Tag: GDP

Proposed tax on MNCs with a large Indian base may see a broadening of its range

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

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The government may include firms working beyond the digital space under the proposed plans to tax multinationals with sizable Indian presence, reported The Economic Times.

As per the report, the budgetary plans initially meant for firms such as Google and Facebook may now be implemented on any company operating in the country. And according to sources, these companies may now see domestic tax of up to 42% on their profits.

Some, however fear that the new tax, likely to be introduced soon will hit hard companies that only export goods or services. “The question is whether there is a tax to do business with India. If non-digital companies that merely trade with India could see their business connection/permanent establishment set in India slapped with domestic taxes, this could lead to unsettling of settled tax positions,”  Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP was quoted saying in the report.

On the other hand the report also quoted people who supported the plan and though it was just to tax firms earning millions from India. “Why should companies that earn billions from India or have potential to do so be not taxed in the country,” said a person quoted in the report.

Many experts opined that India could be looking to introduce the new tax system even for the existing tax treaties with other countries, the report said.

“The consultative process should result in a model that could apply to the digital economy but is not misused in the brick and mortar businesses. Drafting of the rules must be water tight so that the rules don’t get misused and any company that merely trades with India doesn’t get burdened with tax at 42% on net profit method,”  Vijay Iyer, national leader, transfer pricing, EY India was quoted saying in the report.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

Higher dollar and oil headwinds for Indian economy, says Sameer Goel

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

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Higher dollar and rising oil price are headwinds for Indian economy, said Sameer Goel, Head of Asia Macro Strategy at Deutsche Bank.

The Reserve Bank of India (RBI) on Friday announced it will purchase Rs 10,000 crore of government of India bonds of various maturities from two years to 15 years. This is the first purchase announced by the RBI this financial year. Sameer Goel assess the impact.

“I guess announcing an open market purchase is probably the most direct policy measure with relation to the technical in the market and to the extent that market would probably anticipate more of such open market purchases to be announced. You will probably see some bit of a relief here,” he said.

Edited Excerpts:

Do you think that after all these weapons, this one will work and yields will fall?

I guess, we all hope it would. As you said, they have tried a bit in the recent past including all the changes adjustments they have done to the Foreign Portfolio Investors (FPI) limits, but I guess announcing an open market purchase is probably the most direct policy measure with relation to the technicals in the market. To the extent that market would probably anticipate more of such open market purchases to be announced, you will probably see some bit of a relief there.

But let us not forget the significant headwinds in general from the macro environment. We can see what is happening with emerging markets more broadly in particular in relation to the dollar strength and I think that is going to continue to pose problems here for markets like India. Near-term for sure, this should act as some relief.

The dollar index is now at its 2018 peak, touching 93, do you see more pressure coming there and what could be the ramifications for India?

The dollar index has posted a pretty interesting level. After the NFP, you have probably seen a little bit of a sort of a pressure lower in the dollar. I don’t think it changes the broader picture. We are fundamentally looking at a point where the market is significantly under-pricing what the terminal picture on the Fed trajectory would be and to that extent given that there seems to have been this re-correlation between rate differentials and the currency and the dollar, we will probably see some bit more pressure higher up for the dollar in the near-term.

That will, specially given the key levels around which we are and including on the treasuries at around 3% level, I think emerging markets will keep being under some bit of a pressure here.

I wanted to ask you even about the upcoming Karnataka polls. The rupee is usually sensitive to these things, if there is a BJP victory, do you think the rupee will be able to weather this much more easily, the dollar strength? Can you give us both scenarios, if there is a BJP victory and there isn’t one?

I would prefer not to go into necessarily scenarios here, but what I would say is that there are multiple factors going into the currency at this point in time and I would argue, not just India specific, but obviously what is happening with the dollar environment overall and emerging markets.

To the extent that if it is a market friendly outcome and if equities were to like the outcome and as we know the currency is a lot more sensitive to what is happening with the equity markets than necessarily fixed income at this stage, I think if there was to be a market friendly outcome, that helps rupee being able to weather the dollar strength a little bit more successfully.

