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Economists Suggests FM To Step Up Capex, Cut Tax In Budget 2023

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According to the economists, considering the high inflation rate, providing a relief on income tax will boost domestic demand. In total, the finance minister has held eight rounds of discussions, beginning with India Inc on 21 November and ending with a round of consultation along with economists on 28 November.

The government is asked by the Economists to level up capital expenditure, rationalise personal income tax and stick to fiscal discipline in the upcoming Budget, on 28 November.

During the finance minister Nirmala Sitharaman led pre-Budget interaction, they also urged her to increase health care outlay and focus on quality job creation.

According to the economists, considering the high inflation rate, providing a relief on income tax will boost domestic demand. In their suggestion, the Centre should continue with long-term loans to states, meanwhile relaxing some of the spending restrictions and handhold them through fiscal management. Its focus should especially be on those with high borrowings.

The meeting was attended by the economists and experts along with N R Bhanumurthy of Dr BR Ambedkar School of Economics University, Ashwani Mahajan of Swadeshi Jagaran Manch, Poonam Gupta of National Council of Applied Economic Research, Monetary Policy Committee member Ashima Goyal, economist Karthik Muralidharan, Aditi Nayar of Icra, Santanu Sengupta of Goldman Sachs, Rahul Bajoria of Barclays, Madan Sabnavis of Bank of Baroda, and Deepak Mishra of ICRIER.

In total, the finance minister has held eight rounds of discussions, beginning with India Inc on 21 November and ending with a round of consultation along with economists on 28 November.

Expectedly, the Budget 2023-24 is to be tabled in Parliament on 1 February.

The finance Ministry said that with more than 110 invitees representing 7 stakeholder groups participated in all 8 meetings till date.

Also, she gave assurance to them on their suggestions to be considered carefully while preparing the Budget 2023-24.

CFO World

Centre May Launch 7-8 PLI Schemes In FY23 Budget: Report

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Previously a report stated that a surge from Rs 7.5 trillion in the current FY to Rs 10 trillion in FY24, may be see in capex. The government has launched 14 PLI schemes 2020 only. Expectedly such schemes may boost manufacturing by 500 billion dollar by 2025, according to a media house. The PLI schemes were put out with an outlay of Rs 51,311 crore in March 2020

The central government may make announcements of seven to eight new production-linked incentive (PLI) schemes in the upcoming Union Budget, to boost the privatisation further. Such schemes will cover segments such as textiles, electronic components, furniture, toys and leather, reported a media house.

There might be surge in capital expenditure target according to media reports. Previously a report stated that a surge from Rs 7.5 trillion in the current FY to Rs 10 trillion in FY24, may be see in capex.

A media house had reported that this will play important role for the NDA government too with the upcoming 2024 general election. Also, the Centre will keep tapping states and central public sector enterprises in order to raise their capex.

The government has launched 14 PLI schemes 2020 only. Expectedly such schemes may boost manufacturing by 500 billion dollar by 2025, according to a media house. The PLI schemes were put out with an outlay of Rs 51,311 crore in March 2020.

Mobile components, pharma ingredients and medical device manufacturing companies were given these schemes. Later then in November 2020 during second round, in total 11 schemes were rolled out with an outlay of Rs 1.46 trillion. Segments like food products, drones and telecom formed part of it.

The private investors faced a slowdown during the second half of FY23 and so responding to them, the centre is trying to give boost.

The demand side of the economy could not be impacted much through PLI schemes. During higher inflation, it means that there would be no surge in prices further, turning them into a safe choice.

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JSW Cement Secures Rs 400 Cr From MUFG Bank, Plans To Meet Capex

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The company is planning to utilise the fund for capital expenditure to achieve its annual capacity target of 25 million tonne.

JSW Cement raised Rs 400 crore from as its first sustainability-linked loan MUFG Bank India, said an official on 3 October.

The company is planning to utilise the fund for capital expenditure to achieve its annual capacity target of 25 million tonne by FY25, according to a statement.

It is company’s first sustainability-linked loan in the credit line. Whereas it is MUFG Bank India’s first transaction undertaken out of its new IFSC unit branch launched in August 2022 in the Gift City, the statement said.

