Tag: economy

Pakistan to privatise all state-owned enterprises except strategic ones

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a bid to revive its struggling economy, Pakistan’s Prime Minister Shehbaz Sharif on Tuesday, May 14, announced plans to privatise all state-owned enterprises (SOEs), excluding strategic ones, in a sweeping move aimed at reducing the burden on the cash-strapped nation.

The announcement, made during a review meeting chaired by Sharif, signals a significant expansion of the government’s initial proposal to privatise only loss-making state firms, according to media reports. The decision comes as Pakistan starts negotiations with the International Monetary Fund (IMF) for a new long-term Extended Fund Facility (EFF).

Addressing the meeting, Sharif emphasised that the government’s role is to create a conducive environment for business and investment rather than directly engaging in business activities. He directed all ministries to collaborate with the Privatisation Commission to facilitate the process.

Key among the enterprises slated for privatisation is the Pakistan International Airlines (PIA), a perennially loss-making entity that has been a significant drain on the country’s finances. Sharif ordered that the privatisation of PIA be televised, ensuring transparency throughout the bidding and sale process.

PIA, which requires 11.5 billion Pakistani rupees per month solely for debt servicing alone, stands as one of Pakistan’s top public sector loss-making entities. The privatisation process of other institutions will also be broadcast live to maintain transparency and accountability.

A roadmap outlining the Privatisation Programme 2024-2029 was presented during the meeting, detailing the prioritisation of loss-making SOEs for privatisation, The Express Tribune newspaper reported. The government aims to expedite the sell-off process by appointing a pre-qualified panel of experts within the Privatisation Commission.

The move towards privatisation has been advocated by the Sharif-led government as a necessary step to alleviate the financial strain on the country, the Dawn newspaper repoted.

Pakistan’s Finance Minister Muhammad Aurangzeb emphasised the importance of privatisation in achieving economic stability during the Pre-Budget Conference 2024-25. “You have to move towards privatisation if you want economic stability in the country.”

The government’s decision to limit its involvement to strategic and essential SOEs aligns with recommendations from international institutions like the IMF, which has long urged Pakistan to pursue privatisation to address its fiscal challenges.

While Pakistan has made strides in stabilising its economy, challenges persist, including a high fiscal shortfall and stagnant growth. Despite efforts to control the external account deficit, growth remains subdued, with expectations of only marginal improvement compared to previous years.

Last summer, Pakistan teetered on the brink of default, narrowly avoiding a financial crisis. Since then, the economy has found stability following the conclusion of the previous IMF programme. Notably, inflation has seen a significant decline, dropping to approximately 17% in April from a staggering peak of 38% recorded last May.

With agency inputs

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Greek economy surges after decade of pain

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A decade ago, Greece was in the throes of a devastating debt crisis marked by years of austerity, hardship and unrest. Now, officials and investors say 2024 could be the year its rebound is finally complete.

The Greek economy is forecast to grow nearly 3% this year, approaching its pre-crisis size of 2009 and far outpacing the euro zone average of 0.8%.

Borrowing costs have plummeted to below those of Italy, and banks bailed out during the crisis are set to be fully privatised for the first time in decades – a move some of the country’s largest investors see as a final sign of normality.

“With (the state’s participation) out of the way, that’s a landmark,” said Wim-Hein Pals of asset manager Robeco, which recently bought shares in Greek banks.

“The Greek economy is in good shape to benefit from further growth going forward.”

The turnaround in Greece, whose debt crisis threatened to cause the demise of the whole euro zone, is stark – on paper at least. Now the country faces a novel problem: being held back by stagnation in the same euro zone giants that once imposed strict reforms on its economy.

After years shut off from international markets, Greece returned to investment grade credit rating in 2023. When the state’s bailout fund last month sold its stake in Piraeus Bank (BOPr.AT), opens new tab, one of the country’s largest, the sale was oversubscribed eight times.

Challenges remain, however. Falling birthrates and labour shortages threaten the long-term outlook, and the spread of climate-related disasters like wildfires and floods have strained government finances.

Many ordinary Greeks reeling from the crisis say they see little difference as economists say the wider benefits of the rebound will take time. To ensure long-term growth, the country needs to diversify beyond the typical economic drivers of tourism, real estate and services.

More than half of foreign direct investment into Greece, which totalled about 7.5 billion euros ($7.98 billion) in 2022, comes from northern European countries like France and Germany that are struggling with weak growth.

Greek exports, such as agricultural goods, fuel and pharmaceutical products – two thirds of which head to the EU – fell almost 9% last year. Economic growth slowed to 2% in 2023, partly a result of its lagging neighbours.

“The lower expectations for growth in Europe affect Greece in two main ways. Through pressure on exports… and through the higher cost of money,” said Nikos Vettas, head of economic think tank IOBE.

