In an age when gloomy stories occupy front pages of newspapers, and prime times on TV, and doomsday scenarios are overdone, one has to search closely to see what’s really happening in the economy. This becomes especially difficult when the rupee has crashed by 20% or so and the stock market has come off its recent peaks. But the effort is well worth it. For the finding is that the India story is intact. The government’s policy paralysis has surely changed to policy activism. Here are ten stories from today’s papers which should set the mood for the week ahead:
1) FDI: ET reports that FDI inflows in Q1 this year were $9.1 billion, a full 70% more than year ago. If this does not speak of the confidence of foreign investors in the Indian economy, what will? Better, this is not just a flash in the pan. Expectation is that FDI inflows will be another $5-6 billion in Q2, on the back of deals like Etihad, Yes Bank, Mylan, Hexaware Technologies, Ikea, Air Asia and many many more.
2) Cabinet Committee on Investments: The CCI set up by the government and announced during the budget has been on an overdrive. Business Standard reports that the CCI is set to clear projects worth more than Rs 1.7 lac crores of investments, stuck for various reasons such as environmental issues and fuel supply linkage problems. Specifically, 18 power projects worth Rs 82,000 crores are likely to get the go-ahead with the coal ministry being directed to sign fuel supply agreements by August 31st. The list also identifies 10 other projects worth more than Rs 92,000 crores which will be cleared by September 30th.
3) PSU disinvestment: With a huge Rs 55000 crore disinvestment target, ET reports that the ball is expected to start to roll with full divestment in two companies – Hindustan Zinc (Govt share 29.5%) and Balco (49%). If all goes to plan, the government could get as much as Rs 30,000 crores; most of it in foreign investment.
4) Two stuck UMPPs – government clears re-pricing issue: With imported coal prices surging on the back of price increases in Indonesia and elsewhere, the two UMPPs in Mundra (Adani, Tata Power) have been stuck. ET reports that the government, in a pragmatic negotiation with the promoters, and with help from industry experts, have closed the talks with a per-unit price increase ranging from 40-60 paise.
5) Two new UMPP auctions: The Hindu Business Line reports that the center has cleared the auctions of two new UMPPs – one in Odisha and another in TN – with a total investment potential of Rs 40,000 crores and a power generation capacity of 8000 MW.
6) Exports: Exports rose by 11.6% in July on the back of a weak rupee and an economic uptick in the US and Europe to reach $26 billion. What is more important is that the exports rush is expected to continue in August with Rafeeque Ahmed, President, Federation of Indian Exporters Organizations quoted in the Indian Express as saying the growth could be as high as 15%. Exports could cross $330 billion during the current year.
7) Gas price resolution will improve production: PMS Prasad, Executive Director of RIL says in the ET that even at the higher rate approved by the government recently, domestic gas is cheaper than imported LNG by 40% and by oil by 60% (equivalent energy units). Far from being inflationary, the price of $8.4 per million BTU will lower prices of power/fertilizers etc if used to substitute more costly oil/imported LNG. Business Standard quotes UK major BP’s Indian head as writing to Yashwant Sinha, Head of the Parliamentary Standing Committee on Finance, that 27 trillion cubic feet of discovered gas resources (or 9 fields of the size of Reliance’s KG-D6) await being put on production. By extrapolation, we should expect gas discovery to start in right earnest now.
8) Big moves on 2G: A few weeks back, the DoT referred the 2G reserve fee matter to the TRAI. After going through the motions, TRAI has given feelers that it is likely to recommend drastically lower reserve fees. What this implies for the politics of 2G is another story by itself – proving the CAG’s report to be full of gas! But in another story in ET today, the DoT is likely to ask TRAI for its views on spectrum sharing. Now this is another game changer, which can make usage more efficient, besides providing telcos more operating flexibility, and hopefully lower spectrum costs.
9) Parliament may work! This is a big deal these days. With the Speaker having disqualified 12 MPs, and with the BJP on the back foot for its obstructionism, the Lok Sabha is likely to pass the Land Acquisition Bill and others (Pensions etc) this week or soon thereafter. The Government has extended the session by a week too. Fingers crossed!
10) And other good stories: And finally, an article in The Hindu Business Line by Aarati Krishnan “Four bright spots in the economy” show how kind rain gods are likely to give the GDP a boost, and rural consumption a bigger kick! This should be good news to wide sectors of the economy considering 55% of the Indian GDP is made up of consumption.
The real truth is that we need to figure out how we want to approach the current “troubled” times. Those who are politically opposed to this government are bound to play up the negatives, as if all of those are of India’s own making. But those who choose to be neutral will note that the gloom is lifting. And that there is a lot to cheer!