Managing Director of JSW Cement, Parth Jindal said that the funds will allow the company to meet its goal of 25 million tonne per annum capacity by FY25. Also, it forms part of environmental, social, and governance (ESG) objectives.

JSW Cement caters installed capacity of 17 million tonne across its units at Vijayanagar in Karnataka, Nandyal in Andhra Pradesh, Salboni in West Bengal, Jajpur in Odisha and Dolvi in Maharashtra.

Shiva Cement, along with a 1 million tonne grinding unit, is investing Rs 1,500 crore in a 1.36 million tonne clinker unit in Sundergarh district of Odisha. Shiva Cement is the subsidiary company of JSW Cement.

With over 360 years of history, the Mitsubishi UFJ Financial Group is one of the world’s leading financial groups located in Tokyo.

economy

CFOs Reviewing Capex Plans Amid Global Growth Worries

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The RBI is cutting down its growth forecast 7 per cent from its previous projection of 7.2 per cent for the current financial year. CFOs hold back further in the wake of slowing global growth.

With the continuing rise in interest rates in current year finance leaders in companies are reviewing their capital investments. The global demand environment too looks increasingly uncertain.

Reserve Bank of India (RBI) increased repo rates by 50 basis points, reaching to 5.9 per cent, in the last week. Since May 2022, rates have been hiked by 190 basis points to subdue inflation.

The RBI is cutting down its growth forecast 7 per cent from its previous projection of 7.2 per cent for the current financial year. CFOs hold back further in the wake of slowing global growth.

“Due to uncertain market environment capex hardly grew. We held back in the first quarter of this financial year. We will see how the demand plays out in the current and in the subsequent quarters as well. Inflation is still continuing to remain high, and most probably that interest rates will flatten in the near term. That is why we will keep on reviewing our investment plan,” said a CFO of large auto component maker with capex plans of around Rs 2,500 crore this fiscal.

JSW Steel being India’s top steel manufacturer, cut down its FY23 capex to Rs 15,000 crore from a budgeted Rs 20,000 earlier. However, Tata Steel being another leading steelmaker, is still moving forward with its Rs 12,000 crore FY23 outlay.

“Big corporates already have enough liquidity, hence yet to come to the markets or approach banks for further money requirements,” CFO Venkatraman Venkateswaran, Federal Bank said.

Bharat Madan, Global CFO at Escorts Kubota, has apprehensions over the investments and demand in agriculture and construction machinery sector. He believes it may get impacted if interest rates go beyond 6.5 per cent.

Investments due to festive demand

Due to festive demand, the investments are holding up enough however, surety of holding the momentum would require a couple of more quarters. The wait-and-watch approach will continue, said financial leaders.

“Major impact of the rate hikes is not foreseen as of now.Demand for the coming two quarters looks extremely strong. However global scenarios will keep on changing and what implications leave on India needs to be seen,” said Raymond CFO Amit Agarwal, emphasizing that the consumption is festive season driven now.

An improvement in seasonally adjusted capacity utilization of the manufacturing sector is seen from 73 per cent in Q4 FY22 to 74.3 per cent in Q1FY23. It is the highest level in three years according to a survey by RBI.

“There is a sustained revival in urban demand which should get a further impetus from the unfettered celebration of upcoming festivals after two and half years of living with COVID-19. Rural demand is also gaining gradually. Investment demand is picking up and is evident from the robust growth of domestic production and import of capital goods in July and August,” said RBI Governor Shaktikanta Das during his address during the latest monetary policy meeting.

Rates and Inflation:

RBI expects inflation to come down to 5.0 per cent in Q1FY24 after it retained its FY23 retail inflation outlook at 6.7 per cent.

Allowing high inflation to hover will invariably trigger second-order effects and unsettle expectations, Governor said. The Reserve Bank will remain alert and agile in the future, he concluded.

A major tool for the apex bank for its monetary policy decisions, Retail inflation, stood at 7 per cent going above its 6 per cent upper band target in August. For eight straight months Inflation has breached the RBI’s target.