FINANCES REVIVE

Decades of rampant tax evasion and overspending caught up with Greece in 2009, when it went into recession and the government revealed a giant hole in its finances that sent shockwaves across global markets.

By 2015, it had signed three bailouts with the euro zone and the International Monetary Fund worth 280 billion euros. In return it agreed to austerity measures that slashed public sector wages and pensions, and triggered years of violent protests.

Since Greece emerged from the bailout in 2018 it has revived its banking system and has relied solely on debt markets for its borrowing needs. In 2022, it paid off the IMF two years ahead of schedule.

Calm is largely restored. In Athens’ central Syntagma Square, where 10 years ago protesters would hurl petrol bombs at riot police in protest at austerity measures, today buskers entertain tourists who sit in the shade of its sour orange trees.

Visits to the Acropolis, Greece’s best known ancient site, hit 3.8 million in 2023, nearly four times the number seen at the height of the crisis.

INEQUALITY REMAINS

For many Greeks though, economic recovery has not translated into improved living standards.

Unemployment remains above 10%, the second highest in the EU after Spain, and GDP per capita in purchasing power is among the lowest in the bloc, Eurostat data show. The average monthly salary of 1,175 euros is 20% lower than 15 years ago, according to labour ministry figures.

Greece needs to develop sectors where investments are more long term, said Vettas from IOBE, “like infrastructure projects and manufacturing.”

Unions held a general strike on Wednesday in which trains, buses, ships and taxis were halted and hundreds took to the streets calling for higher wages. Some people haven’t recovered from losing everything when the economy tanked.

Periklis Fryganas took out a bank loan in 2009 to expand his motorcycle repair shop in Athens, only for the crisis to reduce his turnover by 90% over the next six years. He closed the shop in 2020 and recently lost an apartment he shared with his unemployed wife and three sons after using it as collateral for the loan.

“The crisis broke a lot of people and I was one of them,” Fryganas, 61, said. “Things are getting better only for the ‘rich ones’, all the others are lοsing.”

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White Paper Live Updates: FM Sitharaman to table ‘White Paper on the Indian Economy’ in Rajya Sabha tomorrow

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Narendra Modi government presented a ‘White Paper’ in the Budget Session of Parliament on Thursday, February 8. The ‘white paper’ compares the state of the Indian economy before and after 2014, when the BJP came to power defeating the Congress. Finance Minister Nirmala Sitharaman tabled it in Lok Sabha. She will table ‘White Paper on the Indian Economy’ in Rajya Sabha on Friday, February 9.

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Budget Session extended till Feb 10, Modi govt to present ‘white paper’ on economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Budget session of Parliament has been extended by a day till February 10, Saturday, Lok Sabha Speaker Om Birla announced on Wednesday, February 7.

The session, which began on January 31, was otherwise slated to end on February 9.

Parliamentary Affairs Minister Pralhad Joshi had said on February 6 that the government will table a ‘white paper’ comparing the state of the Indian economy before and after 2014, when the BJP came to power defeating the Congress.

With the agenda items like the Finance Bill, budget discussion and demand for grants yet to be taken up by Parliament and the white paper also to be tabled, sources had said it was considered necessary to extend the session’s duration by a day.

Finance Minister Nirmala Sitharaman will present the ‘white paper’ to highlight the country’s poor economic condition when the Congress-led UPA left power, as often charged by the government led by Prime Minister Narendra Modi, and how the incumbent dispensation brought the turn around.

She will table it in both Rajya Sabha and Lok Sabha.

Parliament usually does not function on weekends but there have been instances in the past when the Houses have met on Saturdays.

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India to become $5 trillion economy early in Amrit Kaal: FinMin

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India is poised to reach the significant milestone of a $5 trillion economy in the early stages of ‘Amrit Kaal,’ as stated by Minister of State for Finance, Pankaj Chaudhary on Monday. The International Monetary Fund (IMF) aligns with this trajectory, projecting India to attain a $5 trillion economy, securing the position of the third-largest GDP by 2027-28.

The $5 trillion milestone will be crossed with the help of a strong rupee which will result from macroeconomic stability, he said in a written reply in the Lok Sabha. “The government has set the goal of becoming an advanced economy by 2047. In the process, it will become a $5 trillion economy early in the Amrit Kaal,” Chaudhary said.

At the end of 2022-23, the Indian GDP stood at $3.7 trillion. In 1980-81, size of the Indian economy was $189 billion, which increased to $326 billion after a decade. In 2000-01, the size of the GDP rose to $476 billion.

In 2010-11, India’s GDP jumped to $1.71 trillion, and further increased to $2.67 trillion in 2020-21. Chaudhary said the exchange rate is not an overlooked factor as it ranks India’s GDP size in the world.

