India’s fiscal deficit at Rs 4.66 trn, 58.6% of annual target in 2 months

Source: Business Standard, Jun 30, 2020

New Delhi: India’s federal fiscal deficit in the first two months through May stood at Rs 4.66 trillion ($61.67 billion), or 58.6% of the budgeted target for the current fiscal year, government data showed on Tuesday.

Net tax receipts during April-May period were Rs 33,850 cr ($4.48 billion), while total expenditure was Rs 5.12 trillion, the data showed, indicating the government was front-loading its budgeted spending to combat the impact of pandemic.

India’s federal fiscal deficit touched 4.6% of GDP in 2019/20 fiscal year ending March, from initial estimates of 3.3%.

The latest figures for India’s fiscal deficit come at a time when the Centre is said to be seriously considering direct monetisation of the fiscal deficit by RBI having sidestepped the idea for the first half (H1) of 2020-21 (FY21). Business Standard has learnt that it is being seriously considered for the second half of FY21.

“It is a high possibility,” said a top government official, when asked if the Centre was considering direct deficit monetisation. “In the latter half of the year, we will have a clearer picture of the economic damage the Covid-19 pandemic has unleashed, and may require further resources to provide support to the economy,” the official added.

The final decision may be taken before the borrowing calendar for October 2020-March 2021 is announced in late September. Earlier, the Chief Economic Advisor to the Government of India, Krishnamurthy Subramanian had told Business Standard that the Centre’s fiscal deficit in 2020-21, could be 1.7-1.8 percentage points higher than the 3.5 per cent of gross domestic product, which was targeted in the Budget.

Government approves Rs 15,000 crore Animal Husbandry Infra Development Fund

Source: The Economic Times, Jun 25, 2020

NEW DELHI: The government on Wednesday announced a Rs 15,000 crore infrastructure development fund with an interest subsidy scheme to promote investment by private players and MSMEs in dairy, meat processing and animal feed plants, a move which is expected to create 35 lakh jobs.

The fund is part of the Rs 20 lakh crore stimulus package announced in May to help people affected by the lockdown to prevent the spread of COVID-19.

An interest subvention of 3-4 per cent will be provided to farmer producer organisations, MSMEs and private players for setting up of dairy, meat processing and animal feed plants, an official release said.

The Animal Husbandry Infrastructure Development Fund (AHIDF) was approved in the Cabinet meeting, chaired by Prime Minister Narendra Modi.

Briefing about the Cabinet decisions, Information and Broadcasting Minister Prakash Javadekar said: “A Rs 15,000 crore fund has been approved by the Cabinet that will be open to all and will help in increasing milk production, boost exports and create 35 lakh jobs in the country.”

Animal Husbandry Minister Giriraj Singh said the government had earlier approved the Dairy Infrastructure Development Fund (DIDF) worth Rs 10,000 crore for incentivizing investment by the cooperative sector for development of dairy infrastructure.

“However, the MSMEs and private companies also need to be promoted and incentivized for their participation in processing and value addition infrastructure in the animal husbandry sector,” he said.

The AHIDF would promote infrastructure investments in dairy, meat processing and animal feed plants. Farmer producer organizations (FPOs), MSMEs, Section 8 companies, private companies and individual entrepreneurs would be eligible to benefit from the fund, he added.

The minister said the beneficiaries will have to contribute 10 per cent margin towards the proposed infra project and the rest 90 per cent would be a loan component to be made available to them by scheduled banks.

“For the first time, we will give interest subvention up to 3 per cent to private players for setting up of processing infrastructure for dairy, poultry and meat,” he added.

In an official statement, the government said that 3 per cent interest subvention will be given to eligible beneficiaries from non-aspirational districts. About 4 per cent interest subvention would be given to beneficiaries from aspirational districts.

Aspirational districts are those that are affected by poor socio-economic indicators. There are about 115 such districts in the country.

The government said that there will be a two-year moratorium period for repayment of loans with six years repayment period thereafter.

Besides, the Centre would also set up a Credit Guarantee Fund of Rs 750 crore to be managed by National Bank for Agriculture and Rural Development (NABARD) which would provide credit guarantee to the projects which are covered under the MSME defined ceilings. The guarantee coverage would be upto 25 per cent of the credit facility of the borrower, it added.

