Deutsche Bank Expects FM to Present 'Path-Breaking' Budget

Deutsche Bank expects the following 12 big policy measures in the budget,

(1) Rationalize subsidies in a politically prudent manner through moderate monthly price hikes, stretching beyond diesel to LPG and even kerosene (Key beneficiaries: HPCL, BPCL ONGC, Oil India)

(2) Re-direct government expenditure from revenue to capital expenditure and use welfare programmes for capacity creating outlays. Enhance resource allocation to infrastructure. (L&T, UltraTech, ABB, Siemens)

(3) A reorientation of the MGNREGA scheme towards focused capacity creating measures like rural roadways and irrigation projects (UltraTech)

(4) Announcement of new flagship mega-infrastructure projects with time bound deadlines - Delhi Mumbai industrial corridor, Diamond quadrilateral for railways, broadband highways, smart cities. (L&T, ABB, Siemens)

(5) Usher in a new regime of FDI Liberalization with special focus on raising FDI limits in Defense, railways and insurance to 51 per cent or higher (Siemens, L&T, Bharat Forge, Max India, Reliance Capital)

(6) The highest ever target for disinvestments of government's equity stakes in PSU companies. Announced target in range of Rs.60,000- Rs. 80,000 crore.

(7) Create enabling environment for higher flows into equity capital markets, by raising investment limits of pension funds and the LIC in equity capital markets. (Kotak Mahindra Bank, HDFC Bank, Reliance Capital)

(8) Address the urgent need to recapitalize PSU banks either via diluting government stakes to 51 per cent or through establishing holding company entity for government stakes in PSU banks. (Punjab National Bank, Bank of Baroda)

(9) With limited room to raise taxes , and yet address fiscal imbalances, government to rely on raising revenue through auction of resources like coal and telecom spectrum, which can be fairly significant.

(10) Provide tax relief to the middle class through raising basic exemption limit to Rs. 3 lakh - Rs. 4 lakh and hiking deduction under Sec 80C to Rs. 2 lakh. The revenue thus foregone may be compensated by raising tax on the super-rich.

(11) Articulate a credible roadmap with time-bound deadlines on ushering the Goods and Services Tax (GST) by March 2016.

(12) Address foreign investor concerns on retrospective taxation by making India's tax environment transparent, less adversarial and prospective only.

Source: NDTV Profit

PM Modi Eyes First Labour Overhaul in Decades to Create Jobs

Prime Minister Narendra Modi has set in motion the first major revamp in decades of the archaic labour laws, part of a plan to revive the flagging economy, boost manufacturing and create millions of jobs.

Successive governments have agreed labour reform is critical to absorb 200 million Indians reaching working age over the next two decades, but fears of an ugly union-led backlash and partisan politics have prevented changes to free up labour markets.

Now, with the benefit of a single party majority in Lok Sabha for the first time in 30 years, laws that date back to just after the end of British rule are set for an overhaul. Officials at the labour ministry say this is a top priority in the government's first 100 days in office.

India has a forest of labour laws, including anachronisms such as providing spittoons in the work place, and are so complex that most firms choose to stay small. In 2009, 84 per cent of India's manufacturers employed fewer than 50 workers, compared to 25 per cent in China, according to a study this year by consultancy firm McKinsey & Co.

The World Bank said in a 2014 report that India has one of the most rigid labour markets in the world and "although the regulations are meant to enhance the welfare of workers, they often have the opposite effect by encouraging firms to stay small and thus circumvent labour laws".

Business leaders hope Modi, who advocates smaller government and private enterprise, will be a liberaliser in the mould of Margaret Thatcher or Ronald Reagan. Perhaps the most important change, they say, is to rules making it hard to dismiss workers.

First up, though, to win public support, his Bharatiya Janata Party (BJP) government is looking to make changes that benefit workers, three senior officials at the labour ministry said. Among the changes: making more workers eligible for minimum wages, increasing overtime hours and allowing women to do night shifts.

"We are trying to provide a hassle free environment that helps both workers and industry," a senior labour ministry official involved in the deliberations said. "It is a priority for us."

