Centre releases over Rs 35,000 crore as pending GST compensation to states

Source: Business Standard, Dec 17, 2019

New Delhi: Ahead of the GST Council meeting on Wednesday, the Centre on Monday sought to soothe the frayed nerves of states by releasing over Rs 35,000 crore as pending compensation. “The central government has released GST compensation of Rs 35,298 crore to states and union territories today (Monday),” the Central Board of Indirect Taxes and Customs (CBIC) said in a tweet.

This is likely to give a positive signal to states for the upcoming meeting, which may take up various options to raise funds to compensate states. Earlier in the day, Union Finance Minister Nirmala Sitharaman assured states that the Centre would not “renege” on the promise of GST compensation.

There was, however, some confusion over the period for which the compensation amount was released. States said with this payment they got compensation dues till September.

“Compensation has been released to the states for the months of August and September. We are hopeful that compensation for October and November will be released by the end of the month,” Bihar Deputy Chief Minister Sushil Modi told Business Standard.

Earlier, Parliament’s Standing Committee on Finance had said the Centre had paid Rs 45,745 crore as compensation to states for the first four months of the current financial year. The dues were paid in June and August. However, according to Sitharaman’s statement in the Rajya Sabha, the Centre had released compensation of Rs 65,250 crore till October this year.

This, she said, was Rs 9,783 crore more than what the Centre collected through the compensation cess — Rs 55,467 crore as of October 31 this year. Even BJP-ruled states raised eyebrows over Sitharaman’s response to the compensation cess issue.

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India's economic growth likely to remain subdued in near future: Report

Source: The Economic Times, Dec 02, 2019

NEW DELHI: India’s economic growth is expected to remain subdued in near future as the slowdown has deepened and is likely to remain extended for a longer duration than previously anticipated, says a report.

According to a Dun & Bradstreet report, a pick-up in the industrial production will only be gradual as investment remains subdued.

Moreover, rural sector demand is likely to remain affected by the recent floods and lower agricultural output.

Besides, most of the sectors from auto to real estate are under stress and this is reflected in the profit margins of the corporate and revenue collections of the government.

“The conundrum of soaring domestic stock market indices in India, slowing growth, rising inflation, and elevated unemployment presents a complex challenge for policymakers to address. The slowdown has deepened and is now expected to remain extended than previously anticipated,” said Arun Singh, Chief Economist Dun & Bradstreet India.

He further said that to address the current issue, both the Centre and the state governments should gear up to execute the infrastructure projects in pipeline.

“This would provide employment opportunities for the rural and urban poor. Secondly, it should work towards ensuring that auditing norms become more stringent,” Singh said, adding that boosting consumption seems difficult when incomes are not growing, food inflation is rising and governance issues have increased in banking and non-banking sector.

“Reinforcing confidence of stakeholders in the ecosystem will be one of the biggest challenges for the government to tackle; there are no easy fixes,” Singh said.

India’s GDP growth hit an over six-year low of 4.5 per cent in July-September 2019, dragged mainly by deceleration in manufacturing output and subdued farm sector activity, according to official data released on Friday.

The pace of GDP growth has moderated from the 5 per cent rate in April-June and 7 per cent in July-September quarter of 2018.

India's economy seen growing at 4.7% in September quarter

Source: The Economic Times, Nov 28, 2019

NEW DELHI: India’s economy probably expanded at its weakest pace in more than six years in the quarter to September, a Reuters poll showed, as consumer demand and private investment weakened further and a global slowdown hit exports.

The median of a poll of economists showed annual growth in gross domestic product of 4.7% in the quarter, down from 5.0% in the previous three months and 7% for the corresponding period of 2018.

Economic growth could dip to around 4% in the September quarter, two domestic television channels said on Wednesday, citing government sources.

If the latest figure for expansion of gross domestic product is 4.7% or less, the quarter will have registered the slowest expansion in 26 quarters, since 4.3% in January-March 2013.

