVID’s third and subsequent waves to a minimum. In
fact, COVID is likely to remain with us over the medium-term. Accordingly, a
comprehensive strategy for neutralizing COVID’s deleterious economic impact and
minimizing its adverse health impact is called for. This would require a
realistic assessment of health infrastructure deficiencies in India and
developing a time-bound plan to fill up the gaps. The combined health
expenditure of central and state governments in India has languished at about 1%
of GDP for many decades, well below the global norm of 3%. The corresponding
average for BRICS countries is 3.1%. The outcome of this is reflected in India’s
deficient per-capita bed availability which is only 18.3% of the corresponding
global average. Similarly, India’s per-capita availability of physicians and
nurses is 50% and 29% respectively of the global average.
In regard to countering COVID, R&D expenditure in public and private sectors
require to be augmented. Both vaccine research and production should be scaled
up significantly since India will have to position itself as a global supplier
of reliable vaccines. In fact, in the future, India has to focus on not only
manufacturing but also supply of health services across the globe by setting up
hospitals and teaching centres in many of the underprivileged countries. This
would be in line with expanding services exports as part of the strategy to take
advantage of our demographic dividend.
GST reforms
We can now also forward to the next stage of the GST reforms. So far, the
revenue growth and buoyancy have not proved yet to be revenue neutral with
respect to the indirect taxes of the central and state governments that were
merged into the GST. In June 2022, when the compensation arrangement is slated
to come to an end, not only a number of states may experience a revenue shock,
but also the system will have to be carried forward to make up for accumulated
arrears of the unpaid compensation. As a short-term measure, in 2022, some
arrangement may be considered for mitigating the revenue shock of some of the
states. This may involve continuation of the existing system with a new base
number and a lower and more realistic growth rate for determining compensation.
Eventually, a comprehensive strategy for rate rationalization and placing of
most goods in the standard rate category should be evolved.
The author is Chief Policy Advisor, EY India. Views expressed are personal.
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INDIAN SMES ARE CAPABLE OF CONSTITUTING A COMPLETE SUPPLY CHAIN: MSME SECRETARY
MSMEs engaged in manufacturing of engineering products are about 29% of the 67
lakh MSMEs which have registered since July 2020 on the Udyam registration
portal.
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Despite various challenges and roadblocks the MSME sector in India has the
capability to rise and compete with the world. Addressing the inaugural session
of MSME conclave organized by Engineering Export Promotion Council (EEPC) India,
BB Swain, Secretary, Ministry of MSME said that there is tremendous potential
for Indian engineering MSMEs to be integrated into the global value chain due to
their manufacturing cost advantage.
He informed the participants that MSMEs engaged in manufacturing of engineering
products are about 29% of the 67 lakh MSMEs which have registered since July
2020 on the Udyam registration portal. "MSMEs are together capable of
constituting a complete supply chain and being globally competitive because of
their diverse products ranging from intermediate to final products," Swain added
in the statement.
In a statement, EEPC India Chairman, Mahesh Desai said that MSMEs need to catch
up on the technological front as this was crucial to increase India's share in
the global value chain. "The Make-in-India initiative has brought ample scope
for the Indian MSMEs to work with the large scale global manufacturing firms and
get access to their upgraded technology and efficient marketing techniques.
Following the onset of the pandemic, large corporations in the developed world
have been looking at India as an alternative destination for manufacturing," he
added.
The MSME sector contributes around 30% to India's GDP and has 50% share in the
country's exports. In a statement, Desai said, "The significance of the MSME
sector in India has long been recognized and its potential has been identified.
In the National Manufacturing Policy, manufacturing output has been targeted to
increase to 25% of GDP."
EEPC India, with nearly 60% of its members coming from the MSME sector, has been
playing an instrumental role in developing the engineering MSMEs of India. It
has been working closely with the government to promote the MSMEs producing
engineering products and has set up two technology centers in Bengaluru and
Kolkata to address the problem of technological backwardness of the engineering
MSMEs.
In a statement, Srikar K. Reddy, Joint Secretary, Department of Commerce said
that improving India’s business climate is one of the key focus areas of the
government. "Reiterating its commitment to 'Make in India', the government has
launched several initiatives, including the Production Linked Incentive Scheme
(PLI) and the India Industrial Land Bank System. The PLI schemes have been
announced for 13 sectors with an overall outlay of $27 billion," he said in a
statement.
A paper titled 'Integrating Indian MSMEs to Global Value Chain' was released in
the conclave. It suggested that India’s trade regime should promote value
addition in the country and recommended that both direct and indirect tax
structure should be neutral and not discriminate between the nature of firms.
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