Highlighting the benefits of the new infra fund, the government said there is huge potential waiting to be unlocked through private sector investment in the animal husbandry sector.

“The AHIDF with the interest subvention scheme for private investors will ensure availability of capital to meet upfront investment required for these projects and also help enhance overall returns/ pay back for investors,” it said.

Such investments in processing and value addition infrastructure by eligible beneficiaries would also promote exports. Since almost 50-60 per cent of the final value of dairy output in India flows back to farmers, the growth in this sector can have a significant direct impact on farmer’s income, it said.

Size of the dairy market and farmers’ realization from milk sales is closely linked with development of organized off-take by cooperative and private dairies.

Thus, investment of Rs 15,000 crore through AHIDF would not only leverage several times more private investment but would also motivate farmers to invest more on inputs thereby driving higher productivity leading to increase in farmers income, it added.

China’s biggest bank makes inroads into India market

Source: LiveMint.com, Jun 23, 2020

The Indian unit of Industrial and Commercial Bank of China (ICBC), the world’s largest bank, has steadily increased lending in the last two years, in a sign of the rising tide of Chinese funds entering India.

The Beijing-based bank, which operates through a single branch in Mumbai, saw its loan book grow 42% in a year to ₹1,250 crore in FY19, the latest data with the registrar of companies (RoC) showed. ICBC, with over $4.53 trillion in assets globally, managed ₹681 crore of assets in India in FY17. Its growing presence assumes significance against the backdrop of the ongoing border skirmishes between the two countries, which has prompted calls to boycott Chinese firms.

As mandated by the Reserve Bank of India (RBI) for banks operating in India, ICBC also has priority sector advances. Of its total loan book of ₹1,250 crore, priority sector accounted for ₹227 crore. The rest was in the category named “others”, according to the balance sheet. Interestingly, the bank‘s advances of ₹219 crore were to public sector entities as on 31 March 2018, but is not present in its FY19 balance sheet. However, the largest portion of its advances is in trade finance at ₹857 crore, which is classified as bills purchased and discounted. Experts said that traders use Chinese banks because of the convenience they bring owing to the seller’s account held in one of these banks, which speeds up transaction closure.

“Most of the assets that you are seeing is on account of trade finance. My belief is that despite the ongoing tussle between the two countries, some amount of trade will continue to happen and to that extent, Chinese banks will play a role,” said Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services Llp.

To be sure, loans extended by the India branch would be only a small portion of what the parent bank would have lent to Indian businesses. That is because most foreign banks disbursing large loans do so from their branches abroad, as the Indian unit has limited capital.

ICBC also has 1,504 crore invested in government securities, including ₹45 crore kept with RBI under Section 11(2) (b) of the Banking Regulation Act. The bank’s net investments in India stood at ₹1,904 crore, as of 31 March 2019. The bank is yet to submit its FY20 numbers to the RoC. ICBC posted a net profit of ₹36.5 crore in FY19, up from ₹18.4 crore in FY18.

AIIB approves additional $750 million loan to strengthen India’s Covid response

Source: The Economic Times, Jun 17, 2020

The Asian Infrastructure Investment Bank (AIIB) approved an additional $750 million loan to strengthen India’s Covid-19 response, according to a release on Wednesday.

Co-financed by the Asian Development Bank (ADB), the loan will go towards bolstering economic aid for businesses, including for the informal sector, expanding social safety nets for the needy, and strengthening the country’s health care systems, the release said.

The latest support came after the AIIB approved a $500 million package co-financed by the World Bank under its COVID-19 Crisis Recovery Facility (CRF) to India on May 8, bringing total support to the country from the infrastructure bank to $1.25 billion under the CRF.

This also brought total support India received from the Beijing-headquartered bank up to $3.06 billion since it began operations in 2016.

“Many of the world’s low and middle-income countries are still in the early stages of the health crisis but are already feeling the impacts of the pandemic. This poses an enormous risk for millions across India who have only recently emerged from poverty,” said DJ Pandian, vice president of investment operations at AIIB, adding, “Our support to India also aims to ensure economic resilience to prevent long-term damage to the productive capacity, including human capital, of India’s economy.”

The multilateral lender initially set up its Covid-19 CRF, with a $5 billion investment which was later doubled to $10 billion, to make funds available to its members for urgent economic, financial and public health pressures and quick recovery from the crisis.

