NEWS HOUR - 27th Nov to 3rd Dec 2017 - FINANCE AND INVESTMENT CLUB - IIM ROHTAK

NEWS HOUR 27th Nov– 3rd Dec 2017

Weekly News Magazine

INDIAN ECONOMY ON THE COURSE OF REVIVAL

In This Issue 

India reports 6.3% GDP growth rate in Q2

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Manufacturing and construction sectors got a big boost in this quarter after the slump in Q1

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Investment, mining, electricity and utilities sectors also reported higher growth

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Trade, hotels and transport sectors has shown a sharp growth rate

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While Farm and Financial sectors has slowed down from Q1

Report by - Vishrut Trivedi

Indian economy has set itself on the course revival diverting the five quarter slide occurred due to the aftermath of two biggest structural reforms in the form of Goods and Services Tax and Demonetisation. GDP growth in the second quarter of the FY 2017-18 has announced by the statistic office as 6.3%. This financial year's first quarter has seen the growth rate of 5.7%, which is lowest in the last three years.

This rebound in the economy will act as a boon for the government, which was on the back foot due to the slumped economy and continuous attacks from the opposition. This news will also help the government in the upcoming Gujarat election.

The finance minister Arun Jaitley, in his press conference, “This marks a reversal.

This additionally indicates that perhaps the impact of 2 significant structural reforms — demonetization and GST — is behind us.” The finance ministry also said that India was well placed for growth resurgence. The official statement was, “The economy now seems to have weathered the transitional challenges experienced earlier in the year and appears poised for a durable recovery going forward."

Regarding the gross value added, growth was 6.1% in the second quarter as compared to 5.6% in the first. The manufacturing sector posted a healthy growth of 7% regarding gross value adds in July-September. This can be credited to the restored supply chains and rebuilt inventories of companies after the disruption caused by the introduction of GST. This sector has reported only 1.2% growth rate in the first quarter.

The mining industry has also incurred 5.5% growth rate in the second quarter. The

war on black money continues to haunt this industry. The investment sector has also seen a pickup inform of 4.7% growth in Gross fixed capital formation in Q2 as compared to just 1.6% in Q1.

Farm sector growth slowed to 1.7% in the second quarter from 2.3% in the first.

The base effect of high 4.1% growth in agriculture in the first quarter of FY17 magnified the slowdown. Electricity and utilities grew 7.6% while trade, hotels, and transport sector posted a sharp 9.9% rise. The financial sector posted 5.7% growth in the July-September quarter, slower than 6.4% in the first.

A STATUS QUO ON THE INTEREST RATES

BY RBI REPORT BY - HIMANSHU JATALE

It is expected that the Reserve Bank of India is likely to maintain a status quo on the interest rates in its Fifth Bimonthly Monetary Policy Statement for 2017-18 which will be discussed by the Monetary Policy Committee headed by RBI Governor Urjit Patel on December 5th and 6th. The above resolution will be published on December 6th.

As the GDP growth in the September quarter saw a rebound after a continuous decline in the previous five quarters. This might be the reason for RBI to keep the interest rates unchanged as it seemed to have eased pressure on it. On the other hand, India Inc. is demanding a cut in the interest rates to leverage the positive sentiments generated by the upgrade of Moody’s sovereign rating of the country.

In the previous Bimonthly Review in October, because of the fear of rising inflation RBI kept the benchmark of the interest rates unchanged while lowering the growth forecast to 6.7% for the current fiscal. In August this year, the lending rate saw a 6 -year low, as RBI reduced the benchmark lending rate by 25 bps points to 6%.

While lower GST rates have moderated output prices, input cost pressure is marginally higher, which along with higher inflation in the food industry is likely to push retail inflation slightly above RBI mid-point target of 4% in November and beyond, said officials from Nomura. The report said,” We expect a hawkish hold from the RBI…and policy rates to remain unchanged through 2018.”

The new tax regime and revved up manufacturing contributed to the expansion of GDP growth by 6.3 % in the July- September period.

Some key points 

Interest rates are expected to remain the same

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In August, the lending rate saw a 6-year low at 6%

Source : Web

Some Key Points 

Healthcare sector is expected to grow to $372 billion by 2022

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Compound annual growth rate is reported as 22%

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Domestic Medical Devices market is poised to grow to $11 billion by 2022

HEALTHCARE SECTOR EXPECTED TO GROW TO $372 BILLION BY 2022: ASSOCHAM Report by - Shivam Aggarwal

Healthcare sector now makes the basic amenities required by the people, and this has re-written the story in the Indian context. Healthcare sector in India majorly includes homeopathy and Ayurveda. With the new emerging centers in the healthcare sector such as Bio-pharma, medical insurance services the growth is tremendous.

