It is now official that the direct tax collections are really short of the target. The CBDT has raised an alarm over a 15% shortfall indirect tax collections as per the data for direct taxes collected till March 23rd. There was the visible weakness in collections of personal taxes, corporate taxes and advance tax payments. The government was counting on direct taxes to make up for the shortfall in GST collections. Revenues normally pick up in the last week but at this rate, the 15% shortfall may be hard to fill up. Interestingly, the government has also held back most of the corporate refunds for the previous year.
The picture painted by CRISIL of fourth-quarter results doesn’t appear to be too rosy. CRISIL had surveyed a total of 354 non-financial and non-oil companies. CRISIL estimates a sharp fall in revenue growth in the fourth quarter compared to the previous three quarters on the back of weak commodity prices. The survey expects only the IT and the Pharma space to benefit in terms of revenues in Q4 due to a favorably weak rupee. There could be some respite from lower input costs. It remains to be seen how this would impact the valuations of Indian companies in the coming months. Auto could be a key loser.
Nearly 3 months after the external price benchmarking for banks was mooted by Dr. Urjit Patel, the government has decided to postpone it indefinitely. The RBI in its December monetary policy had announced the shift of bank loan pricing from the internal cost of funds to external benchmarks. This was to be applicable from April 01st for floating rate loans of individuals and small businesses. Banks have, however, held on to the view that any benchmark without reference to the cost of funds may not make business sense for the banks. This is the umpteenth such attempt that has failed to find buyers.
The government big push to infrastructure is surely having a salutary impact on once sector and that is cement. In fact, cement volumes are up by 13.6% in the 10 months to January 2019 at 276 million MT with the growth rate being nearly double the original projection. While the aggressive investments in infrastructure have been a big boost for the cement sector, analysts expect rural infrastructure and low-cost housing to also give a leg up to cement demand. ICRA, however, expects compression of margins in 2019. Cement companies did face pricing pressure in the North and South during the last year.
Global markets now seem to be worried by two big X-factors viz. the inverted US yield curve and the uncertainty over BREXIT. The Inverted US Yield Curve spooked global markets after the negative term structure of yields gave the first indication of a likely economic recession. In the last 60 years, every recession has been preceded by an inverted yield curve and the 10-year yield fell below the 3 month Treasury yield. Across the Atlantic, Theresa May will now count on Labour party rebels to push the BREXIT deal through. Even with more Conservatives and support from the DUP Party of Northern Ireland, Theresa May could find herself short of the winning line. Her big bet would be to expand the list of rebel Labour voters who would vote for BREXIT deal purely out of fear of the alternative.
It looks like Russia may not want to ball with OPEC much longer on supply cuts as it is beginning to hurt the oil-dependent Russian economy. Even as the OPEC has been trying to convince Russia for a longer period of supply cuts, Russia is unwilling to commit beyond 3 months. Currently, the agreement is to cut 1.2 million bpd of oil between OPEC and Russia till June 30th. Once the agreement ends, Russia is only willing to extend it till the end of September and not the whole of 2019. Russian economy depends substantially on oil earnings and they would not want to see the Americans enjoying the fruits of dear oil prices.