In total the AIIB has approved $4.05 billion to its members under this facility, including $355 million to China, $500 million to Pakistan, $250 million to Bangladesh and $750 million to Indonesia and the Philippines each.

Maharashtra govt signs Rs 16,000-crore investment pacts with 12 firms

Source: Business Standard, Jun 16, 2020

Mumbai: The Maharashtra government on Monday announced the signing of memoranda of understanding (MoUs) with 12 domestic and foreign companies for Rs 16,000 crore investment in the oil, chemicals, auto, electric mobility, and logistics sectors.

The agreements, part of the Magnetic Maharashtra initiative, are expected to help spur economic activities in the state reeling from the Covid-19 pandemic. The crisis has led to a sharp drop in the state’s revenues and led to an exodus of migrant labourers.

To revive the state’s economy, the government has been planning several initiatives, including fast-tracking approvals to new investors. “We will offer all assistance to new investors,” said Chief Minister Uddhav Thackeray on the occasion.

In the agreement with the government, UPL promised to invest Rs 5,000 crore in five years to manufacture pesticide ingredients in the Raigad district. Great Wall Motors, which recently acquired General Motors’ plant in Pune, will invest Rs 3,770 crore.

PMI Electro Mobility Solutions and Foton Motors of China signed MOUs for Rs 1000 crore investment for manufacturing electric vehicles in Pune.

ExxonMobil has agreed to invest Rs 760 crore to manufacture lubricants, while Varun Beverages would put in Rs 820 crore, the government announced.

Land has been allotted to nine of the 12 companies, which had been in talks with the Maharashtra Industrial Development Corporation for the last six months.

“Three more investment projects in the steel, pulp and paper, and electronic system design sectors are in the pipeline. These would entail investments of another Rs 8000 crore. We hope to finalise them soon,” said B Venugopal Reddy, principal secretary, industries department of the state government. “We expect the investment to materialise, and manufacturing to commence in two years,” said Bhushan Gagrani, principal secretary, the Chief Minister’s Office.

Privatisation of public sector banks unlikely this fiscal: Report

Source: LiveMint.com, Jun 14, 2020

NEW DELHI : Privatisation of any public sector bank (PSB) during the current fiscal is very unlikely due to their low valuations and mounting stressed assets amid the COVID-19 crisis, sources said.

At present, four public sector banks are under the RBI’s Prompt Corrective Action (PCA) framework, which puts several restrictions on them, including on lending, management compensation and directors’ fees.

So, it does not make any business sense to sell these lenders — Indian Overseas Bank (IOB), Central Bank of India, UCO Bank and United Bank of India — as there will not be any suitors for them from the private banking space, the sources said.

The government will refrain from distress sale of its entities, especially if they are in strategic sectors, they added.

Forget outright sale, hardly any public sector bank has gone for stake dilution in the last many years as valuations have been very depressed, sources said, adding the government stake in some PSBs has gone past 75 per cent due to successive capital infusions for meeting mandatory regulatory ratios.

The COVID-19 pandemic has not only halted the process of recovery of PSBs but it is going to have an adverse impact on financial health of private sector banks too, they said.

Sanguine about better financial health of the PSBs, Finance Minister Nirmala Sitharaman had not announced any capital infusion for them in Budget 2020-21 in February this year.

The government, however, is following the process of consolidation of PSBs for the past few years.

It started with the merger of State Bank of Saurashtra with its parent State Bank of India (SBI) in 2008. Subsequently, State Bank of Indore was merged with SBI in 2010.

After an over six-year hiatus, SBI again amalgamated its remaining five subsidiaries State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Hyderabad along with Bhartiya Mahila Bank (BMB) effective April 2017.

In the first three-way amalgamation, Vijaya Bank and Dena Bank were merged with Bank of Baroda from April 1, 2019 to create the third-largest lender of the country.

A mega consolidation exercise took shape beginning April this year. As per the consolidation plan, Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank; Syndicate Bank into Canara Bank; Andhra Bank and Corporation Bank into Union Bank of India; and Allahabad Bank into Indian Bank. Following the consolidation, there are now seven large public sector banks, and five smaller ones. There were as many as 27 PSBs in 2017.