Next on the reform agenda will be the most sensitive issue of loosening strict hire and fire rules. Officials said they have begun preliminary talks with concerned groups about slowly implementing the changes.

"There is a definite push ... you will see more measures," said another official at the ministry who is privy to the discussions within the government.

Reforms Key to Manufacturing Jobs

India's 20-year streak of fast economic expansion is often derided as "jobless growth" since the service sector-led model has been capital rather than labour-intensive.

India does not produce reliable, regular jobless data, but long-term surveys by the statistics department show the country only created 5 million manufacturing jobs between 2004/5 and 2011/12. In the same period some 33 million people left farms looking for better paid work. The majority were absorbed into low productivity and irregular work on construction sites.

Moreover, research suggests India needs 12 million new jobs every year to absorb the largest youth bulge the world has ever seen. It has fallen far behind that target.

Companies complain that current laws requiring rarely granted government permission for layoffs make it impossible to respond to business downturns, and blame the laws for the country's relatively small manufacturing sector.

Manufacturing contributes just 15 per cent to India's nearly $2 trillion economy. New Delhi says it wants to lift that share to 25 per cent within a decade to help create 100 million jobs. Comparatively, manufacturing accounted for 45 per cent of China's GDP in 2012.

"If business cycles are volatile, the ability to downsize and upsize should be freely available," said R. Shankar Raman, chief financial officer at Larsen & Toubro, one of India's biggest conglomerates.

In what is seen as a test for Modi's labour reform agenda and is intended to inspire other states, Rajasthan this month proposed amendments to the central law to allow firms in the state to lay off up to 300 workers without government permission. Currently, clearance is required to fire more than 100 workers and this is rarely granted.

Labour Militancy Declines

Labour unions cutting across party affiliations have opposed thestate government's move and have asked Modi to intervene. The BJP's own union has called a meeting of its officials early next month to chalk out a strategy to protest what it said was a lack of consultation over the shakeup in Rajasthan.

Since almost all the unions in India have political affiliations, their opposition to reforms has a risk of turning into a full-scale political agitation. But the risk that the reforms could also bring full-blown street protests similar to that seen in Thatcher's Britain are unlikely.

Labour militancy has declined in India, although sporadic violent protests like one at a Maruti Suzuki factory in 2012 which resulted in a death of a company official are enough to make policymakers wary on the pace of reform.

The labour ministry has asked for public comments by early July on the changes it plans to the Minimum Wages Act, which sets minimum wages for skilled and unskilled labours, and the Factory Act, which governs health and safety.

The proposed changes would standardize minimum wages nationally while increasing the frequency of salary revisions based on consumer prices. Although potentially inflationary, the move could bring millions of workers into the formal economy.

The ministry also wants to extend the amount of overtime workers can clock and scrap a 1948 rule that prohibits women working at night in factories, suggestions that have been welcomed by both labour groups and employers.

Copyright: Thomson Reuters 2014

LPG Cylinder Prices May Go Up By Rs. 5 Every Month: Report

After diesel, the government is considering raising cooking gas (LPG) and kerosene rates in small doses of Rs. 5 per cylinder and Rs.0.50-1 a litre every  month to wipe out Rs. 80,000 crore subsidy on the two fuels.
     
The previous UPA government had in January 2013 decided to raise diesel prices by up to 50 paise litre every month.
     
But for aberrations on two occasions, the monthly increases have taken place regularly to trim subsidy on diesel to just Rs. 1.62 a litre. This too looks set to be wiped off to make the fuel deregulated or free, with the new government continuing with the UPA decision.
     
Following the diesel model, the oil ministry is now proposing monthly increases in LPG and kerosene rates, sources privy to the development said.
     
Subsidy on LPG currently is a staggering Rs. 432.71 per 14.2-kg cylinder and at Rs. 5 per month increase it will take 7 years to wipe out the subsidy.
     
Sources said the ministry is of the view that the monthly increases can be as high as Rs. 10 if the political leadership takes a stand.
     
On kerosene, the subsidy currently is Rs. 32.87 per litre and at Re 1 hike per month it would take more than two-and-a- half years to wipe out the subsidy.
     