I should point out that for all the weakness we had seen in rupee, it is at best mid-beta to the bigger dollar move. If you take up a chart of all emerging market currency performance since the dollar started to strengthen from around middle of April, India is at best in the middle of the pack and probably slightly towards the better end of the pack, especially among its high yield emerging market peers.

So already the currency is doing relatively better than a lot of other equity market. I think the problem will remain, it will have to face particularly the higher dollar trend and were oil to continue to push higher towards $80 per barrel, those will be the very significant headwinds. Of course, a market friendly outcome on sort of the political front will certainly help buffer some of that implication.

Give us a word on the range, how much you think yields could fall in the very near-term?

I think it is hard to say as to how much this would be worth. The initial expectation would be this probably be worth of about 10 basis points and particularly, I would imagine for the front end, I don’t think the market gets immediately terribly enthused about taking up a lot of duration, but if you combine that together with the relaxation, they have done on FPI limits for the frontend, I would imagine the front of the curve probably gets a little bit more relief as a result of this measure but again beyond that, we cannot ignore the fact that we are still in global fixed income sort of at very key pivotal levels there.

Rupee? For the next two months or one month, what is the range?

I think the pressure to my mind to the extent that I think the dollar will probably be somewhat pressurised higher and given the other headwinds, which we have up ahead, I would imagine that we probably pressurise for dollar rupee more likely towards 67 rather than not.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

California, now the fifth largest economy in the world

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

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California’s economy has surpassed that of the United Kingdom to become the world’s fifth largest, according to new federal data made public Friday.

California’s gross domestic product rose by $127 billion from 2016 to 2017, surpassing $2.7 trillion, the data said. Meanwhile, the UK’s economic output slightly shrunk over that time when measured in U.S. dollars, due in part to exchange rate fluctuations.

The data demonstrate the sheer immensity of California’s economy, home to nearly 40 million people, a thriving technology sector in Silicon Valley, the world’s entertainment capital in Hollywood and the nation’s salad bowl in the Central Valley agricultural heartland. It also reflects a substantial turnaround since the Great Recession.

“We have the entrepreneurial spirit in the state, and that attracts a lot of talent and money,” said Sung Won Sohn, an economics professor at California State University Channel Islands. “And that’s why, despite high taxes and cumbersome government regulations, more people are coming into the state to join the parade.”

All economic sectors except agriculture contributed to California’s higher GDP, said Irena Asmundson, chief economist at the California Department of Finance. Financial services and real estate led the pack at $26 billion in growth, followed by the information sector, which includes many technology companies, at $20 billion. Manufacturing was up $10 billion.

California last had the world’s fifth largest economy in 2002 but fell as low as 10th in 2012 following the Great Recession. Since then, the largest U.S. state has added 2 million jobs and grown its GDP by $700 billion.

California’s economic output is now surpassed only by the total GDP of the United States, China, Japan and Germany. The state has 12 percent of the U.S. population but contributed 16 percent of the country’s job growth between 2012 and 2017. Its share of the national economy also grew from 12.8 percent to 14.2 percent over that five-year period, according to state economists.

California’s strong economic performance relative to other industrialized economies is driven by worker productivity, said Lee Ohanian, an economics professor at University of California, Los Angeles and director of UCLA’s Ettinger Family Program in Macroeconomic Research. The United Kingdom has 25 million more people than California but now has a smaller GDP, he said.

California’s economic juggernaut is concentrated in coastal metropolises around San Francisco, San Jose, Los Angeles and San Diego.

“The non-coastal areas of CA have not generated nearly as much economic growth as the coastal areas,” Ohanian said in an email.

The state calculates California’s economic ranking as if it were a country by comparing state-level GDP from the Bureau of Economic Analysis at the U.S. Department of Commerce with global data from the International Monetary Fund.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

US economic growth slowed to 2.3 percent pace in Q1

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

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The US economy slowed to a moderate 2.3 percent annual growth rate in the first quarter as consumer spending turned in the weakest performance in nearly five years.

