Core Sector Unhurt by Note Ban Drive, But Some Bruises Visible

ET-03 JANUARY 2017-Pg. 01.

Jan 03 2017 : The Economic Times (Mumbai)

Core Sector Unhurt by Note Ban Drive, But Some Bruises Visible

New Delhi:

Our Bureau

Core sector grows 4.9% in Nov; PMI and investment data disappoint

The first official production numbers following the November 8 demonetisation suggest the impact of the measure was not as severe as feared that month, but two other sets of data indicate a turn for the worse from December. One indicates that manufacturing contracted for the first time in a year in December while the other points to greater wariness on the part of investors.

Core sector output rose 4.9% in November on the back of a strong expansion in steel production and electricity generation, though the pace is down from 6.6% in October, data released on Monday showed. Part of the buoyancy was due to the base effect of lower 0.6% growth in November 2015.

The eight industries that make up the core sector -coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity -have a 38% weightage in the index of industrial production (IIP), suggesting that overall factory output may not have been tripped up by demonetisation in November.

That's backed up by data released on Friday showing robust direct and indirect tax collections.The government said that showed the economy had not suffered because of demonetisation.

To be sure, there's been a sharp dip in growth in cement (6.2%) and steel (16.9%) output from October. “There is some slowdown impact on construction as both steel and cement have begun taking a hit, which is partly because of demonetisation,“ said Kotak Mahindra Bank economist Upasana Bharadwaj. Aditi Nayar, principal economist at ratings firm ICRA, said, “Construction and real estate are cash-intensive both from the purchase side, with a portion of transactions involving cash, and also because daily wages would to a large extent be paid in currency notes. So, the impact of demonetisation is seen in the performance of key inputs like cement and steel.“

Economists expect the full impact of demonetisation to be visible in the December numbers, which will be announced on January 31. “We expect December core sector growth to be at least 2.5 percentage points lower than the 4.9% seen in November as the impact of demonetisation becomes apparent in various sectors,“ Nayar said. However, coal output bounced back into positive territory in November after three months of contraction to post 6.4% growth.

Electricity generation rose 10.2%, and steel production was up 5.6%. Cement posted a modest 0.5% output growth while refinery products and fertilisers were up 2% and 2.4%, respectively.

Overall, April-November core sector growth was up 4.9% against 2.5% last year. According to government data, November 2016 tax collections added up to Rs 91,157 crore, a sharp increase from Rs 36,061 crore in the yearearlier month.

“Of course there would be areas which would be adversely impacted, but what was predicted by the critics has to have a rationale with revenue collection,“ Finance Minister Arun Jaitley had said on Thursday, citing the tax numbers. “Assessment can be unreal but revenue is real.“

SOMBRE PROSPECT

Two separate data releases on Monday indicated that the effects of demonetisation may take a harsher turn from December.The Nikkei India Manufacturing Purchasing Managers' Index fell to 49.6 in December from November's 52.3, the first contraction in the past 12 months.

It's also the biggest monthly decline in the index since November 2008, the start of the glo bal financial crisis. Both the output index and the new orders index sank to their lowest for the year.

Separately, data compiled by the Centre for Monitoring Indian Economy (CMIE) showed new investment proposals worth Rs 1.25 lakh crore in December quarter.

“This is low compared to the average Rs 2.36 trillion (Rs 2.36 lakh crore) worth of new investments seen per quarter in the preceding nine quarters of the (Narendra) Modi government,“ wrote Mahesh Vyas, CMIE managing director.

“Data suggests that demonetisation has hit the pace of announcement of new investment proposals during the quarter ended December 2016.“

Jan 03 2017 : The Economic Times (Mumbai)

Manufacturing PMI Contracts in Dec

India's manufacturing contracted in December as cash crunch due to demonetisation hurt demand as well as output. The Nikkei India Manufacturing Purchasing Managers' Index fell to 49.6 from November's 52.3, marking the first contraction in 12 months.

Pg. 15.

Jan 03 2017 : The Economic Times (Mumbai)

Manufacturing Takes a Hit Amid Cash Crunch, Dec PMI Below 50

New Delhi:

Our Bureau

At 49.6, Nikkei India Manufacturing Purchasing Managers' Index sees sharpest fall since 2008 financial crisis

India's manufacturing contracted in December 2016 as cash crunch due to demonetisation hurt demand as well as output in the first month of ban on old high denomination notes, a private survey showed on Monday.