Fuel subsidy, they said, is the biggest drain on the exchequer. In the current fiscal, subsidy on diesel, LPG and kerosene is estimated atRs. 115,548 crore. Of this, LPG accounts for Rs. 50,324 crore and kerosene Rs. 29,488 crore.
     
This subsidy is met through a combination of direct cash dole from the budget and contribution by state-owned firms like ONGC.
     
In 2013-14, the government paid Rs. 70,772 crore in cash subsidy while upstream firms shelled out Rs. 67,021 crore. In the previous year, the government payout was Rs. 100,000 crore and upstream contribution Rs. 60,000 crore.
     
For diesel, the subsidy estimated is Rs. 35,736 crore but this will come down if the monthly increases continue as planned, sources said.
     
Petrol price was deregulated in June 2010 and retail rates have more or less moved in tandem with the cost.
     
With the introduction of monthly increases in January, subsidy on diesel tripped to less than Rs. 3 a litre in May last year before a fall in rupee value led to it widening to Rs. 14.50 per litre in September, 2013

Source: NDTV Profit

Market Weekahead: High expectations as Modi becomes PM

Shares may look to extend gains in the first half of next week as Narendra Modi is set to be sworn in as the country's prime minister on Monday. The first task for Modi will be to pick a new cabinet, with the finance ministry expected to go to former commerce minister Arun Jaitley. Comments on the fiscal deficit, inflation, and the relationship with central bank Governor Raghuram Rajan will be of prime importance to investors. That could help sustain gains for the BSE Sensex, which on Friday became the best performing equity index in Asia-Pacific for 2014. However, the second half of the week could be volatile given the expiry of May derivatives contracts, and a slew of key earnings such as Tata Motors Ltd , Sun Pharmaceutical Industries   and  Coal India  .

Source: Moneycontrol.com

Rupee Hits 10-Month High of 59.51 Per Dollar on Exit Poll Hopes

Rupee rallied to its strongest level against the dollar since July 2013 on widespread hopes that exit polls later on Monday would show the opposition Bharatiya Janata Party winning a majority in the country's elections.

The optimism comes even as exit polls in previous elections have proved to be unreliable.

India's five-week long elections are set to conclude on Monday, with exit polls from media organisations to be released starting after 6:30 p.m. Actual results will be out on Friday.

The partially convertible rupee touched as much 59.51 per dollar on Monday, the strongest level since July 29, 2013, compared to its 60.02/03 close on Friday.

Copyright: Thomson Reuters 2014

Nifty Soars Above 7,000 Ahead of Exit Polls

The BSE Sensex surged over 550 points, while the broader Nifty broke above the key 7,000 levels for the first time as markets rallied to record highs for a second successive session on Monday. The rupee, too, strengthened to as much as 59.51 per dollar, its strongest level since July 29, 2013 from its close of 60.02/03 on Friday.

The Sensex has now jumped over 1,200 points or around 5 per cent in just two sessions. Strong buying in equities came amid rising hopes that exit polls would show Bharatiya Janata Party (BJP) and its allies winning a majority in the current elections. Exit poll results are due to be telecast at 6.30 p.m. after the five-week-long elections wind up today. Actual results will be announced on May 16.

"Markets are factoring numbers close to 230-240 seats for the BJP alone, and if that is the case, the NDA will get a majority on its own. That will lead to pro-growth, right of central, stable formation, which is enthusing for the investors," said Manishi Raychaudhri, strategist and head of research at BNP Paribas Securities.

The Nifty has surged 17 per cent since Narendra Modi was announced as the BJP's prime ministerial candidate on September 13. Polls have consistently shown the BJP ahead, raising expectations the opposition party, which is seen by markets as being more investor- and business-friendly, will either win or come close to an outright majority.

Domestic-oriented shares led the rally, with the Bank Nifty hitting a record high.Coal India, up 7.3 per cent, was the top Nifty gainer. HDFC Bank and Tata Motors closed with over 4 per cent gains, while ITC, Hero MotorCorp, Maruti Suzuki, SBI and Reliance Industries ended 3-4 per cent higher.

