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Hello, hope you are doing well!
To sum up Week 4 of August 2021, we will be reading about…
A ₹6 lakh crore monetization plan
Tax concerns on Automobiles
Regional outreach program
Snippets of other things that happened
Wrap-up
Infra monetized!
To continue funding the development of infrastructure, the government has decided to (hopefully) make the best of a difficult situation, by leveraging the existing infrastructure. Enter the National Monetisation Pipeline.
While the structure itself is not new (road infrastructure projects are built this way), it involves taking existing assets that were built and operated by the government being handed over to private parties to operate. The government has identified a number of assets that it would like to bid out in this process, over the next 4 years, with a total value of ₹6 lakh crore. The asset’s ownership will remain with the government, but the right to operate the asset will shift to a new owner. The government views asset monetization as a strategy for the augmentation and maintenance of infrastructure, and not just a funding mechanism.
The FM, Nirmala Sitharaman asserted the fact that the government will not sell off any assets, but only utilize them in a better manner, such that the entire exercise will generate greater value and unlock resources for the economy. the government is finalising ₹6 lakh crore worth of infrastructure assets that will include assets like national highways, pipelines, and the power grid. Each ministry has been given an individual target and a goal of ₹88,000 crore has been set for the current fiscal year. As many as 25 Airports Authority of India (AAI) airports, including ones at Chennai, Bhopal, Varanasi and Vadodara, as well as 40 railway stations, 15 railway stadiums and an unidentified number of railway colonies have been identified for getting private investments.
The main question is: Will it work?
The Opposition surely thinks otherwise. Rahul Gandhi on Tuesday (24.08.2021) asked every patriotic Indian to oppose the sale of national assets and accused PM Narendra Modi of "attacking the future" of India's youth to help a handful of industrialists. Rahul contended that Modi's policies were aimed at creating monopolies in the formal sector while destroying the informal sector, ultimately leading to job reductions/losses.
Without naming any industrialists, he said: "We all know who the airports and ports are going to. We know who is interested in warehouses. All these assets will go to three-four people."
Former finance minister P. Chidambaram, who too was at the news conference, said: "What are the goals (of the handover exercise), what is the consultation with the stakeholders? They say they want to raise money. Can that be a goal in itself?" He added: "It is closing-down sale. Virtually no public sector will remain after this."
(G)ST (S)tandoff in (T)hird gear
A lot of sectors are facing the brunt of the pandemic and its induced lockdown-related financial distress. One such sector is the Auto sector. But can the fall in demand in this sector be entirely attributed to the pandemic? Let’s look at what two of the biggest names from the auto industry have to say.
The demand for automobiles is unlikely to revive anytime soon as buyers are finding it difficult to buy cars and two-wheelers due to the continuous increase in costs and no respite in taxes, said R C Bhargava (Maruti Chairman) and Venu Srinivasan (TVS Motor Chairman).
Mr. Bhagarva worries on the revival of the auto sector if the taxation structure on automobiles continues to remain this high. Apart from having a high GST rate, states have this one-time road tax, which takes the tax rate to 37-38% on cars, making it difficult for end consumers to conclude their decisions on purchasing cars.
“The Centre and states must reconsider high taxes on automobiles. Green mobility will not take off unless we address the question of affordability. We haven’t seen any action on the ground to reverse the decline of the auto industry. India is not looking at incomes, paying capacity and job creation while making mobility plans,” Bhargava added.
Coming to the two-wheeler industry in India, which is the largest in the world, these vehicles have now become more of a necessity rather than a luxury. But what agitates Mr. Srinivasan is the fact these vehicles are being taxed (GST) at the same level as luxury cars.
“The price of the moped has gone up by 45-50 percent. GST on two-wheelers is the same as a luxury-level product but is a basic mode of transportation. The switch to BS6, cost of ABS, Supreme Court ruling on mandatory purchase of three-year insurance, and a one-time tax have pushed prices of two-wheelers higher. I think we have given away too many low tax benefits on other products which has made one of the major engines of growth globally to stall,” Srinivasan added.
It’s about time the authorities find out what is the real reason that has led to the fall in demand for automobiles since 2017-18.
Credit worthy government
Association Finance Minister Nirmala Sitharaman on Wednesday (25.08.2021) said it is too soon to say in case there is a lack of demand for credit and reported a regional outreach program to be embraced by banks to assist with credit growth from October. A push to credit development from such endeavors will likewise help the momentum set by the stimulus packages, which have been stretched out by the government since the beginning of the pandemic. It very well may be noticed that in late 2019, banks had led the "loan melas" in 400 districts to push up credit development. Indeed, even presently, the credit growth is faltering at around 6%.
"I think it is too soon to finish up whether there is lack of interest. I don't think it is time yet to presume that there is no credit pickup. Indeed, even without anticipating signs, we have found ways to increase credit," Sitharaman told correspondents.
She noticed that over Rs 4.94 lakh crore was dispensed by the banks between October 2019 and March 2021 through the effort drives embraced by them. This year too at some point in October, there will be a credit outreach in each region of the country. Sitharaman added that the public authority had reported that credit up to Rs 1.5 lakh will be given to borrowers through NBFC-MFIs.
All this just to keep the pulse of the nation running? Maybe or mabe not.