Still, the January-March increase was better than expected and was enough to propel growth over the past year to come close to the 3 percent goal set by the Trump administration.

The Commerce Department says the gain in the gross domestic product, the economy’s total output of goods and services, followed a 2.9 percent rise in the fourth quarter and gains above 3 percent in the previous two quarters. It was the strongest nine-month stretch in a decade.

Economists had been forecasting a first quarter slowdown. They expect growth to surpass 3 percent in the current quarter.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

Fitch gives India BBB- rating, indicates stable outlook

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

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India’s long-term foreign currency issuer default rating (IDR) is rated at BBB- with a stable outlook by Fitch, credit rating agency.

The Fitch report points that India’s rating is based on the balance of a strong medium-term growth outlook and favourable external balances.

The economy, however, “has weak fiscal finances and some lagging structural factors, including governance standards and a still-difficult, but improving, business environment,” the report said.

Fitch remains positive on the favourable economic growth outlook, supporting the economy’s credit profile. This is despite the real GDP growth falling to 6.6% from the 7.1%  estimate in the financial year 2017-2018.

“India’s five-year average real GDP growth of 7.1% is the highest in the APAC region and among ‘BBB’ range peers,” Fitch said in its report named, “Fitch Affirms India at ‘BBB-‘; Outlook Stable.”

India’s growth is forecasted to rebound to 7.3% this financial year and further move up by 0.2% in the next as the “temporary drag will fade” from the withdrawal of demonetisation on November 8, 2016, and from the introduction of Goods and Services Tax (GST) in July 2017, the report said.

The rating agency remains confident on the GST regime. The report points that the regime “will support growth in the medium term once the teething issues dissipate.”

On the monetary policy, Fitch gives a thumbs up to the Reserve Bank of India (RBI) for keeping the inflation in the target range of 4%.  The ratings agency expects the inflation to average close to 4.9% this financial year.

On raising the policy repo rate, Fitch forecasts that the central bank may increase the rates from 6% by next year.

“India’s relatively strong external buffers and the comparatively closed nature of its economy make the country less vulnerable to external shocks than many of its peers,” the report said.

With the government reform of opening up the economy, the credit ratings firm said that this move will help in recovering the Foreign Direct Investments (FDIs), particularly if combined with further investment climate reforms.

India is unable to upgrade its ratings due to its weak fiscal balances.

On the bank recap, NPA norms and the recent PNB fraud case, Fitch supports the government’s move on injecting capital. The report said, “These banks are likely to need additional government capital, however, in particular after a recent high-profile fraud case involving $2.2 billion in Punjab National Bank.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

India’s average GDP growth to rise to 7.8% in first half of this year, says report

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

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Indian economy is expected to witness a cyclical recovery driven by investments as well as consumption, and the average GDP growth is expected to rise to 7.8 percent in the first half of this year, says a report.

According to the Japanese financial services major Nomura, investment and consumption demand are the main drivers for India’s growth, amid worsening net exports.

“Our leading indicators suggest the cyclical recovery, which started in the second half of 2017, is set to continue through the first half of 2018,” Nomura said in a research note.

Consistent with these data, “we expect average GDP growth to rise to 7.8 percent year-on-year in the first half 2018 from 7.2 percent in October-December 2017.

The report, however, noted that rising oil prices, tighter financial conditions and a likely slowdown in investment activity ahead of the elections suggest growth will start to moderate in the second half of this year “towards our Q4 2018 forecast of 6.9 percent”.

Meanwhile, the Reserve Bank expects India’s economic growth rate to strengthen to 7.4 percent in the current fiscal, from 6.6 percent in 2017-18, on account of revival in investment activity.

On RBI’s monetary policy stance, the report said the rising oil prices are changing the macro dynamics and may put pressure on inflation.

According to Nomura, for every $ 10/bbl rise in oil prices CPI inflation may rise by 30-40 bps and worsen the current account balance by 0.4 percentage points.

“Thus, if oil prices remain at these levels, then monetary policy is likely to move towards tightening versus our base case of no change,” the report said.

