Business Today 4-Nov-2018

TO BORROW FROM Charles Dickens, these are the best of times, these are the worst of times for Indian businesses. On the one hand, the news on the economic front is not particularly cheerful. High commodity prices, old debt and overcapacities in several industries have ensured that a great many firms in different sectors are still struggling to raise revenues and margins. To top it all, the Infrastructure Leasing & Financial Services (IL&FS) defaults – which briefly threatened to trigger off a chain reaction among a number of financial and asset management firms, before the government stepped in firmly – shows that all is not well with our banking and financial system. On the other hand, this year’s Coolest Start-ups Survey shows how far young entrepreneurs have evolved. Even five…

FOR THE current NDA government, the 8.2 per cent GDP growth clocked in the first quarter of this fiscal along with the lower than anticipated inflation should have been a reason for comfort. But over the past few weeks, bad news on the economic front – both macro and micro – has far outweighed any good news. Crude oil prices have been rising inexorably and many analysts expect it to cross $100 a barrel. Meanwhile, the rupee has been plunging in value, and it has been the worst performing currency in Asia since the beginning of this year, having dropped below ₹74 to a dollar at the time of going to press. If this had helped spur exports, it would have been some consolation but exports have been sluggish while…

THE GOVERNMENT IS reportedly considering giving the Air India board autonomous control to run the Maharaja, on the condition that it will not ask the government for further support from the next financial year. The decision is an indirect acknowledgement that the government has been unable to run Air India efficiently. But autonomy per se is not synonymous with the airline’s revival. The Air India board will get ₹15,000 crore and a debt-restructuring proposal to manage its gargantuan outstanding debt. The board – just like any other corporate entity – will take all capital expenditure-related and commercial decisions. A host of ideas contemplated by previous managements will go back to the discussion stage. With its huge financial and operational baggage, Air India may not be able to make a fresh…

WARNING SIGNS of tighter fiscal control emerged with the government trimming borrowings by ₹ 70,000 crore for the rest of the year. Tepid revenue collections may ruin the party notwithstanding adhering to the 3.3 per cent fiscal deficit target. Until August this year, the government’s revenue collection (₹4.6 lakh crore, 13.34% jump over last year) was on track. The two spoilsports could be: lower-than-expected GST collection and disinvestment proceeds. GST collection from April-August 2018 was ₹2.37 lakh crore, only 31% of the full-year estimate of ₹7.43 lakh crore, and, the government has only ₹9,500 crore against the divestment target of ₹80,000 crore. With no signs of a sudden spurt in monthly GST collection (which still hovers around ₹95,000 crore against the required ₹1.04 lakh crore), and no big disinvestments in…

BJP-AND NDA-ruled states have been hit the hardest by the Centre’s decision to cut fuel price. Take Uttar Pradesh – the state will take a ₹20,000 crore-hit in VAT collection to facilitate a ₹2.50 reduction in per litre rates of petrol and diesel. Central devolution will claim another 0.90 paise per litre. Most NDA-ruled states are finding it tough to manage – they have to fund UDAY electrification, infrastructure augmentation, and rural penetration while absorbing losses from fuel price slashes. With elections around the corner, NDA-ruled states are a worried lot indeed.…

WITH THE RUPEE weakened, the Narendra Modi government is again exploring the feasibility of non-dollar trade with friendly nations. At a recent meeting, Prime Minister Modi broached the possibility of a Government-to-Government (G2G) mechanism with visiting Russian president Vladimir Putin. The two commodities that Russia has in abundance - oil and precious stones - constitute 45 per cent of India’s total import bill. This may seem to be a terrific way to reduce India’s dollar dependence but the problem lies in implementation. Trade with Russia accounts for less than 2 per cent of India’s merchandise trade at the moment, though both countries have a long-standing friendly relationship. The $7 billion India-Russia defence deal was definitely the high point of Putin’s visit, but oil and diamonds can be the real game…