In the meantime, Sitharaman said there is a need to increase credit development in the eastern pockets of the country in states like Jharkhand, West Bengal, and Odisha, where the population is showing a higher inclination to store cash in current and investment accounts. Banks have additionally been approached to make state-wise plans for northeastern states to help the logistics sector and exporters.
Aside from that, Sitharaman, who took a survey meeting with the heads of all the 12 state-run moneylenders, said banks have been approached to contact exporters at the region level to help push the "one district, one export" message of Prime Minister Narendra Modi.
What else happened?
$100m in Khata!: Khatabook, a startup that is helping shippers in India digitize their accounting and acknowledge online installments, said on Tuesday it has brought $100 million up in another financing round as it gets ready launch financial services. The startup's new financing round — a Series C — was driven by Tribe Capital and Moore Strategic Ventures and valued the Bangalore startup at "near $600 million.
As a feature of the new round — which was oversubscribed and furthermore saw the participation of Balaji Srinivasan and Alkeon Capital just as numerous other existing financial backers including Sriram Krishnan, B Capital Group, Sequoia Capital, Tencent, RTP Global, Unilever Ventures and Better Capital — Khatabook said it is likewise repurchasing shares worth $10 million to compensate its current and previous representatives and early financial backers. The startup said it is additionally growing its investment opportunities pool for representatives to $50 million
HydroGAIL: India’s top gas company GAIL will foray into hydrogen generation and take the acquisition route to scale up its renewable energy portfolio as it pivots business beyond natural gas to align with the energy transition being witnessed across the globe. As part of a push to embrace cleaner forms of energy, GAIL will be laying pipeline infrastructure to connect consumption centers to gas sources while also augmenting its renewable energy portfolio, GAIL CMD Manoj Jain said. The firm is laying around 6,000-km of the pipeline, including a west coast to east coast pipeline from Mumbai to Jharsuduga in Odisha via Nagpur, he said. It currently has around 13,700-km of the natural gas pipeline network. The move by GAIL, which commands a 75% market share in gas transmission and more than 50% share in gas trading in India, is seen as part of the gov's vision to prepare for the energy transition process, under which the share of gas in the energy mix is sought to be raised to 15% by 2030, from the current 6.2%.
Gold in equity Olympics: India's equity markets have arisen as the best-performing among its worldwide peers on a year-on-year (YoY) and year-to-date (YTD) premise on the rear of strong retail and institutional investment and better income possibilities. India's benchmark index Nifty is up 45% in last year itself and 19% on a YTD premise, according to a report in Economic Times. Indian benchmarks have outflanked developed markets measure MSCI World Index by 15% and 29% separately in the last 12 months and YTD individually.
The return relationship among's India and worldwide values has declined to 61% from more than 80% a couple of months prior. The market capitalization of the Indian market has expanded by an incredible $1 trillion in the last 12 months which presently remains at $3.2 trillion. This implies Indian stocks are additionally the most expensive on the planet with a valuation of 23 times FY22 expected earnings. Finally, a gold medal in the equity market Olympics!
To wrap it up…
The equity market gold was quite visible in the Sensex throughout the week as it closed over the 56k mark on Friday. L&T, TCS and UltraTech Cement drove the gainers. The Sensex/Nifty closed 176/68.30 pts higher at 56,125/16,705.20 on Friday (26.08.21). The all-time closing high for Sensex was on the count of an economic recovery and investors having faith that the roller coaster ride is bound to reach its peak soon. Moreover, the price paid to take the roller coaster has touched the ₹73.69-to-a-dollar mark. Foreign investors want to have a fun time in the domestic rides as they seem to have potential and versatility for an adrenaline rush and thrill. Investors’ wealth amassed ₹246 lakh crore as gains were limited due to selling in HDFC Bank, RIL and Infosys.
It will soon be time to pay via an e-currency to take the thrill rides as RBI reiterated that it is exploring the idea of a Central Bank Digital Currency (CBDC). They are yet to be acquainted with the security measures and will take a call whether to establish a distributed ledger technology or not. If things go well, everyone will be excited to use e-currency in their daily chores by December 2021. However, the bar on purchasing digital gold goes quite against the tech-savvy government. SEBI issued an order stating that brokers should immediately stop selling of gold as it does not come under the purview of the Securities Contracts Rules, 1957. But you will be able to purchase it via investment platforms and mobile wallets as the directive was only for stockbrokers registered with the regulatory body.
The auto parts industry is poised to log 20-23 percent revenue growth during this financial year, upheld by recuperation in the domestic automobile sector and robust exports, with all portions (passenger vehicles, two-vehicles and commercial vehicles) likely to report solid twofold growth in 2021-22, credit scores office ICRA said on Thursday.
The homecoming of Cristiano Ronaldo or the first Olympic paralympic medal in TT for India by Bhavina Patel has taught us to keep our roots firm and to follow the basics. Your portfolio is bound to multiply if stick to your objective of creating wealth over a long period of time rather than looking for risky short-term gains. There are plenty of opportunities. Make sure you grab them and make the best out of them.
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That brings us to the end of this weekly wrap-up.
See you next weekend. Stay safe!
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Sources: Moneycontrol, The Signal, The Boring News Co., Business standard, Upstox Daily, and Motilal Oswal.
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