In a recent report published by ASSOCHAM, the Indian healthcare sector is expected to grow threefold by 2022 to $372 billion from the current level of $110 billion with a compounded annual growth rate (CAGR) of 22%. Currently, the Indian pharmaceutical market is third largest in the world in volume and 13th largest regarding value. Changing lifestyle and food habits are being considered as the primary reason for this tremendous growth. The changing lifestyle habits have created a massive demand for the healthcare services including immediate medical care, medical insurance services, and medical tourism. The other reason is that the penetration of healthcare services has increased across the length and breadth of the country. The healthcare companies are catering to this demand by investing more in the research activities for creating affordable services, doing meaningful mergers and acquisitions to tap the untapped market. The report “Indian Healthcare Sector- An Overview” states that the changed lifestyle has increased the geriatric population, this has driven the growth of the domestic medical devices market. As per 2016, it is valued at $4 billion annually, but it is poised to grow to $11 billion by 2022 with CAGR of 15%.

However, ASSOCHAM has shown concern as 75% of the medical devices, and 70% of the $20 billion generic drugs market is imported.

However, the face of the industry would change in the future as more companies are investing in the research activities and companies are adapting fast to assess the product development needs. Also, the GST is sought to have a positive impact as it has eased the processes of doing business in India thus attracting more investment from FIIs, it would also, streamline the tax regime thus reducing the manufacturing cost resulting in affordable healthcare services.

AUTO SALES IN NOVEMBER RISES OVER 16%, EXCEEDS INDUSTRY FORECASTS

Some key points 

Unusual surge in auto sales after Diwali season

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16% increase from last month

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Market leader reported 14% growth in sales

Report by - Rajesh Khanna

Auto sales usually turn into a lean phase post festive season. But surprisingly, there was an unusual surge in November after a lower-than-expected demand during the Diwali sales. This rise is credited to continued demand increase from the rural segment, a low-base effect following demonetization in the previous year and high success of new models launched in the market. Sales report of all passenger cars from top 7 manufacturers (combined market share of more than 90% of total passenger vehicle volumes) reveals that there is an increase of 16% from 2.53 lakh units to 2.18 lakh units sold in the same month last year.

Market leader Maruti Suzuki saw its overall domestic sales (1.44 lakh units) grew over 14% year-on-year, while Mahindra and Mahindra had its total sales rise at 13%. India’s second-biggest car manufacturer, Hyundai had its domestic wholesales grow by 10% to around 44000 units against 40,016 units in the same month of previous year. Tata motors posted 35% rise in sales in November to more than 17000 units as against 12736 units sold in November 2016. Ford India has also reported a healthy double-digit growth of 13%, thanks to their new market variant EcoSport.

Altogether, Indian Auto industry is poised to have structural growth cycle by ending the financial year with strong numbers, positively due to 6-7% growth in the GDP in the domestic economy (as per Nomura India research note). India’s factory activity accelerated to a thirteen month high as the Nikkei/HIS Market Manufacturing Purchasing Manager’s Index increased to 52.6 from 50.3 in the previous month. As the short-term negative impacts of demonetization and GST were fading away, Industry experts were expecting a healthy growth in demand for consumer vehicles and two-wheelers for rest of the fiscal year.

PSU BANKS TIGHTENING RULES ON CORPORATES DEFAULTS Report by - Sanchit Goel

Indian PSU Banks are tightening screws on corporates with stricter covenants and greater enforcements in a battle to curb the loan defaults. Total default amounts to $207 billion which calls for strict actions by lenders. Banks are asking for collateral that mat amount to one to one and a half times the amount of debt on new loans extended are insisting on contracts that allow loans to be turned to equity if the account becomes stressed.

The Reserve Bank of India had instructed banks to resolve 50 of the biggest defaulters within a year. Lenders are also introducing rating triggers for immediate repayment if there’s a downgrade in the credit grades of borrowers. The administration’s decision last month to inject $32 billion of capital into state-owned banks is expected to help lenders to clean their bad debts and prop loan growth.

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