“India is a market economy, and the government monitors economic progress through market-determined GDP and exchange rate,” Chaudhary said. He further said both domestic and international markets are the mechanisms that determine India’s GDP, exchange rate and contribution of various sectors to GDP.

Contribution of agriculture, industry and services to nominal GDP in 2022-23 stood at 18.4%, 28.3%, and 53.3%, respectively. Chaudhary said the government also contributes to economic progress through policy interventions, including the measures announced in annual budgets.

Major initiatives taken by the government in the last 9 years for directly increasing the GDP include, implementation of the Insolvency and Bankruptcy (IBC) Code, recapitalisation of public sector banks, rollout of Goods and Services Tax (GST), reduction in corporate tax, boost in effective capital expenditure, introduction of Production Linked Incentive (PLI) scheme in 14 sectors, continuous liberalisation of the FDI regime, and building of digital infrastructure.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

G20 Summit Countdown: FM Nirmala Sitharaman maps 5 key priorities for global economic growth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s struggle with exports to Europe has an important lesson for policy makers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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US and Europe, cumulatively accounting for one-third of India’s merchandise exports, have equally influenced growth of India’s exports in the past decade. Crisil, in its report titled ‘Rider in the storm’ analyses past 90 quarters of exports to the US and EU27, which suggests India has a tendency to gain share in the US market during both economic downturns and upturns. However, India tends to gain share in the European market mainly during upturns. Why India is more sensitive towards EU (European Union) trade is due to its higher share of commoditised products, at up to 40 percent even in the downturn years, as against US which is slightly lower. Commoditized products such as petroleum, dairy, petrochemicals, metals, gems and jewellery are more sensitive to economic downturns, compared with value added articles like computer hardware, textiles, automobiles and components, medical devices, etc.

With slower growth expected in GDP of both US and EU27 in 2023, exports from India are expected to be impacted in FY24. In the same period, exports of nearly Rs 2 lakh crore are likely to be supported by commissioning of PLI-linked capacity.

An analysis of past two fiscals reveals that PLI has provided support for Rs 1.9 lakh crore of exports during the initial stages of capacity commissioning. For example, for mobile phones India has been a net exporter for the past several years and over a period of time, the average export-to-import ratio has improved substantially and is likely to improve further due to a push from PLI. Ashwini Vaishnaw, Minister of Electronics and Information Technology in Feb 2023, said mobile exports from India will exceed $10 billion this year. Crisil expects mobile phones, telecom, IT hardware to aid 63 percent of the PLI-driven exports in FY24, while the remaining would be led by textiles, specialty steel, white goods, and food processing.

Multiple corporates in their interaction with CNBC-TV18 have highlighted the benefits of the PLI scheme. Blue Star is one such which recently said it has invested about Rs 156 crore in plant machinery through the PLI scheme and are expecting about Rs 73 crore by way of a PLI benefit. Further, NITI Aayog CEO interacted with CNBC-TV18 in February 2023 and said with the introduction of PLI schemes, there is a huge increase in investment in capex and Rs 800 Cr of incentives are already approved.

India’s top exported products include petrochemicals, petroleum, gems and jewellery, plastic and footwear, pharma, auto and components, textiles, metals, agri, meat and sea food. Of these, PLI has been launched for the latter six which is likely to propel incremental exports. Further, verticals such as electronics, which currently are not in the top 10, should get good support from the PLI scheme. PLI-driven exports are seen growing  about 5 percent in FY24, compared with 2 percent between FY21 and FY23.

Furthermore, in FY23, value-added verticals such as electronic components and computer hardware contributed to 33 percent of incremental exports to the US, where the PLI scheme provided a fillip to exports of these segments, particularly electronic components. Continuing with this trend, Crisil expects value-added exports and PLI to support incremental growth in exports to the US in FY4 as well.

In case of EU, recently, the exports of petroleum products to EU27 have increased due to the geopolitical crisis, which has made EU27 dependent on oil imported through the sea route. However, geopolitical developments could aid exports of key commodities to EU. The share of value-added products stands at nearly 35- 40 percent in case of EU compared with around 30 percent for other key nations, which puts India in a favourable position during a downturn. Furthermore, continued exports of petroleum products amid geopolitical uncertainties, as well as strong growth in exports of electronic components, medical devices and computer hardware given the PLI-driven policy push, will support incremental growth. However, the growth will be slower to EU than that of exports to the US, due to its relatively sharper slowdown in the GDP growth.

For India, new-age verticals such as consumer electronics and computer hardware saw sudden jump in FDI in past five fiscals. Meanwhile, traditional sectors such as petroleum products and machine tools saw lower FDI, suggesting India is expanding its manufacturing base of high-growth value-add verticals. The PLI scheme’s continued push across major sectors is likely to enhance India’s position as a trade partner with the US and EU, resulting in market share gains over the medium term.