Interest rates have been increasing worldwide including in India. The US Federal Reserve raised rates by 75 basis points at its 20-21 September meeting. It took the federal funds rate to a target range of 3-3.25 per cent. The Fed is planning to increase the rates to 4.25-4.5 per cent by the end of this year. Expectedly, emerging markets’ central banks including India’s RBI will follow the same lines.

morgan stanley

RIL’s Fourth CapEx Cycle May Double Its Profits: Morgan Stanley

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Morgan Stanley claims in its most recent study that each time RIL reimagined its company, it outperformed investor expectations

Reliance industry limited (RIL) has always gone large, and each capex cycle is bigger and “newer” than the last. According to Morgan Stanley, an American multinational investment management and financial services company, the oil, telecom, and retail conglomerate is currently in its fourth capex cycle, following a significant 75,000 crore (about. $9.4 billion) investment into a new energy ecosystem.

Morgan Stanley claims in its most recent study that each time RIL reimagined its company, it outperformed investor expectations. At the 45th annual general meeting, RIL chairman Mukesh Ambani described it as the most ambitious ever.

The report claims  that the Investment cycles have unwound with about two to three times value generation for shareholders in the previous two decades with each decade witnessing around $60 billion in market cap creation.

As its new energy pivot is combined with its chemicals business and its own substantial captive usage, this fourth cycle will likewise deliver more value more quickly.

Morgan Stanley also predicts that the balance sheet leverage ratios will be the lowest ever during the current investment cycle. The reasons for this will include the rise in refining margins, the production of gas, rising telecom costs, the development of the food business, and the quicker monetization of new energy sources.

In addition to predicting repeated re-ratings of the retail and telecom sectors as these IPOs would unleash value, the brokerage expects many triggers for RIL over the next months across all industries.

It does anticipate that the value unlocking in telecom and retail would lead to certain holding company discounts.

Coal

Coal India’s Capex Rises 65% In Q1

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Land acquisition at Rs 608 crore accounted for nearly one-fifth of the first quarter’s total capex basket. This is close to 2.3 times of Rs 268 crore spent under this head during April-June 2021-22.

Coal India on Monday said its capital expenditure increased 64.8 per cent to Rs 3,034 crore in June quarter 2022-23, driven by strong spend in acquiring land and strengthening transport infrastructure in its coalfields under first-mile connectivity projects. Coal India’s capital expenditure was Rs 1,841 crore in April-June period of last financial year. “Sustaining its growth in capital expenditure (capex) for the ninth quarter on the trot, Coal India Ltd (CIL) achieved a sturdy 65 per cent growth in the first quarter FY23 over comparable quarter last year,” it said in a statement.

Land acquisition at Rs 608 crore accounted for nearly one-fifth of the first quarter’s total capex basket. This is close to 2.3 times of Rs 268 crore spent under this head during April-June 2021-22. The expenditure was spread across all the subsidiaries of CIL. “The capex increase came on the back of a strong spending in acquiring land and strengthening transport infrastructure in our coalfields under first-mile connectivity (FMC) projects. These two vital areas help CIL in expanding its mining operations for accelerated production and pairing it with seamless transportation of coal,” a senior official of the company said.

FMC is an initiative by coal companies to minimise environmental pollution, where coal is being transported through conveyor belt from coal handling plants to silos for loading. Capex under FMC projects, on construction of coal handling plants, silos including weighbridges totalled to Rs 577 crore during the quarter under review. This is much higher as compared to Rs 141 crore spent in the first quarter of last fiscal.

Rail sidings and laying of rail corridors took up Rs 571 crore during Q1 FY23, registering a year-on-year growth of 57 per cent. “CIL’s production tempo is keeping up a consistent double-digit growth in FY23 so far and all efforts are on to continue the trend. What assumes importance is to have a matching evacuation infrastructure that can handle transportation of the increased output”, the official said. Even during COVID-19 slowdown, CIL’s capex spending witnessed steady quarter-wise increase. CIL accounts for over 80 per cent of domestic coal output. 