The six-member MPC, headed by RBI Governor Urjit Patel, had left the benchmark repo rate unchanged for the third time in a row after deliberations on April 4-5, citing inflationary concerns.

The minutes of the April MPC meeting released by the RBI noted that RBI Deputy Governor Viral Acharya favoured withdrawal of monetary accommodation in the next policy review meeting scheduled on June 4-5.

Meanwhile, Executive Director Michael Debabrata Patra voted for an increase of 25 basis points in April itself, though the majority view of maintaining status quo prevailed.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

India’s GDP expected to reach $5 trillion by 2025, says Economic Affairs Secretary

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

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India is poised to remain the fastest growing large economy in the world and its GDP is expected to reach $5 trillion by 2025 as the economic reforms adopted in the last few years have started to bear fruit, a top Indian official has told the World Bank.

Giving an overview of the South Asian countries – Bhutan, Nepal, Bangladesh and Sri Lanka – Economic Affairs Secretary Subhash Chandra Garg said India continued to be a beacon of growth in the region.

“India is poised to remain as the fastest growing large economy in the world. In 2018, we expect India to grow at over 7.4 percent,” Garg told the 97th meeting of the Development Committee of the World Bank here on Saturday.

Transformational reforms such as Goods and Services Tax (GST) and initiatives such as Insolvency and Bankruptcy code, recapitalisation of banks, and unclogging of infrastructure investments will support such elevated growth, he told the World Bank.

“In the last few years, India has undertaken massive structural reforms toward formalisation of the economy and fostering digital financial inclusion,” he said, adding that the country had grown at an average of 7.2 percent per annum in the last four years and was continuing on the trajectory of sustained growth.

“India’s GDP is expected to reach a volume of $5 trillion by FY2025 by leveraging on digitisation, globalisation, favourable demographics and structural reforms,” Garg added.

In the absence of Union Finance Minister Arun Jaitley, Garg is leading the Indian delegation for the annual Spring Meeting of the International Monetary Fund and the World Bank.

India, he said, has accorded top priority to addressing its infrastructure deficit to sustain economic growth. Steps have been taken to mobilise funds from various sources for development of infrastructure which includes, inter alia, launching of innovative financial vehicles, he added.

India has begun undertaking a major programme of monetising brown field assets of Central Public Sector Undertakings (CPSUs) as a separate asset class for infrastructure investments, Garg said.

“In the field of digitisation, India has completed the ambitious task of connecting 100,000 gram panchayats through high speed optical fibre network under phase-I of the Bharat Net project,” he said, adding that it has enabled broadband access to over 200 million Indians living in about 250,000 villages.

The government also proposes to setup 500,000 wi-fi hotspots which will provide broadband access to 50 million rural citizens, Garg said.

Around 470 Agricultural Produce Market Committees (APMCs) have been connected to the electronic National Agriculture Market (e-NAM) network providing a unified national market for agricultural commodities, he added.

Garg told the World Bank that one of the key features of India’s economic performance in recent years has been the speed and scale of implementation of reforms.

“Recent upgrade of the sovereign rating reflects India’s strength, speed and scale of these ongoing reforms,” he said.

Noting that India rolled out the GST in July 2017, Garg said within a short span of eight months, monthly earnings from GST have crossed $ 12.7 billion.

The number of dealers registered in the GST database increased by about four million in the fiscal year of the roll-out which is about 60 percent higher than unique assesses registered earlier in the VAT network in the country.

India’s massive leap in the Ease of Doing Business rankings from 142 in 2014 to 100 in 2017 is testimony to India’s commitment to long-term reforms for an open and vibrant economy. This is also reflected in strong FDI inflows which have grown from $34.3 billion in 2012-13 to $60.1 billion in 2016-17, he added.

In the arena of financial inclusion, the Jan-Dhan Yojana, launched in August, 2014, has rapidly expanded banking services for the hitherto deprived sections, he said. Till date, over 313 million bank accounts have been opened and savings of about $11.510 billion has been mobilised under the scheme, Garg said.

