A Reserve Bank of India (RBI) ban on Indian banks buying new issues of infrastructure bonds has handicapped Prime Minister Narendra Modi’s chances of gathering billions of dollars needed for mega-projects through the bond market
. Elected in May, Modi has made heavy infrastructure investment and construction of affordable housing for all by 2022 key elements of a reform agenda aimed at getting India’s lumbering economy to grow a lot faster.
Meeting the housing goal alone would need investment of at least USD 2 trillion, according to a KPMG report released last month. Faced with those funding needs, the government in mid-July encouraged banks to issue bonds to fund infrastructure by exempting these bonds from reserve requirements, in order to enable them to extend cheaper loans to the cash-starved sector.
The trouble is the RBI issued guidelines a week later that barred banks from buying bonds issued by other banks in order to forestall risks arising from circular trading, whereby lenders agree to buy each other’s bonds. The RBI is hoping for greater investor participation by the likes of insurers, pension funds and mutual funds .
But, analysts and bankers say the ban hampers secondary market liquidity and prevents the creation of a deeper market. Banks are traditionally the biggest buyers of debt, and without them the market for these bonds has become so illiquid that other investors are reluctant to buy. “Banks are the market makers, the largest investors and underwriters of corporate bonds,” said Shashikant Rathi, head of investments and capital markets at Axis Bank. “If banks are not allowed to invest in these senior infrastructure bonds then other investors like mutual funds would be sceptical buying them since they wouldn’t be sure of being able to sell them if liquidity need arises,” he said.
Given these constraints, few banks have made fresh issues, despite the incentives, and those that have, have received a lukewarm response. Analysts said the RBI would have to relax its ban if it wanted bond funding to raise anywhere near the 500-600 billion rupees (USD 8.3 billion to USD 9.9 billion) in infrastructure bonds that traders say can be raised in the year to March.
The manufacturing curve has turned for the better and most sectors are indicating positive news, Finance Minister Arun Jaitley said at a press conference to highlight the government’s achievements in its first 100 days since being sworn in office. India’s GDP expanded 5.7 percent in the first quarter of FY15, the highest in nine quarters, against a growth of 4.6 percent in Q4 of 2013-14, and 4.7 percent in teh year-ago period. He said inflation by and large was showing signs of moderation and while there could be some impact of deficient monsoons on food prices, there were sufficient stocks.
He also added the steep rise in food prices was a common at this time of the year. He expressed confidence that the Insurance Bill would be passed in the next session of Parliament and that he was hoping to see a positive attitude in some of the principal opposition parties.
He said the government’s ambitious Jan Dhan Yojana has been a success with over 2 crore bank accounts being opened so far till today noon. He added that banks would not bear the burden of the scheme. Jaitley said the situation in the road sector was challenging and that the concerned ministry has been given more flexibility to deal with it.
On the issue of Goods and Services Tax, he said there have been discussions with the chief ministers of West Bengal and Rajasthan, and that the government was serious in paying central sales tax dues to the states.
He said the government will take try to pay the arrears as soon as finances improved. Jaitley however said too many items could not be kept out of the GST chain.
The Central Bureau of Investigation on Friday filed chargesheet in the Aircle-Maxis deal case in a special 2G court. Nine people have been named in the chargesheet including former Telecom Minister Dayanidhi Maran and his brother Kalanidhi Maran.
Court has fixed September 11 for consideration of the charge sheet.
Malaysian business tycoon T Ananda Krishnan has also been named as accused in the CBI charge sheet. Besides four individuals the CBI has also named four companies including Sun Direct TV Pvt Ltd as accused in the case.
All the accused have been chargesheeted for offences of criminal conspiracy and under various provisions of Prevention of Corruption Act.
The economy grew 4.7 percent in the year-ago period. The economy grew at its highest pace since the fourth quarter of FY12.
The broad range for the Q1 GDP was 5.4-6 percent. The revival in the first quarter was expected to be led by industry. Manufacturing, coming off a low base, was expected to push industries and it did not disappoint. The manufacturing sector grew at 3.5 percent, against a 1.2 percent contraction year-on-year.