(PTI)

Coal

Coal India’s Capex Rises 65% In Q1

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Land acquisition at Rs 608 crore accounted for nearly one-fifth of the first quarter’s total capex basket. This is close to 2.3 times of Rs 268 crore spent under this head during April-June 2021-22. The expenditure was spread across all the subsidiaries of CIL

Coal India on Monday said its capital expenditure increased 64.8 per cent to Rs 3,034 crore in June quarter 2022-23, driven by strong spend in acquiring land and strengthening transport infrastructure in its coalfields under first-mile connectivity projects. Coal India’s capital expenditure was Rs 1,841 crore in April-June period of last financial year.

“Sustaining its growth in capital expenditure (capex) for the ninth quarter on the trot, Coal India Ltd (CIL) achieved a sturdy 65 per cent growth in the first quarter FY23 over comparable quarter last year,” it said in a statement. Land acquisition at Rs 608 crore accounted for nearly one-fifth of the first quarter’s total capex basket. This is close to 2.3 times of Rs 268 crore spent under this head during April-June 2021-22. The expenditure was spread across all the subsidiaries of CIL.

“The capex increase came on the back of a strong spending in acquiring land and strengthening transport infrastructure in our coalfields under first-mile connectivity (FMC) projects. These two vital areas help CIL in expanding its mining operations for accelerated production and pairing it with seamless transportation of coal,” a senior official of the company said. FMC is an initiative by coal companies to minimise environmental pollution, where coal is being transported through conveyor belt from coal handling plants to silos for loading.

Capex under FMC projects, on construction of coal handling plants, silos including weighbridges totalled to Rs 577 crore during the quarter under review. This is much higher as compared to Rs 141 crore spent in the first quarter of last fiscal. Rail sidings and laying of rail corridors took up Rs 571 crore during Q1 FY23, registering a year-on-year growth of 57 per cent. “CIL’s production tempo is keeping up a consistent double-digit growth in FY23 so far and all efforts are on to continue the trend. What assumes importance is to have a matching evacuation infrastructure that can handle transportation of the increased output”, the official said. 

Even during COVID-19 slowdown, CIL’s capex spending witnessed steady quarter-wise increase. CIL accounts for over 80 per cent of domestic coal output. 

(PTI)

Rbi cfo

Indian Economy Continues To Forge Ahead, Says RBI

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The recovery is spearheaded by an uptick in private investment through November-December alongside a turnaround in bank credit offtake and high Capex from the government sector (Centre and States).

Upbeat high-frequency indicators and consumer confidence show that the Indian economy continues to forge ahead, emerging out of shackles of the pandemic, said an article on the state of the economy published in RBI Bulletin on Wednesday. 

The recovery is spearheaded by an uptick in private investment through November-December alongside a turnaround in bank credit offtake and high Capex from the government sector (Centre and States).

In conjunction, the employment situation has brightened, said the article written by RBI officials. “The outlook remains upbeat, though concerns revolving around the spread of the new Omicron variant are surfacing,” it added.

The article further said indicators of aggregate demand point to sustained recovery across spheres, but with signs of sequential moderation. Even as E-way GST bills generation remained above pre-pandemic levels, there was some sequential dip in November on account of festive season fatigue in the first half of November.

However, E-way bills generation has picked up again in December (up to December 12) posting sharp month-on-month growth.

“The end of the festive season reflected in moderation in the growth momentum of petroleum consumption, led by a decline in diesel even as petrol consumption remained above pre-pandemic levels and aviation turbine fuel recorded a steady pick-up in November 2021,” the article said.

The RBI clarified that the views expressed in the article are those of the authors and do not necessarily represent the views of the Reserve Bank of India.

The authors further said global supply chain and logistics disruptions continued to weigh heavily on the domestic automobile sector. The supply bottlenecks thwarted festive season sales of motor vehicles. The global economy remains hostage to heightened uncertainty, with Omicron sparking fresh containment measures.

The Indian economy bounced back strongly in the second quarter of 2021-22, with GDP surpassing its pre-pandemic levels, and inflation broadly aligning with the target. A host of incoming high-frequency indicators are looking upbeat and consumer confidence is gradually returning. Aggregate demand conditions point to sustained recovery, albeit, with some signs of sequential moderation, it said.

“The Indian economy continues to forge ahead, emerging out of shackles of the pandemic,” the article said. According to it, the ongoing revival is driven by a confluence of factors.