For providing access to financial facilities by small businesses, India rolled out the Mudra Yojana in April 2015 and had supported over 115 million small businesses by sanctioning loans of $77.66 billion so far, he claimed.

Noting that India is pursuing a path of clean and climate responsible growth, Garg said the country aimed to achieve about 40 percent cumulative installed power capacity from non-fossil fuel based energy resources by 2030 with the help of transfer of technology and low cost international finance.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

RBI’s Goldilocks scenario doesn’t work for Indian economy, says Andrew Holland

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

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“Reserve Bank of India’s (RBI) goldilocks scenario for the Indian economy of strong growth, no inflation just doesn’t work well with me,” says Andrew Holland, CEO of Avendus Capital Alternate Strategies.

Edited excerpts:

Anuj: What is your sense now? There has been so much volatility, February and March we saw big downtick and April has been such a good month for the bulls. Do you reckon that this is the market where the risk reward is in favour of buying or would you want to stay out for now?

It has been a good start to the earning seasons globally. Lot of worries that we had few weeks back in terms of global trade disappeared. US President Trump is keeping his volume down on some of the bigger issues. So that has helped markets rally including ours from the lows that we saw in March. But there is still a few things that worry me going forward.

Now, we have got elections next month, which will obviously make the markets volatile but the two-year treasury yield and the 10-year treasury yield in the US – the differential is only 50 basis points (bps) and whenever we say in inverted yields, it usually means that we are heading for a difficult times.

Secondly, Reserve Bank of India’s (RBI) goldilocks scenario for the Indian economy of strong growth, no inflation just doesn’t work well with me. I think the risk to their targets and inflation is on the high side rather than I expect them to get to those kind of figures.

Latha: What would be the strategy in non-banking financial companies (NBFCs)? Is that a long NBFC, short public sector undertaking (PSU) banks or is it long private banks and short NBFCs, how do you play this finance space?

We like private banks, we like selective NBFCs because it will continue to take market share from the PSU banks and there is no doubt in my mind that that will happen. So we will continue with that kind of strategy. Electrosteel moving towards Vedanta give some optimism that the banking sector is getting through NPAs.

I still think we are a quarter or away but sentiment wise probably we will keep this sector reasonably buoyant but that said, there are a lot of problems out there. So it is a bit like owning the power sector. You don’t know what is going to hit you next.

Sonia: After the rally that we have seen in the last eight days, at least what we have done is corrected our underperformance compared to other emerging markets. So it is absolutely flat now for the year but what are the returns that you are expecting from the Indian markets over the next 12 months?

It is going to be more volatile year that is for sure. Last year wasn’t easy. If you look from April to March, it wasn’t the kind of euphoric year that I suppose we all felt that it was. I think earnings growth issue will be around 15 percent and I think market should move up in line with those increases and earnings. So we are more optimistic on the earnings growth for this year and GDP of 7-7.5 percent but certainly not the goldilocks scenario, which the RBI gave us.

Latha: You alluded to the elections. That is about four weeks away at least in the election results from Karnataka. Hypothetically, if it is not a Bharatiya Janata Party (BJP) win, will it really harm the markets much?

Shouldn’t do. I think everyone is not expecting the BJP to do as far as the extent of how they don’t do. It is how many seats they lose. But I think now we will say whether expectations will go towards whether we need to think about early elections or not and I suspect, we will think about not.

Anuj: Your thoughts on IT right now, are you buying anything here?

We have actually been a little bit of both, the largecaps and midcaps. We think the worst is over. If you take Infosys, the dividend yield is around 6 percent. So that gives you a lot of cushion for the share price and obviously we will have to wait and see what the new CEO is going to tell the analysts next week in terms of his strategy.

However, I think the rupee will depreciate. I am not comfortable with the fiscal deficit and not comfortable with inflation in India. Therefore, I think the rupee will head towards 67 per dollar level very quickly and that would probably be very favourable for IT as well.