The mining sector too grew at 2.1 percent 2.1 percent versus -3.9 percent YoY. But all eyes were on agricultural growth, which was expected to disappoint considering the fact that the first quarter is generally a lean period for agriculture. But that too surprised on the positive – the sector grew at 3.8 percent versus 4 percent YoY
Agri Sector Growth At 3.8% Vs 6.3% (QoQ)
Financial Svcs Sector Growth At 10.4% Vs 12.9% (YoY)
Electricity Sector Growth At 10.2% Vs 3.8% (YoY)
Hotels Sector Growth At 2.8% Vs 3.9% (QoQ)
Construction Sector Growth At 4.8% Vs 1.1% (YoY)
Manufacturing Sector Growth At 3.5% Vs -1.4% (QoQ)
India’s public debt rose sharply to Rs 6 lakh crore in the April-June period 2014 from Rs 5,63,911 crore in the corresponding period last year. For fiscal year 2014-15, gross and net market borrowing of Rs 6 lakh crore and Rs 4.61 lakh crore, respectively, show an increase of 6.4 percent and 1.6 percent over 2013-14, a finance ministry statement said. In April-June quarter of 2013-14, gross market borrowing was over Rs 5.63 lakh crore and net borrowing was over Rs 4.53 lakh crore.
During Q1 of FY15, the government issued dated securities worth Rs 1.98 lakh crore, higher than Rs 1.51 lakh crore in Q1 of last fiscal. “Net market borrowings during the quarter at 26.6 percent of Budget Estimates were, however, lower than 28.6 percent of BE in the previous year, reflecting higher repayments in the first quarter this year,” the statement added.
The public debt of Rs 6 lakh crore excludes liabilities under the ‘Public Account’. “Liquidity conditions in the economy remained comfortable during the quarter, barring period of advance tax outflows, with the liquidity deficit, as reflected by net borrowings from RBI under Liquidity Adjustment Facility (LAF)…” it said.
The statement further said that the cash position of the Government during Q1 of FY15 was comfortable and remained in surplus mode during the quarter barring a few occasions.
Adani Enterprises has agreed to pay Australian dollar (A$) 155 million (USD 145 million) to Linc Energy to buy out the Australian firm’s rights to future royalties from Adani’s huge but delayed Carmichael coal project, already four years behind schedule.
The deal comes amid growing questions on whether Adani will eventually go ahead with a project to build what would become Australia’s biggest coal mine, amid opposition from green groups and a slump in coal prices to five-year lows. A final decision to go ahead with the project, in Northeastern Australia, would mean spending A$16.5 billion to dig the mine, build a rail line and a port. “This agreement reflects Adani’s confidence in the progress of Carmichael mine, which received final federal environmental approvals from the Australian government last month,” Adani said in a statement emailed to Reuters.
“The agreement…underlines Adani’s consistent commitment to ensure that the high-quality coal from the Carmichael mine is cost-efficient.” The agreement announced by Singapore-listed Linc on Thursday means Linc is walking away from a A$2 per tonne royalty, indexed to inflation, on the first 20 years of production from the coal mine.
Adani bought Carmichael from Linc Energy amid a coal boom in 2010, paying A$500 million in cash upfront and agreeing to pay the royalty stream. In 2010, Adani said it aimed to open the mine by 2014 and at the time Linc said it could earn more than A$3 billion in revenue over the life of the royalty stream.
Linc chief executive Peter Bond said the two companies agreed on the A$155 million price tag based on the risks of the current weak coal price and “all the other risks of the coal industry at the moment”. “I actually have a lot of confidence that Adani will get the pit going,” Bond told Reuters by phone from Brisbane. “It’s more about us focusing our strategy into cashing up the balance sheet and driving towards a more focused outcome like drilling our shale in South Australia.”
Prime Minister Narendra Modi will promise on Thursday to provide a bank account for every Indian household when he launches a major initiative that could save billions of dollars in welfare spending and help mend strained state finances.
India has grown to become Asia’s third largest economy, but nearly two-fifths of its 1.27 billion people do not have a bank account. This leaves them dependent on moneylenders and other informal financing routes. In a keynote speech this month, Modi made financial ‘inclusion’ a top priority of his administration.
He followed this up by writing 725,000 emails to bank officials urging them to support the initiative. “There is an urgency to this exercise as all other development activities are hindered by this single disability,” he said in a Twitter post. Modi won India’s biggest electoral mandate in 30 years in May with a promise to revive India’s flagging economy.
So far, he is yet to launch the big-bang reforms needed to break out of a cycle of low growth and high inflation. Some commentators say his emphasis on the new banking and insurance programme seeks to cement his support base among poor households with small savings. Over 40 percent of Indians live on less than one dollar a day.
The launch of the Jan Dhan Yojana, or the Scheme for People’s Wealth, comes weeks after Modi blocked a global trade deal, saying it threatened the interests of poor farmers.