High-frequency indicators, include the sale of passenger vehicles, cargo movement, E-way bills, and PMI Index. Going forward, the authors said the emergence of the Omicron strain has heightened the uncertainty in the global macroeconomic environment, accelerating risks to global trade with the resumption of travel restrictions/ quarantine rules at major ports and airports.

(PTI)

Coal

Coal India Aims At Rs 40,000-50,000 Cr Capex In 4-5 Years: Chairman

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The Rs 17,000-crore capex (capital expenditure) for the current fiscal is “on track”, CIL chairman Pramod Agrawal told investors.

Coal India Ltd on Wednesday said the company is aiming at investing Rs 40,000-50,000 crore as capital expenditure in the next 4-5 years.

The Rs 17,000-crore capex (capital expenditure) for the current fiscal is “on track”, CIL chairman Pramod Agrawal told investors.

He also acknowledged that price revision is “inevitable” and this may happen soon.

We have spent Rs 7,000 crore capex so far and our Rs 17,000-crore target for the current fiscal is on track. We will invest around Rs 40,000-50,000 crore in the next 4-5 years, he said.

Most of the incremental capex will go into coal production and evacuation, he said.

Asked about a mismatch between EBITDA (earnings before interest, taxes, depreciation, and amortisation) and the increased capex of the miner, he said, “Our industry (mining) is not like any manufacturing entity in which an increase in capital expenses will translate into higher EBITDA. We have to carry out such expenditure to maintain production. Since last year only, we have invested heavily in production and evacuation,” he said.

The Maharatna company said the capital expenditure plan will not be affected due to a fall in receivables as it has “enough cash flow” to manage the investments.

As of October, the receivables of the coal behemoth were at Rs 12,000 crore, down from Rs 19,000 crore in March 2021.

(PTI)

economy 2

GDP growth to accelerate further to 9.8% in FY23: Goldman Sachs

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The GDP had contracted by 7.3 per cent in the pandemic-hit FY21, and is widely expected to grow at a faster pace due to the base effect in 2021-22. The Reserve Bank of India (RBI) expects a 9.5 per cent growth in 2021-22, and the same to slow down to 7.8 per cent as things normalise.

 Indian GDP will grow at 8.5 per cent in 2021-22, and the rate will accelerate further to 9.8 per cent in 2022-23, a foreign brokerage said on Tuesday.

The GDP had contracted by 7.3 percent in the pandemic-hit FY21 and is widely expected to grow at a faster pace due to the base effect in 2021-22. The Reserve Bank of India (RBI) expects a 9.5 per cent growth in 2021-22, and the same to slow down to 7.8 per cent as things normalise.

“We expect consumption to be an important contributor to growth in 2022, as the economy fully re-opens driven by a notable improvement in the virus situation and adequate progress on vaccination,” Goldman Sachs said in a report.

It expects government capital spending to continue, nascent signs of private corporate capital expenditure (CAPEX) recovery, and a revival in housing investment.

The American brokerage pegged the FY23 growth number to be higher, making its analysts one among the few to expect an acceleration in growth even after the base effect wears out.

Earlier in the day, analysts at British brokerage Barclays said FY22 growth will come at 10 percent, and the same will slow down to 7.8 per cent in FY23.

Goldman Sachs said that as the growth catches up, the RBI will begin its policy normalisation, and expected cumulative rate hikes of 0.75 per cent in 2022. The central bank is currently in the second stage of the four-stage policy normalisation process, which began with ‘less dovish’ comments from the rate setting panel and will end with repo rate hikes, it added.

Concurring with the same view, Barclays also said the policy is already shifting to being less accommodative and there will be a hike in reverse repo rate at the upcoming policy review in December, which will be followed with rate hikes next year.

Barclays said Indian policymakers have been focused on managing growth risks for the past three years, stressing that the downturn had started before the onset of the pandemic itself, and added that the focus will now shift to managing financial stability concerns.

Inflation will decline in the second half of next year after being elevated and may result in appropriate action by the RBI, it said.

Analysts at Goldman Sachs expect the headline consumer price inflation to rise to 5.8 percent in 2022 from 5.2 percent in 2021. 

PTI

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