Business Today 6-Sep-20

First it was exports. Around 2013, when the slowdown-induced economic nationalism and protectionism was taking roots, globalisation was slowly getting uprooted. India — forever a fringe player in global trade — bore the brunt of the de-coupling as merchandise exports began to flatten for the next seven years. With one major economic engine practically flat since 2013, India was still chugging along. Then, with domestic economy beginning to slow down, the second engine — private investment — started sputtering. Neither of these two major engine failures got undue attention as the economy continued to grow at a reasonably healthy 6 per cent plusrate, stillamong the fastest in the world, barring China. But the big blow came when the third engine of the economy — consumption — began slowing and eventually…

On July 22, Commerce Minister Piyush Goyal tweeted a video with a message that India and the US are on the cusp of a limited trade package. "I believe we have a quick trade deal, which has some of the pending matters, built up over the last couple of years, which we need to get out of the way quickly. We are almost there, another couple of calls and we should be able to sort them out,” Goyal said. The minister’s words, which signalled the beginning of the end of retaliatory trade, lifted the spirit of hundreds of Indian exporters. It brought back hopes of regaining some of the export incentives such as zero tariff, which had given sections of Indian manufacturers an edge in the US market until recently.…

On July 10, Virendra D. Mhaiskar, Chairman and Managing Director of Mumbai-based IRB Infrastructure Developers, was enthused. IRB had emerged the preferred bidder for the ₹2,193-crore build, operate and transfer (BoT) project for six-laning the 63.83-km stretch of NH-19 from Dankuni to Palsit in West Bengal under the Bharatmala Pariyojana. His joy was short-lived. On July 21, the National Highways Authority of India (NHAI) annulled the bids. Its rationale: it expected a premium or upfront payment from private developers while IRB asked for a grant. Bids for another BoT project were cancelled for similar reasons amid tepid market sentiment. The development hurts NHAI equally badly as it prefers to award projects on BoT (toll) mode instead of Engineering, Procurement and Construction (EPC) or Hybrid Annuity Model (HAM) where it has…

To counter the slowdown, the Union government accorded priority to infrastructure building. Prime Minister Narendra Modi last year announced a ₹100 lakh crore infrastructure plan. The National Infrastructure Pipeline (NIP) followed; it was revised in April this year to peg total investment at ₹111 lakh crore. The Centre had projected infrastructure investment of ₹ 14.4 lakh crore in FY20 but the number is unlikely to be anywhere close to it. Actual figures have not been made public. A query to the finance ministry went unanswered. Projects worth ₹21.5 lakh crore – more than the Atmanirbhar Bharat stimulus–have been lined up under NIP for FY21. But financial conditions pose a challenge. "For triggering and sustaining economic recovery, it is important that both Centre and states retain NIP projects to the extent…

Demand for power dropped in recent months and is likely to remain subdued. How will it impact the sector? The major dip was during the April lockdown. Now we are back. Energy is a function of demand from consumers, both households and industries. In the National Infrastructure Pipeline, power accounts for 20 per cent of investment during FY20-25. How has the progress been? If you look at capacity addition from 2014/15, in renewables alone, capacity addition and projects under implementation have been about 100GW. That entails investment in power generation alone of about ₹5 lakh crore. Then, we have thermal and hydro. Our capacity addition has been satisfactory. When we started off, we, in fact, had a power deficit. We did not generate enough power to meet demand. Today, our…

In June, the Karnataka Authority for Advance Rulings (AAR) for Goods and Services Tax (GST) ruled that Malabar Parota is not the same as ready-to-eat chappati/roti as it has be processed further for consumption, and hence should be taxed at 18 per cent and not 5 per cent (tax rate for chappati). There was outrage and, soon, memes around the ruling started doing rounds of social media. Blame it on flaws in the way AARs are constituted or complexity of India’s tax laws, the Karnataka AAR is not the only one that has been in news of late for wrong reasons. Take the issue of tax on compensation paid to directors of an incorporated entity. Two state AARs — Karnataka and Rajasthan — came up with different interpretations and rulings on…