Prime Minister Narendra Modi’s government has taken several steps, including cutting corporate tax in September, to boost investments and bolster economic growth.

Economists in a Reuters poll predicted the Reserve Bank of India would cut its repo rate for the sixth time in a row, by 25 basis points, to 4.90% at its Dec. 3-5 meeting.
“Agrarian distress and dismal income growth so far, coupled with subdued income growth expectation in urban areas, have weakened consumption demand considerably,” said Devindra Pant, chief economist at Fitch arm India Ratings & Research.

“Even the festive demand has failed to revive it,” he said, citing data on non-food credit, auto sales and select fast moving consumer goods.

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India is heading for economic growth below 5%: Economists

Source: LiveMint.com, Nov 20, 2019

NEW DELHI : India’s economic growth probably hit a new low last quarter, with early forecasts showing expansion below 5%.

Economists at State Bank of India, Nomura Holdings Inc. and Capital Economics Ltd. lowered their growth forecasts for the quarter ended September to between 4.2% to 4.7%. The government is scheduled to publish the data on Nov. 29.

Growth of 4.2% would be the lowest since authorities adopted a new base year for gross domestic product data in 2012. The economy expanded 5% in the three months through June.

“We now believe GDP growth did not bottom in” the April-June period, said Sonal Varma, chief economist for India and Asia at Nomura in Singapore, who is predicting 4.2% growth for last quarter. “High-frequency indicators have plunged and domestic credit conditions remain tight amid weak global demand.”

The Reserve Bank of India has cut interest rates five times this year to boost growth, with the monetary easing complemented by fiscal measures, including $20 billion of tax cuts for companies.

“We now expect larger rate cuts from RBI in December,” said Soumya Kanti Ghosh, chief economic adviser at State Bank in Mumbai, whose growth estimate matches that of Nomura’s Varma. “However, such rate cut is unlikely to lead to any immediate material revival.”

Finance Minister Nirmala Sitharaman last week said it was too early to say if the slowdown had bottomed out. Companies are planning new investments which might take time to materialize, she said. “We doubt that these tailwinds will have been enough to offset the weakness elsewhere,” said Shilan Shah, senior India economist at Capital Economics in Singapore, who is forecasting a 4.7% expansion. “It is clear that the recovery in growth we have been forecasting has so far proved elusive.”

Q2 GDP growth to decline to per 4.9 per cent: NCAER

Source: The Hindu Business Line, Nov 16, 2019

New Delhi: Economic think-tank, National Council of Applied Economic Research (NCAER), said that India’s GDP growth is likely to decline to 4.9 per cent in the second quarter of this fiscal due to sustained slowdown in virtually all the sectors.

India’s economy grew at 5 per cent in the first quarter of 2019-20 — the slowest pace in over six years.

For the full fiscal 2019-20, the Delhi-based organisation has pegged GDP growth at 4.9 per cent as against 6.8 per cent in 2018-19.

Going forward, NCAER said the monetary policy measures are unlikely to revive growth at this juncture and suggested providing fiscal stimulus, which too can be challenging unless it can be financed through better revenue generation.

“Whether the growth deceleration may be bottoming out or not, we will know in next two weeks based on the Q2 growth figures of the government. However, the current poor growth is mainly due to a demand problem. It can be addressed through fiscal measures,” NCAER Distinguished Fellow Sudipto Mundle said on the sidelines of its event on ‘Mid-year review of the economy’

Emphasising that the focus should be on fiscal measures, Mundle said there is a need to pump up expenditure without pushing up the fiscal deficit.

There are ways of doing it, he said, adding, “We have a bold leader. There is a huge fiscal space which has not been used. It is myth that some say there is no fiscal space.”

Mundle said that revenue foregone is 5 per cent of the country’s GDP and about 1.5 per cent of GDP is locked up as excess appropriation of the budget which has not been spent. Even the government is not paying the bills, he said.

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Economists say growth for FY20 may slip to around 5%

Source: The Economic Times, Nov 13, 2019

 Two of India’s leading banks see growth slowing to 5% in the current financial year, following a sharper-than-expected contraction in industrial production in September and little evidence of a meaningful recovery. GDP grew 6.8% in FY19.