The Nikkei India Manufacturing Purchasing Managers' Index fell to 49.6 in December from November's 52.3, marking the first contraction in the last 12 months. A reading above 50 indicates economic expansion, while a reading below 50 shows contraction.

“Having held its ground in November following the unexpected withdrawal of `500 and `1,000 bank notes from circulation, India's manufacturing industry slid into contraction at the end of 2016,“ said Pollyanna De Lima, economist at IHS Markit and author of the report.

The decline in the index is the sharpest since November 2008, the beginning of the global financial melt down. The government on November 8 announced cancellation of Rs 500 and Rs 1,000 notes, withdrawing from circulation over 86% of the currency.

Due to the resultant cash crunch, output and new orders fell for first time in one year, the survey showed.

Economists have slashed their growth estimates for India to less than 7% for the current financial year following demonetisation, well below 7.6% recorded last year.

Blaming the withdrawal of high-value rupee notes November 8 onwards for the downturn, survey participants said cash shortage and lower workplace activity resulted in shedding of jobs and falling buying levels in December 2016.

Operating conditions deteriorated in both consumer and intermediate goods categories, the report said.

Businesses also highlighted challenging conditions in external markets with a fall in new business from abroad ending a six-month sequence of growth.

“With the window for exchanging notes having closed at the end of December, January data will be key in showing whether the sector will see a quick rebound,“ De Lima said.

The Reserve Bank of India has said that the impact of demonetisation will be transient.

It had not cut interest rates in the monetary policy review last month but banks have started slashing interest rates after they raised low cost deposits following demonetisation.

Jan 03 2017 : The Economic Times (Mumbai)

CMIE Reports Big Drop in Investments

Investments have fallen sharply after demonetisation, data released by CMIE showed. In the quarter to December, new investment proposals worth  1.25 lakh crore were observed, against . 2.36 lakh crore in the average  the preceding 9 quarters.

Pg. 15.

Jan 03 2017 : The Economic Times (Mumbai)

Slowdown in New Investments: CMIE

New Delhi:

Our Bureau

Investments have fallen sharply post demonetisation, slipping to their lowest under the current Narendra Modi-led NDA government, data released by the Centre for Monitoring Indian Economy (CMIE) showed.

In the quarter to December, new investment proposals worth `1.25 lakh crore were observed, CMIE said, contrasting it with the average `2.36 lakh crore worth of new investments per quarter in the preceding nine quarters of the Modi government.

“Data suggests that demonetisation has hit the pace of announcement of new investment proposals during the quarter ended December,“ Mahesh Vyas, managing director and CEO of CMIE said.

The data showed 227 new investment proposals worth 81,800 crore were an nounced during this quarter before the demonetisation on November 8.Only 177 investment proposals worth 43,700 crore were made between November 9 and December 31.

The contrast is starker when adjusted for the number of days in each period. “The quarter consisted of 39 days before demonetisation and 53 days after. Evidently, the quarter had more days in the post-demonetisation period and yet, investments during this period were lesser than in the shorter pre-demonetisation period,“ Vyas said.

Only 404 new investment proposals were observed during the quarter ended December, the lowest number of new projects announced in a quarter in over a decade, CMIE analysis showed.

“On an average, 7-8 projects are announced per day. The post-demonetisation fall in this average to just three projects per day reflects a new level of anxiety on the investments front,“ Vyas said, adding that the investment climate is expected to remain weak for some more time.

STALLED PROJECTS

Projects involving investments worth 77,700 crore were stalled during the December quarter, 38% higher than the value of projects stalled during the preceding quarter. “Eighty per cent of the investments that were stalled during the December quarter were stalled because of lack of environmental and non-environmental government clearances. Lack of government clearances was the biggest factor responsible for stalling of projects under implementation,“ Vyas wrote.

Unfavourable market condi tions and lack of promoter interest account for only about 11% of the to tal projects stalled during the quar ter of December, CMIE estimated.

“Six of the 16 projects that gave rea sons for stalling their projects in the December quarter mentioned rea sons that imply an adverse business environment. It is important that such projects are revived and saved from remaining stalled for long,“ Vyas said.

TOI- 03 JANUARY 2017, Pg. 01.