India’s Forex Reserves cross half trillion dollars for the first time

Source: The Economic Times, Jun 12, 2020

MUMBAI: India’s foreign exchange reserves rose $8.2 billion in the week of June 5 and has now crossed the milestone $500 billion mark for the first time in country’s history.

The healthy surge in the forex kitty was largely on the back of capital raising rounds by Reliance and Kotak Mahindra as the foreign currency asset held by the Reserve Bank of India rose $8.4 billion and stood at a record $463 billion in the reporting week, data released by the central bank on Friday showed.

Expressed in US dollars, foreign currency assets include the effect of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in the reserves.India’s central bank has been shoring up its foreign reserves since over a year and in the process has leapfrogged Russia and South Korea as the third-biggest holder of forex reserves only behind China and Japan.

“We feel that the inflows coming in on account of Foreign Direct Investment and debt raising exercises by domestic financial institutions and Non-Banking companies would have largely contributed to the surge in inflow,” Saugata Bhattacharya is the Chief Economist at Axis Bank.

“In times like this, the news is a significant psychological milestone.”Rating agency S&P’s decision earlier this week to not downgrade India’s sovereign rating and outlook is also expected to improve the foreign fund flow from global investors.

The prime objective of RBI’s reserve management policy is liquidity and safety of reserves.

A strong kitty allows the central bank to timely intervene in forward and spot currency markets to arrest any slide in rupee devaluations.For example, the assimilation of reserve with the central bank and subsequent interventions helped the rupee recover by around 2% from a record low of 76.92 witnessed in April 2020. Since then, INR has been quite resilient, trading in the range of 75-76.

“Something which have differentiates our reserves from China and Japan is the sporadic FDI inflows and contribution of inward remittances. However, over the recent months, capital inflows to some of the largest corporates have indicated that not just sunrise sectors but even the mature industries are finding interest among global investors,” said K Harihar of First Rand Bank.

Other components of India’s foreign reserves such as its reserves held in gold declined by $329 million in the reporting week and stood at $32.352 billion, the latest RBI data showed. Separately, SDR and central bank’s reserve position at IMF stood at $1.4 billion and $4.2 billion respectively, in this period.

With a law, India plans lasting ban on cryptos

Source: The Economic Times, Jun 12, 2020

NEW DELHI: India is looking to introduce a law to ban cryptocurrencies, as the government sees a legal framework as being more effective than a circular from the Reserve Bank of India (RBI) in this regard. “A note has been moved (by the finance ministry) for inter-ministerial consultations,” a senior government official told ET.

The spur for the draft cabinet note was the March 4 decision of the Supreme Court to quash the April 2018 circular from the RBI that prevented banks from providing services in support of cryptocurrencies, said the official cited above.

The note will be sent to the cabinet after consultations and, subsequently, to Parliament. If it is along similar lines as an earlier proposal, the law will deal a blow to investors, exchanges and other entities dealing in virtual currencies such as bitcoin, experts said.

A high-level government panel, in July 2019, prepared a draft law providing for a ban on all forms of private cryptocurrencies. It had suggested a fine of up to Rs 25 crore and imprisonment of up to 10 years for anyone dealing in them.

SC Lifted De Facto Ban
At the time, the court had said: “While we have recognised… the power of RBI to take a preemptive action, we are testing in this part of the order the proportionality of such measure, for the determination of which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none.”

The ruling lifted a de facto ban on trading in bitcoin and other such instruments and had prompted startups to say they would revive plans to invest and expand business in India.

However, the going hasn’t been smooth, industry experts said. Several banks haven’t allowed payments for currency trades in India or overseas, in the absence of any specific communication from the RBI following the Supreme Court decision. Still, transactions have been taking place through other channels, the experts said.

The draft rules in the July 2019 proposal were too harsh, said one of them. Such a proposed legislation would make it “illegal to hold, sell, issue, transfer, mine or use cryptocurrencies and, if passed in the current form, would completely decimate the crypto-industry in India,” said Amit Maheshwari, partner, AKM Global.

He hoped the government would conduct stakeholder consultations and not go ahead with the bill in its present form.

The panel, headed by former finance secretary Subhash Garg, had, in its report, advocated a ban on all forms of private virtual currencies, though it asked the RBI and the government to look at introduction of an official virtual currency.

