Midnight News Update – Sep 15th 2017
The Bullet Train deal may be opening up a slew of Japanese investments into India. As part of Shinzo Abe’s visit to India to lay the foundation stone for the Bullet Train project, Suzuki of Japan has agreed to infuse Rs.3800 crore into Gujarat. It will invest an additional Rs.1150 crore to produce lithium ion batteries in partnership with Toshiba and Denso. It may be recollected that Suzuki has already invested Rs.9600 crore at its two plants in Hansalpur and this Rs.3800 crore investment will take the total investment by Suzuki in Gujarat to over $2 billion. The plant will produce 2.5 lakh cars annually.
The CBDT is worried about the sluggish growth in TDS (tax deducted at source) collections and has urged the Income Tax offices across India to move on a war footing. In fact, some regions have actually shown flat to negative growth in TDS collections. Income Tax authorities in specific regions will be conducting more aggressive TDS surveys to check evasion or under-reporting. The IT department will also do a spot verification in cases where the fall in TDS has fallen more than 10% compared to the previous year. While the TDS revenue is still growing at 10.44%, the growth is sharply lower than 17.44% last year.
Bank of England has given perhaps its first indication that it may induced to hike its benchmark rates if the high price syndrome continues. If it happens, it will be the first rate hike by the Bank of England in a decade. In its last meeting, policymakers voted 7-2 in favour of maintaining status quo on rates at the level of 0.25%. But in the last few weeks, the inflation has risen much faster and unemployment has fallen much faster than anticipated. Among the major central banks, BOE will be the second after the US Fed to consider hiking rates. ECB and the BOJ are still favour a dovish rate policy.
According to the Chairman of Coal India, higher production of coal in the last few years has saved nearly Rs.25,900 crore ($4 billion) of forex outflows. The biggest demand for coal comes from thermal power generation which is fuelled by coal. The thermal capacity is likely to go up from 192 GW in 2012 to 441 GW in 2040. CIL’s share of coal production is likely to remain at around 55% till 2040 and hence it needs to drastically increase coal production to avoid dependence on imported coal. CIL has set itself a target of 1 billion tonnes of production by 2022 and is on target for that.
India has beaten Indonesia to take the top slot in terms of yield for foreign investors. For the last 2 years, Indonesian yields on the 10-year benchmark have been consistently higher than the Indian yield but the yield on Indian debt has finally gone above that of Indonesia in the month of September. One of the reasons for the rapid rise in yield in India has been the sharp rise in CPI inflation. In the last 2 months, the CPI inflation has moved up sharply by 190 basis points in India from 1.46% to 3.36% resulting in higher yields. At the same time, inflation in Indonesia is trending downwards. There is also speculation that the Indonesian Central Bank will reduce the rates while the RBI is expected to keep rates at the current levels considering that inflation has gone up sharply in the last 2 months.
In tune with the retail inflation, the Wholesale Price Index (WPI) also rose by 3.24% for the month of August. This is sharply higher than the 1.88% reported in the previous month. Like in case of CPI inflation, the big driver was primary food and non-food articles. The sharp rise in WPI shows that there is a clear up trend in the producer level pricing. In case of farm produce, the higher MSP has been instrumental in propping the price of primary products. Of course, the GST has also had its impact in pushing the WPI higher, although most of it comes from the base effect.
