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!
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