Currently we are witnessing aggressive rate hikes by major central banks to fight inflation. Policy rates are at decadal highs across the advanced world. Slowing global growth is expected to put the brakes on India’s exports. Hence, policy makers have an important role to play here through their fiscal and monetary policy support to banking and financial sector. The full-blown impact of RBI’s tighter monetary policy, which typically plays out with a lag of 3-4 quarters, will show up in the coming months.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Hong Kong’s 7 lakh free air tickets: Who is eligible for free flights, know here

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investors, influencers, entrepreneurs and academics will be the among those targeted by Hong Kong for the 700,000 free air tickets offered as part of global promotional drive to bring visitors back to the city which is bringing down its Covid-19 restrictions.

Hong Kong Chief Executive John Lee Ka-Chiu launched the “Hello Hong Kong” campaign on Thursday inviting tourists and visitors to the city in a bid to revive the economy that has been shrinking over the last four years due to the pandemic and security restrictions in view of the violent protests.

The tickets will be given away from March 1 and will last for around six months, Airport Authority CEO Fred Lam Tin-fuk said.

About 75% of the tickets will be given away to visitors from Southeast Asian countries, including Thailand, the Philippines, Indonesia, Singapore and Malaysia, and China.

As many as 80,000 free air tickets will be given to citizens of Hong Kong and another 80,000 to those from the Greater Bay Area.

Each visitor is expected to bring 2-3 companions, which would result in bringing around 1.5 million extra visitors.

The vouchers will be available at tourist inquiry counters located at four border checkpoints from 5pm on Thursday.

Who are these free tickets for

Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said the objective is to have an ecosystem which can foster innovation by gathering fintech innovators and pioneers of sustainable finance as well as enterprises needing both capital and investors.

“Hong Kong can fulfil all their needs,” he said. “We will continue to grasp opportunities and play the unique role of connecting mainland China and international markets.”

Secretary for Innovation, Technology and Industry Sun Dong said the city is planning to get 100 start-ups to relocate and would be subsidising universities to bring in notable academics.

Influencers will be invited to promote the city’s culture and arts scene, wildlife and Chinese and Western cuisine across the globe using promotional videos.

International events showcasing the city’s advantages will also be held, both in Hong Kong and various parts of the world.

Hong Kong is slowly withdrawing its severe restrictions put in place for the COVID-19 pandemic.  Mandatory quarantine of up to three weeks, with intensive testing and screening were part of that process that kept away a big chunk of visitors to the city state.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

M&A, other corporate deals surpass pre-Covid levels in 2022: PwC India report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Despite global headwinds, mergers and acquisitions and other corporate deals in India surpassed pre-Covid levels to reach USD 159 billion with as many as 2,103 transactions in 2022, a 29 percent increase from 2021 in terms of value, said a PwC India report.

India demonstrated signs of stable corporate deals defying the trend among most major economies of the world, said the PwC report titled ‘Deals in India: Annual Review 2022’.

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Mergers and acquisitions accounted for a major share of the deal value, boosted by more than 20 large transactions, and reached a record high of USD 107 billion — almost twice that of 2021.

“However, excluding the HDFC Ltd and HDFC Bank merger (worth USD 60 billion), M&A deal values were about 15 percent lower than that of 2021. Private equity (PE) investments stood at USD 52 billion, 22 percent lower than 2021 but 20 percent higher than all other preceding three years in terms of value and quantum,” it said.

It is to be noted that deal activity witnessed a steady decline quarter-on-quarter after a strong start in the initial months of 2022, the report said, and 70 percent of deal activity in terms of value and volumes was witnessed in the first half of 2022, with only 30 percent activity in the second half of 2022.

“The year 2022 has shown us that investor perspective on India is long-term, and the current market slowdown, while tough, will likely not result in major concerns for most. We believe M&A will be an essential instrument for companies to move forward, integrate supply chains, beat disruption and boost their market share,” said Dinesh Arora, Partner & Leader – Deals, PwC India.

On M&A activity, the report said 72 percent of disclosed deal value was generated from domestic deals in 2022 (88 percent, if the HDFC merger deal is considered). Companies sought to consolidate positions, curb competition and enter new disruptive segments, leading to some of the largest-ever transactions in the banking, cement and aviation sectors.

Sectors such as financial services, technology, healthcare, energy and power, and industrials are expected to stay active on the domestic front in terms of value creation and market share gain.

On PE activity, it said early-stage deals saw an uptick in deal value by 13 percent compared to 2021, reflecting investor confidence and the outlook for the Indian startup sector, while buyouts and late-stage deals witnessed a 55 percent and 33 percent dip in deal value, respectively, compared to 2021.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow