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LEGAL VOICE
World Bank pegs India's GDP growth at 7.5%
The Indian economy has turned the corner but wider reforms are needed to boost growth, the World Bank said, and estimated the economy to expand by 7.5% in 2015-16. The World Bank's India Development update said if the reform agenda was successfully implemented, it carries great promise of an acceleration in economic growth. The government expects growth in the 8.5% range, boosted by the measures that have been unveiled. “The government has made progress in several policy areas, and long-term prospects for growth remain bright for India,” said Onno Ruhl, World Bank country director for India. “The current situation offers an opportunity to further strengthen the business environment and enhance the quality of
India's core sector contracts on steel, cement slide
India's key infrastructure sector remained under stress in March with data showing that annual growth in output fell, dragged down by a sharp decline in cement and steel sectors. Data released by the commerce and industry ministry showed the core sector comprising steel, cement, crude oil, natural gas, refinery products, fertilizers, electricity and coal, contracted 0.1% in March compared to a 4% growth in the same month earlier year. For 2014-15, the sector grew 3.5% compared to an expansion of 4.2% in the year earlier period. The core sector data has remained volatile and has hurt overall industrial growth. The sector accounts for 38% of the index of industrial production. Economists said the data showed that a wider revival in industrial growth was yet to be visible and called for government action to fast-track stalled projects. “The stagnation in core sector output and contraction in merchandise trade are expected to outweigh the mild uptick in automobile production in March 2015, leading us to expect a moderation in industrial growth from the threemonth high of 5% in February 2015,” Aditi Nayar, senior economist at rating agency ICRA, said. “While capital goods output witnessed a 10% expansion in JanuaryFebruary 2015, a broadbased revival in investment activity is yet to take root,” she said.
public spending. Continuous strong momentum in these reforms will further unleash the productivity that Indian firms need in order to create jobs and become globally competitive,” said Ruhl. The report said a favourable external environment, particularly the sharp decline in the international prices of oil, metals and food, has helped to improve the economic outlook significantly. According to the update, a twice-yearly report on the Indian econ-
omy and its prospects, economic growth is expected to rise to 7.9% in 2016-2017 and 8% in 20172 0 1 8 . H o w e v e r, acceleration in growth is conditional to investment growth picking up to 11% during 2016 to 2018. But, it said the economic outlook is subject to both external and domestic risks. “A rapid increase in oil prices is a key risk, and global growth remains constrained, particularly in several of India's trading partners,” the report said. It also said a tightening of US monetary policy can have a disruptive impact on India's exchange rate and financial markets. While the RBI has built reserves to reduce India's external vulnerability, the
risk remains, warranting vigilance, the report said. On the domestic front, the report points out that boosting private investment will be crucial to bridge the yawning infrastructure deficit and support the favourable growth outlook. “With India's tax-toGDP ratio remaining stubbornly low, the country will need to explore alternative channels of long term investment, and revive PPP model of financing. Additional fiscal space can be generated by increasing the tax-to GDP ratio, and improving tax administration and compliance,” the report said. It said the outlook for new investments continues to be dented by the debt overhang in the corporate balance sheets, which has extended to the public sector banks.
Global rating agency Moody’s said any upgrade in India’s sovereign rating would depend on implementation of policies by its leaders to improve business environment for private sector and for infrastructure growth. “How the recently elected leaders in India… implement the pledges to improve infrastructure and governance will determine the credit trajectory of the sovereign,” Moody’s Investors Service said in a report. Moody’s, which has given the lowest investment grade rating to India, named regulatory complexity and weak social and physical infrastructure as challenges before the country. “The evolution of sovereign’s credit profile will hinge on whether its leaders are able to implement policies that facilitate infrastructure development and strengthen the private sector’s operating environment,” Moody’s said. Earlier this month, Moody’s had upgraded India’s outlook to ‘posi-
tive’ from ‘stable’, but retained the credit rating at the at ‘Baa3′, just a notch above the junk grade. Moody’s had said it would consider a rating upgrade after 12-18 months depending upon improvement in macroeconomic parameters. In its report, Moody’s said India’s growth will outperform similarly rated peers, and macroeconomic policy vigilance is likely to contain inflation and balance of payments pressures in the near-term. It said India’s sovereign rating reflects credit strengths of robust economic size and growth and credit challenges of weak governance and infrastructure. Favourable savings levels, investment rates,
and demographics are likely to keep India’s growth stronger than most Moody’s rated peers, it said. Lower global commodity prices support India’s growth and balance of payments, but its banking system would pose sovereign risks over the medium-term if asset quality and capitalisation levels do not improve, Moody’s said. The positive outlook incorporates the reduction in inflation and the balance of payments pressures over the last year, recent measures to address constraints on investment, including the passage of related bills in Parliament, and its expectation that India’s strong growth will improve its fiscal ratios over the rating horizon, it added.
Anil Agarwal-led Sesa Sterlite, which was renamed as Vedanta recently, has been hit hard by falling crude prices as it booked nearly Rs 200 billion ($3 billion) as “goodwill impairment charges” related to its oil and gas business. The write-down resulted in the company posting the biggest quarterly loss in India's corporate history. Vedanta reported a consolidated net loss of Rs 192.28 billion (about $3 billion) for the January-
March quarter as against a profit of Rs 16.21 billion in the corresponding quarter last year. An impairment refers to an erosion in the value of an asset, including an intangible asset like goodwill. This means Cairn India, which Vedanta acquired for $9.1 billion in 2011, is now valued at around $6 billion as the company reported exceptional items of Rs 199.56 billion for the quarter ended March 31, 2015,
Vedanta said in its earnings report. Vedanta, the Indian-listed subsidiary of London-listed Vedanta Resources Plc controlled by Anil Agarwal, owns 58.9% in Cairn India. It may be recalled that Tata Steel in May 2013 had announced a goodwill impairment charge of $1.6 billion on account of loss of value at its European steel business under Corus and other overseas assets due to a slump in demand in overseas markets, the biggest
Reforms to determine India’s rating upgrade: Moody’s
www.abplgroup.com - Asian Voice 9th May 2015
Maria Fernandes
Off to cast your vote…
Finally, after all these weeks, the end is near, the vote ever closer. If you do not have a postal vote you will I hope be trotting down to the polling booths to cast your vote. I cannot bear those who say there is no point. Not after people have died for this fundamental democratic right. Immigration has been of course on the top of the issues that the various parties want to “tackle”. Almost all of them talk about immigration control. EU “immigration” is top of the agenda although it is scandalous to describe it as immigration. The rights of EU citizens to move is a fundamental right derived from Treaties which Governments from all sides have signed. What has undoubtedly happened is that as a result of this, there has been an attempt to control migration from non EU countries, but even in relation to this not all migration is equal. In terms of actual numbers, the multinational companies have been able to bring and transfer their staff with ease. The smaller and disparate businesses have however suffered. Take restaurants as a prime example. Chefs have been completely obliterated from entering. New talent has all but completely been brought to a halt. The Migration Advisory Committee retained the shortage list although they recommended a raise in the salaries being paid. However the system has been manipulated to reduce numbers even further by creating a system in which control of the decision lies with the UKVI and their decision is final even if poorly reasoned. There is a huge amount of subjectivity in the hands of those whose
primary task is to restrict numbers. Care homes too are suffering the same fate. And all the time much is being made of the fact that there is a shortage of nurses. Another area which is of great concern is the student market. Finally, the UKVI have removed the term “highly trusted” but they continue to grant licences to colleges and take them away at will. There is no oversight or protection for students themselves. I can point to countless cases of students who have paid fees upwards of £9000 only to be refused for some reason and give the colleges an excuse to pocket the funds. And individuals do not fare any better. The appeals system has been demolished despite the fact that around 40% of appeals were successful. The UK has always been known throughout the world for its rules of fair play, justice and the rule of law. Not any more. When we do not play by these rules any more we are not different to the dictatorship regimes that operate throughout the world. Much has been made of the pressure on services. What is true is that migrants contribute more than they take from the system. The politicians paint a picture out of numbers rather like the paint by numbers pictures you can buy. They deliberately scapegoat immigrants. There are decent, hardworking people out there who very rarely complain about their situation. When you go out to vote consider very carefully what has passed and what is on offer. Many of the immigrants reading this will be unable to cast a vote. For those who can, make it count.
To contact Maria Fernandes, please email at: info@fernandesvaz.com
Vedanta writes down about Rs 200 bn in oil biz write-off then. “This is a one time noncash charge. The impairment will be reflected as a write-down in goodwill and will have no bearing on operational cash flows in coming quarters,” Vedanta Resources CEO Tom Albanese said. The companies that brought assets at higher valuations at the peak of the economy are now forced to write down the value of their investments in such assets. BP Plc, in last two years, has
written down the value of its 30% stake in the KG basin block acquired from RIL for $7.2 billion by over $1 billion. State-owned ONGC also had to write down the value of its investments in Imperial Energy by $500 million that it acquired for $2.1 billion in 2008. Globally, natural resource firms and oil companies have taken impairments write-downs on their balance sheets in the last few quarters, totalling over $30 billion.