After a long break, the GST mop-up crossed Rs.1 trillion (Rs.1 lakh crore) for the month of November 2019. The monthly GST inflows need to be closer to Rs.1.15 trillion each month to reach the full year target for GST. The sharp rise in GST inflows in November was largely driven by a surge in festive demand towards the end of the year as well as better anti evasion steps taken by the GST Council. Last year, the government had fallen short on its GST targets as well as its direct tax targets. Even this year, the government looks most likely to miss targets, especially after the huge corporate tax benefit.
The era of oligopoly may be back on the telecom sector as the 3 major players in telecom; Bharti Airtel, Reliance Jio and Vodafone Idea propose to hike telecom tariffs for voice and data by as much as 40%. While the tariff hikes of Bharti Airtel and Vodafone will be effective from 03rd December, the new tariffs for Reliance Jio will be effective from December 06th. The tariff hikes are expected to hit prepaid customers more than the post-paid customers. After the huge AGR charge of nearly Rs.92,000 imposed by the DOT on telecom players, the price hike is supposed to partially help them compensate.
The China / US trade deal continues to remain in ambivalent zone as China is unwilling to sign the trade deal unless all the additional tariffs imposed by the US are rolled back in the first phase of the trade deal itself. Trump is desperate to close the trade deal in January before he approaches the people of the United States for re-election in 2020. Recently, the relations had partially soured after the US House passed a resolution supporting the pro-democracy protesters in Hong Kong and also called upon China to not use heavy handed tactics against the protesters. China has been unhappy with this intervention.
There could be some upward pressure on oil prices in the coming week. According to sources in the press, the OPEC in its forthcoming meeting at Vienna was likely to increase the supply cut from 1.2 million bpd to 1.6 million bpd. This was a substantial supply cut and was likely to immediately have an impact on the price of Brent Crude. Earlier, there were also indications that US supply of shale could get hit as the funding taps were drying up. If the US-China trade deal happened then prices could move up rapidly. A strong oil price will enable Saudi Aramco to get richer valuations on its listing.
With the GDP growth dipping to 4.5% and the GVA growth dipping to a mere 4.3%, the RBI may have to stick its earlier promise of another rate cut. In fact, the situation does look a little challenging when the two consecutive months of negative growth in IIP and core sector are also considered. In its last Monetary Policy Committee (MPC) minutes, the RBI had promised to adopt a dovish policy till the time there were green shoots of economic recovery visible. While the markets have factored in the rate cut of 25 bps as a foregone conclusion, the analysts and economists would be interested to see if the RBI tries a bigger rate cut or gives a more dovish guidance. Finance Minister has already indicated that India would have to combine monetary and fiscal measures to actually revive GDP growth in Q3 and Q4.
Foreign portfolio investors remained net buyers for the 3rd straight month, infusing a total of Rs.22,872 crore during November. The November inflow is more than the total FPI inflows for the months of September and October put together. Interestingly, the equity inflows during the month were to the tune of Rs.25,230 crore while FPIs pulled out Rs.2358 crore from debt. The turnaround in FPI flows began in late September after the finance minister announced liberal cuts in corporate taxes. Prior to that, there had been heavy FPI outflows post the Union Budget announced in July 2019.