The draft law prepared by the committee said any direct or indirect use of cryptocurrency will be punishable with a fine or imprisonment, which shall not be less than one year, but may extend up to 10 years.

As per the draft law, a repeat offence will be punishable by imprisonment of up to five years, which could extend to 10 years with a fine. The fine could be three times the loss or harm caused by the person, three times the gain made by a person, or up to ₹25 crore.

Edelweiss Infra fund buys two road assets from Navayuga for $140 million

Source: LiveMint.com, Jun 07, 2020

MUMBAI: Edelweiss Infrastructure Yield Plus, an alternative investment fund managed by Edelweiss Alternative Asset Advisors Ltd. (EAAA), along with its portfolio company Sekura Roads Ltd, has acquired two annuity road assets from the Navyuga group. The deal size is at $140 million on an enterprise valuation basis.

The two road assets are Navayuga Dhola Infra Projects Limited (in Assam) and Navayuga Dibang Infra Projects Private Limited (in Arunachal Pradesh). These assets have been acquired from Navayuga Road Projects Private Ltd, a subsidiary of Navayuga Engineering Company Ltd. Sekura Roads is the road and highway infrastructure platform of the fund, focused on acquiring operating road assets and this is its first acquisition.

Last year, Subhash Chandra-led Essel group sold two transmission assets owned by Essel Infraprojects, Darbhanga-Motihari Transmission Ltd and NRSS XXXI (B) Transmission Ltd, to Sekura Energy, operated by the same fund.

EAAA has assets under management of over ₹28,000 crore. “We are happy to see the acquisition of these high-quality road assets to the Sekura Roads portfolio. This is in line with our strategy of investing in Infrastructure assets which can deliver predictable long-term yield to our investors. We now have a healthy portfolio of operating transmission and operating annuity road assets,” said Subahoo Chordia, Head of Edelweiss Infrastructure Yield Plus, in a press statement.

Sachin Bhansali, CFO, Navayuga group said the transaction will help the company de-leverage its balance sheet by freeing up cash. The Dhola and Dibang roads are of strategic importance because they ensure seamless all-weather connectivity between North East and the rest of India. The Dhola bridge is the country’s longest river bridge, inaugurated by Prime Minister Narendra Modi in 2018, has opened an economic corridor to the states of Assam and Arunachal Pradesh.

America’s DFC to invest $350 million in India

Source: The Economic Times, Jun 05, 2020

Kolkata: The US International Development FinanceNSE 8.16 % Corporation (DFC) is looking to invest $350 million in India to support multiple projects in the country’s financial services sector, health infrastructure, renewable energy and food security space.

DFC, known as America’s development bank, has approved loans worth $142 million for ReNew Power and $50 million for Sitara Solar Energy to build and operate solar power plants in Rajasthan, $50 million for Northern Arc Capital to scale up lending to businesses that expand access to water, sanitation, and food or advance women’s economic empowerment, besides committing to invest in several other projects.

These are part of DFC’s $1 billion commitment approved by its board to firms enaged in developmental works across in Africa, Latin America and other emerging markets. The investments mark one of the largest tranches approved during a board meeting, DFC said.

“The projects have a particular focus on development impact, with nearly 60 per cent of investments in low- and lower middle-income countries,” DFC said in a statement from Washington, adding that the investments are aimed at supporting financial services for women, small businesses, and other underserved groups at a time when capital is in desperate need.

“These projects will uplift some of the most underserved communities around the world,” DFC chief executive officer Adam Boehler was quoted as saying a statement. “The impact of these projects will be particularly meaningful as the world continues to fight the health and economic fallout of the pandemic.”

Northern Arc chief executive Kshama Fernendes expects to receive the funding in the second quarter. “It’s a long term facility and hence very valuable. Fernendes said, adding that interest rate is “very attractive”.

The funding agency has committed up to $20 million to buy equities in delivery app Freshtohome, which envisaged a project to support over 1,500 farmers and fishermen throughout the country; and up to $30 million investment in South Asia Growth Fund II to support businesses in the energy, water, and food sectors. It has also lined up a $27.3 million loan for Paryapt Solar Energy to build and operate a 50-megawatt solar power plant in Gujarat. It has offered $14.6 million loan guarantee to World Business Capital to enable it to support the expansion of Avanse Financial Services’ student loan program.

DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world.