Growth in the July-September period may have dropped to 4.2% from 5% in the first quarter, according to estimates compiled by ET, increasing pressure on the government to take more steps to revive sentiment and demand. Official GDP data for the second quarter will be released on November 29 and the first full-year estimate will be available in January.

“The second-quarter GDP growth rate is likely to slip to 4.2% on account of low automobile sales, deceleration in air traffic movement, flattening of core sector growth and declining investment in construction and infrastructure,” according to Ecowrap, a monthly report by the Economic Research Department of State Bank of India (SBI).

The SBI report pegged full-year growth at 5%, down from 6.1% it had estimated earlier and expects “larger rate cuts” from RBI in the December monetary policy review, although it cautioned against such a move. The economy grew 5% in the June quarter, its slowest pace in six years.

Data released on Monday showed industrial production contracted 4.3% in September, the worst performance since October 2011. For the six months to September, industrial growth was 1.3% against 5.2% in the same period last year.

The numbers triggered a raft of downgrades, even sharper than those after the first-quarter GDP estimates were announced in end-August.

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Q2 GDP growth could fall below 5%

Source: LiveMint.com, Nov 11, 2019

New Delhi: With industrial output in the September quarter contracting 0.4% from a 3% expansion in the preceding three months, economic growth is likely to slow to less than 5% in the quarter ended September, data for which is to be released on 29 November.

The weaker-than-expected economic data emerging from India points to a deepening slowdown in Asia’s third-largest economy, where private consumption, investments and exports have all taken a hit. Economic growth rate had cooled to a six-year-low of 5% in the June quarter.

“GVA (Gross Value Added) and IIP measure two different data points and industrial GVA growth has generally been in excess of IIP growth. However, in Q2 of FY20, industrial GVA growth is likely to be lower than 2.7% achieved in Q1 of FY20,” said Devendra Kumar Pant, chief economist at India Ratings.

Nomura has projected September quarter GDP growth to decelerate to 4.2% from 5% in the June quarter of FY20. The brokerage last week cut its overall GDP growth forecast for FY20 to 4.9% from 5.7% estimated earlier, the lowest so far among forecasting agencies.

SBI in its Ecowrap report released last week said it is less hopeful of a growth pick-up in Q2 FY20. “Out of 26 indicators, only 5 indicators were showing acceleration in September. This indicates the demand slowdown in the economy is still significant and would take longer time to recover. If we map the leading indicators showing acceleration, there is a distinct possibility that growth in GDP in Q2 will be lower than 5%,” the report said.

The Narendra Modi administration has taken a series of steps to reverse the slowdown, including a cut in the corporate tax rate in September. The Cabinet cleared a proposal last week to set up a 25,000 crore debt fund to finish incomplete housing projects, a move that is expected to boost cement and steel sectors in the coming months.

Sachchidanand Shukla, chief economist at Mahindra Group, said the government has tried to address sectoral pain points through specific measures. Most of these measures are addressing supply-side concerns and not those on the demand side, barring RBI’s rate cuts, he added. “We will see from Q3 onwards a slight recovery and may end Q4 probably with a growth rate of close to 7%. The factors that will support this recovery are a favourable base, some favourable lagged effect of RBI’s policy rate cuts meant to infuse liquidity and government spending. This recovery will be clearly visible from Q4. Please bear in mind, large part of it will be statistical,” he added.

The country needs to create employment and livelihood so that income levels go up which will help resolve the weakness in the economy rather than resorting to patchwork aimed at boosting investor sentiment, said Arun Maira, former member of Planning Commission of India. “We need a broader policy for improving incomes and livelihood. Short term measures will not help recover the economy in a sustainable way. We need an industrial policy that focuses on the bottom of the economy, that is, small enterprises in various sectors, which will create more employment and income for people. From this, we can derive the solutions for other facets of the economy,” Maira added.