May 20, 2014 : Modi elected leader of BJP Parliamentary Party
May 20, 2014 : Modi Invites Nawaz Sharif to swearing-in-ceremony
May 26, 2014 : Sworn in as Prime Minister of India
May 27, 2014 : Modi constitutes SIT to get back black money
May 30, 2014 : Don’t include me in textbooks, tweets Modi
June 2, 2014: India’s 29th state Telangana is born
June 14, 2014 : Dedicates INS Vikramaditya to the nation
June 15, 2014 : Modi visits Bhutan, meets PM of Bhutan
June 16, 2014 : Addresses Bhutan Parliament
June 20, 2014 : Controversy over Modi’s ‘Hindi’ directive
June 30, 2014 : Witnesses successful launch of PSLV-C23
July 4, 2014 : Modi’s first visit to Jammu and Kashmir
July 8, 2014 : NDA’s 1st Rail Budget presented
July 10, 2014 : Modi hails NDA Government’s maiden General Budget
July 15, 2014 : Modi meets Chinese President at the BRICS Summit
July 16, 2014 : Prime Minister meets Russian President Putin
July 23, 2014 : World Bank President Jim Yong Kim meets the PM
August 1, 2014 : Kerry meets Modi in prelude to Washington summit
August 3, 2014 : Modi’s historic address to Constituent Assembly of Nepal
August 12, 2014 : Modi says Pakistan raging proxy war
August 15, 2014 : Modi addresses nation of Independence Day
August 19, 2014 : Modi invites people’s ideas on replacing plan panel
August 20, 2014 : India should stay ahead of world in technology: PM
August 23, 2014 : Sri Lanka must ensure justice for Tamils: Modi
Ratan Tata, Tata Sons Chairman Emeritus, has invested in online marketplace Snapdeal.com. “Mr Tata has made a personal investment in the company,” Snapdeal cofounder and CEO Kunal Bahl said.
The investment amount, however, was not disclosed. “This stands testimony to the growth and success that we have seen in a short span of 4 years,” Bahl said. Snapdeal, which has raised about USD 400 million since its inception, has invested about USD 100 million in logistics and operations to expand its presence in the USD 3 billion Indian eCommerce market. “An investment by a legendary and respected figure like Mr Tata is an excellent validation of our focused strategy on building a long term enterprise and marks the start of a very important phase for the company,” Bahl said. Snapdeal has seen 600 per cent growth year-on-year for the last two years, he added.
Snapdeal currently houses over 5 million products across 500 diverse categories from over 50,000 sellers. The city-based firm had raised USD 100 million (about Rs 600 crore) in May from Temasek, BlackRock Inc, Myriad, Premji Invest and Tybourne, while in February, it had received funding worth USD 133.7 million (about Rs 830 crore) from its existing investor, eBay and others.
A report by consulting firm Technopak pegs the USD 2.3 billion e-tailing market to reach USD 32 billion by 2020. Snapdeal rival Flipkart on July 29 announced a USD 1 billion funding, which is the largest in the fledgling ecommerce sector.
A day later, world’s largest e-tailer Amazon said it will pump in USD two billion to bolster business here. Another report by consultancy firm PwC and industry body Assocham suggests that e-commerce firms are expected to spend up to USD 1.9 billion by 2017-2020 on infrastructure, logistics and warehousing.
President Barack Obama vowed to punish the Islamic State killers of American journalist James Foley on Tuesday but said rooting out the militant group in Iraq and Syria will not be fast or easy.
As Obama spoke, the United States was moving ahead with surveillance flights over Syria to identify targets for a potential presidential order to launch air strikes against Islamic State targets in what would be a direct US military intervention into a country embroiled in a three-year civil war. “America does not forget. Our reach is long. We are patient. Justice will be done,” Obama told veterans gathered at a convention of the American Legion in Charlotte, North Carolina.
Obama, who ordered air strikes against the militant group in Iraq and is considering them for Syria, said he would do whatever is necessary to go after those who harm Americans. “Rooting out a cancer like ISIL won’t be easy and it won’t be quick,” he said. ISIL is the acronym the United States uses for Islamic State. Launching air strikes into Syria would add an unpredictable element to a civil war that Obama has taken great pains to stay out of a year after stepping back from attacking the government of Syrian President Bashir al-Assad for using chemical weapons on his own people.
White House spokesman Josh Earnest said there was no plan to coordinate with the Syrian government on how to counter the threat from Islamic State. Syria has appealed for coordination. “As a matter of U.S. policy we have not recognized the Assad regime as the leader of Syria. There are no plans to change that policy and there are no plans to coordinate with the Assad regime as we consider this terror threat,” he said.