Infrastructure shares also gained, with Power Grid rising 4.35 per cent and Grasim Industries ending 4.3 per cent higher. State-run power equipment maker Bharat Heavy Electricals surged 2.4 per cent. 

"Infrastructure, engineering, cement, power and industrial stocks should gain if a Modi-led government comes to power," said UR Bhat, managing director, Dalton Capital Advisors.

Despite gains, analysts cautioned investors about going overboard amid the euphoric sentiments on the Street. That's because not only opinion polls, but exit polls, too, have got it horribly wrong in the past.

The BSE Sensex ended 556.77 points higher at 23,551, while the Nifty closed up 155.45 points at 7,014.25.

Source: NDTV Profit

Maruti, Toyota, M&M sales drop in April; Hyundai, Honda up

Major car makers, including Maruti Suzuki India, Toyota Kirloskar Motor and General Motors India, reported decline in domestic sales in April as demand continued to be subdued due to overall unfavorable macro-economic conditions.

Other manufacturers Hyundai Motor India Ltd, Honda Cars India and Ford, however, reported increase in April sales on the back of their new models.

The country's largest car maker Maruti Suzuki India (MSI) reported 12.6 percent decline in its April sales during the month at 79,119 units.

Sales of the company's bread and butter segment mini cars comprising M800, Alto, A-Star and WagonR declined by 25.4 percent to 26,043 units, while those of premium compact cars consisting of Swift, Estilo, Ritz rose by 9.9 percent to 23,659 units in April.

MSI said sales of its popular compact sedan Dzire declined 17.7 percent during the month under review to 16,008 units, while sales of utility vehicles, including Gypsy, Grand Vitara and Ertiga, also declined by 5.8 percent to 5,011 units in April.

Similarly, homegrown Mahindra & Mahindra also saw its domestic sales dropping by 15 percent at 34,107 units as against 39,902 in the same month previous year.

"It is unfortunate that the auto industry has not seen an upturn over the last couple of months in spite of a reduction in excise duty," M&M Chief Executive (Automotive Division) Pravin Shah said.

The company expects that post the general elections, sentiments would improve, leading to a better economic situation and hence increased demand, he added.

General Motors India also reported a 35.30 percent decline in April sales at 5,302 units.

"Customer sentiment continues to remain negative even with price reduction on account of excise duty cut and other market promotion schemes," General Motors India Vice President P Balendran said.

Going by the market scenario, the company expects the challenging times to continue as the general economic conditions continue to remain depressed, he added.

"The buoyancy in the market is completely missing and we don't see any upturn before the new government assumes office," Balendran said.

Toyota Kirloskar Motor also saw its domestic sales decline by 16.04 percent at 7,562 units in April. The company, which saw labour unrest at its Bangalore facility, said it resumed normal production from April 22.

In contrast, Hyundai Motor India, saw its sales increase by 8.78 percent in its domestic sales at 35,248 units last month. 

Commenting on the sales performance, HMIL Senior Vice-President (Sales and Marketing) Rakesh Srivastava said the domestic volume growth is in line with this year's objective of growth in volume and market share.

"Growth is led by sedan and utility vehicles across geographies, with new products Xcent, Grand and Santa Fe adding volumes with an overwhelming response from customers," he added.

Similarly, Honda Cars India posted a 30 percent increase in domestic sales at 11,040 units in April, riding on the success of its premium sedan City.

The company sold 7,044 units of the car in April.

Ford India also posted rise in domestic sales last month. The company sold 6,651 units in April, up 66.15 percent from same month previous year.

"Despite on-going business challenges faced by Indian automotive industry, Ford India sales have held steady in April," Ford India Executive Director (Marketing, Sales and Service) Vinay Piparsania said.

In the run up to the formation of the next government, the company remains cautious and watchful in anticipation of progressive policy interventions to energise the Indian automotive sector, he added.

In the two-wheeler segment, Honda Motorcycle & Scooter India posted 20.92 percent rise in sales at 3,13,942 units last month. Yamaha Motor India posted a 42.39 percent increase in domestic sales at 51,158 units in April. 

Source: PTI
http://zeenews.india.com/