Sonia: The space that everyone wants to be in these days is consumption. You have liked some of these stocks in the past, this rural focus consumption theme, does it still excite you?

We were kind of early on the kind of domestic FMCG plays and we continue to like them. Their ratings are a bit scary at times, but if I look over it after two to three year period, I am okay with it. We have added discretionary stocks as well into that mix. We think that is a longer term play and is not going away from us. They will have their days in the sun as well which we have just been seeing over the past few weeks.

I think the one area which is going to get a little bit more interesting is metals. Now that the trade war is not there or hopefully is not there, the metal prices will continue to rise. I think oil prices will also rise. So, if we can see oil price nearer to $80 per barrel, this is why I am a little bit more negative on the rupee in the very short term.

Latha: You are quite negative on macros. If I read every one of your answers, you do not believe in the goldilocks scenario that the RBI has painted. You believe rupee is at 67 per dollar, you believe crude will go to $80 per barrel, you are troubled by the macros. Can this rock the boat generally?

In terms of the oil prices, obviously that was a great tailwind for India, from 2014 to up until last year and that obviously has to become a headwind now. I am still not overly convinced that the GST collections are on an upward trajectory. So that means the borrowing programs will have to continue. Whilst we are delaying it for a little while, it is still going to come back. I would have thought the second half, the government will spend money. So, bond yields are probably likely to head higher too. So these are kind of macro factors which worry me. On the earnings side, I think earnings will be very good.

Latha: There is any pocket of value in the corporate, I think you referred to the fact that Electrosteel sale gives a hope for banking sector. Corporate banks in the private sector, you like them?

A: No. We are sticking mainly to the private banks and retail banks for the moment.

Sonia: What about some of these beaten down names that have come back into action in the auto space, some of the laggards like Tata Motors, etc. are now starting to show a revival. Is it good time to put some money there?

We will probably just stick to the winners. There might be some value and you will get maybe a pop of 4-5 percent, but fundamentally I want to be with the ones which are going to be taking market share and I do not think Tata is going to do that.

Latha: What about the ancillaries, they are taking share even globally?

We are looking at more and more largecaps and are not looking at those sectors or parts of that sector.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

RBI says investment activity, capital goods production boosts FY 19 GDP estimates

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

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The gross domestic product (GDP) growth estimates for fiscal year 2018-19 was raised to 6.6%, compared to the earlier estimate of 6.5%, the RBI said in its first bi-monthly Monetary Policy Statement for 2018-19.

The gross domestic product (GDP) is a key indicator to measure a nation’s economy.

GDP measures the contribution of various sectors in an economy and provides a monetary value for the amount of goods and services produced over a particular period of time.

Capital goods production registered a 19-month high growth in January 2018, indicating a slowdown in investment demand.

Net exports were dragged down by Goods and Services Tax (GST) related working capital disruptions.

Merchandise import growth also weakened because of gold imports, and due to a weak external demand.

In the agriculture sector, the total food grain production for 2017-18 is expected to be 277.5 million tons, up about 0.9% from the previous year.

The manufacturing sector improved and remained in an expansionary mode for the eighth consecutive month in March, driven by increasing output and new orders.

In the services sector, growth of value added services surged, driven by trade, hotels, transport, communication and a significant uptick in construction activity.

Increased sales of commercial vehicles, tractors and two-wheelers, a strong upturn in production of consumer durables, rise in domestic and international air passenger traffic, also contributed to a significant rise in the GDP, the report said.

On the growth outlook front, RBI said that it expects GDP to strengthen from 6.6% in 2017-18 to 7.4% in 2018-19 due to sustained expansion of capital goods production and an increase in imports.

GDP growth for the first half is expected to be in the range of 7.3-7.4%  and 7.3-7.6% for the second half of the financial year.

Exports are also expected to rise due to higher global demand, and boost fresh investment.

In a poll conducted by CNBC-TV18, 10% of the respondents had expected RBI to cut its FY18 GDP forecast to lower than 6.5%, while 90% expected RBI to keep FY18 forecast unchanged at 6.6%.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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