Jan 03 2017 : The Times of India (Mumbai)

Only those abroad from Nov 10-Dec 30 can now exchange scrapped notes

TIMES NEWS NETWORK

RBI Turns Away People Trying To Deposit Old Currency

Those who missed depositing scrapped notes with banks before December 30 are finding out that the Reserve Bank of India too has firmly shut its doors on everybody except those who were abroad from November 10 to December 30, 2016.

Several citizens who we returned away at RBI offices in different cities on Monday recalled that in his November 8 speech, Prime Minister Narendra Modi had said that there may be some who were unable to deposit their old Rs 500 or Rs 1,000 notes by December 30, 2016. “They can go to specified offices of the Reserve Bank of India up to March 31, 2017, and deposit the notes after submitting a declaration form,“ the Prime Minister had said on television.

However, when depositors turned up at the central bank's offices in Kolkata, Ahmed abad and other parts of the country to exchange some notes that were left behind, they were told that there was no grace period.

“This policy is in the government's ordinance and notification. The grace period is only for those who were abroad during November and December and did not have an opportunity to deposit,“ said an RBI official.

The Specified Bank Notes (Cessation of Liabilities) Ordinance did have a provision for allowing deposits but it specified that the grace period was only for those who were overseas at the time of demonetisation.

A senior finance ministry official said enough time had been given to residents to deposit old notes.

The ordinance issued by the government clearly mentioned that only those who were outside the country during the 50-day period could deposit their old notes, but after stating the reason for their absence, a finance ministry official told TOI. Residents of the country who have forgotten to de posit the old notes even after expiry of the December 30 deadline will not be eligible to deposit the scrapped notes in RBI offices, said the official, adding that indefinite time could not be given to people who were present in the country during the 50-day period.

This is in sharp contrast to the RBI press release issued on November 8, which stated that “any person who is unable to exchange or deposit the specified banknotes in their bank accounts on or before December 30, 2016 shall be given an opportunity to do so at specified offices of RBI or such other facility until a later date as may be specified by the RBI“. An RBI spokesperson said the RBI has no advice for citizens who were in the country during the period and, for some reason, were unable to deposit the money in their bank. “The government has issued an ordinance. Holding over Rs 5,000 in old currencies is illegal and a punishable offense. If someone has less than that amount, it is not an offense as of now,“ she said.

There are some in banking circles who believe that the wording of the ordinance still leaves government with enough room to reopen a win dow. But A senior finance ministry official said, “There was never a commitment that all Indians could exchange old notes after December 30. The (Dec 28) ordinance is clear that only those who were outside the country during the 50day period can deposit the old notes in RBI offices after stating the reasons for their absence.“

Pg. 04.

Jan 03 2017 : The Times of India (Mumbai)

66,000kg gold imported in Nov, ED probing traders and banks

Vijay V Singh

Mumbai:

Given the high volume of gold imports in November this year, Enforcement Directorate (ED) officials suspect much of it may have been used to make investments against unaccounted cash.

The ED collected nationwide data on gold imports in November 2016 which reveals total gold imports that month stood at 66,000 kg. Of this, 25,000 kg sold in Delhi, 15,000 kg in Ahmedabad, 7,300 kg in Hyderabad, 7,000kg in Chennai, 6,200 kg Bangalore, 2,550 kg in Kolkata and 1,250 kg in Mumbai. Recently in Delhi, the ED arrested two Axis Bank officials for helping some people convert their demonetised currency into gold. Data shows that of the total gold imported in Delhi, 7,300 kg was brought by Axis Bank alone.Gold can be imported into the country mostly through registered banks and private firms.

Earlier, a Kalbadevi-based bullion trader who was raided told the ED that he sold 600 kg gold in November after demonetisation and produced documents to support his claim. But the ED was not convinced, as it did not match the city's total gold imports in November. He was unable to produce gold purchase receipts, which raised suspicion. Also around Rs 200 crore deposited into his account came from various shell companies. The trader claimed he sold them gold in exchange of money but was unable to provide customers' details. The ED also found he had shifted most of the money out of his account and it had only Rs 8 crore.

Another bullion trader, earlier probed in the money laundering case against former Jharkhand chief minister Madhu Koda, allegedly had ge nerated Rs 70 crore through gold sales after demonetisation. The ED attached his account but again found a very nominal amount in it.

Officials had searched premises of both traders and said they were mainly trying to determine how much gold the traders had bought from institutions and will match it with their sales records.

Officials suspect bullion traders had bought less gold from institutions but forged their records to show increased sales.