Posts Tagged ‘fiscal deficit’

Points Discussed in Budget :)

  • Excise duty on silver rose to 10%
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  • Surcharge on domestic cos reduced to 7.5% from 10%..
  • Excise duty on oil rose to 10%.
  • Fiscal deficit will be at 5.5% in 10-11, at 4.8% in 11-12 and 4.1% in 12-13
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  • Revised income tax slabs ๐Ÿ™‚
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  • Net market borrowing for 2010-11 at Rs 3, 45,010..
  • Extended 1% interest subsidy scheme for affordable housing.
  • Rs 5400 cr of funds allocated for urban development..
  • Defense allocation rose to Rs 147344 cr.
  • Rs 48000 cr allocated for Bharat Nirman.
  • Farmer loans extended for 6 months to June 30th 2011.
  • Allocated Rs1.73 lakh cr for infrastructure..
  • Agriculture credit flow targets at Rs. 375000cr.
  • FDI worth $20.9 bn in April to Dec 2009.
  • Proposed Rs 16500 cr for PSU banks.
  • Challenge for a 9% growth, need to review stimulus.
  • Stay Tunedย for More updates ๐Ÿ™‚

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    Note : For More Latest Industry, Stock Market and Economy News and Updates, pleaseย click here

    Weekly Update of The Market (15th – 19th February)

    Hello Friends, here, we bring you the weekly overview of the Indian as well as of the Global economy and latest global business and industry updates.

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    Weekly Update of The Market (15th - 19th February)

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    The much awaited gains in global markets which came in the week gone by, was a big relief for investors.

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    Improving Australian Jobless rate (falling) to 5.3% from 5.5% & China‘s lending surged to 1.39 trillion yuan ($203 billion) in January, more than in the previous three months together lowered the concerns of global economic recovery and proved to be some of the triggers for the global markets gain.

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    European Union statement that it is ready to support Greece somewhat eased pressure but China central bank another move to hike reserve requirement by 50 basis point to rein the credit growth spoiled the mood of the markets.

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    Chinese banks disbursed 19% of the lending target in January alone.

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    The existing reserve requirements stood at 16 percent for the biggest banks and 14 percent for smaller ones.

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    Back at home, CSO expectations of decline in farm output to be contained within 0.2 per cent & robust recovery in industrial performance rejoiced the markets that GDP growth may come even better for the current fiscal year.

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    On the flip side, market is cautious from budget outcomes on expected move towards fiscal consolidation.

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    High fiscal deficit together with high inflation pose some long term risk for the equity market.

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    The much awaited reforms in the areas FDI, BFSI & fuel and fertilizer subsidiary & a roadmap for implementation of Goods & Services Tax & Direct Tax Code can spark the rally in the domestic market.

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    In the coming week, we may see some activity in capital goods sector on the back of very good IIP numbers.

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    Industrial production witnessed a growth of 16.8% on Year on Year basis while cumulative growth for the April to December period has now inched up to 8.6% over the corresponding period.

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    Overall the trend of most asset classes including stock markets around the world is down due to rising dollar index.

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    Going ahead in the budget, we expect volatility to increase and markets to see big moves up and down.

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    International cues are positive on the fundamental side but Europe problems and stimulus withdrawal along with rising inflation are having negative effect.

    One should remain cautious going ahead.

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    Nifty faces resistance between 4900-5000 levels and Sensex between 16400-17000 levels.

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    A pick up in investor’s sentiments, softer dollar amid expectation of rescue plan for Greece have rejuvenated most of the commodities, especially metals and energy.

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    We are expecting a thin trading in the beginning of the week, as US market is closed on Monday on the occasion of โ€œPresident Dayโ€.

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    Absence of participation of Chinese market due to celebration of New Year holidays can limit the volatility of commodities further.

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    If we talk about the trend, overall commodities may trade in a range now.

    Any improvement in Japanese GDP data can give further boost in the prices.

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    Stay Tuned for More on weekly updates.

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    Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here

    Indian Industry Expanded At A Fastest Rate in 25 Months :)

    Indian Industry Expanded At A Fastest Rate in 25 Months

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    India’s industrial output rose at a faster-than-expected 11.7 per cent in November ย from a year earlier, due to stimulus-backed demand for manufactured goods, particularly consumer goods.

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    Part of the industrial growth, measured by IIP is no doubt due to a low base of last year but it is mostly attributable to stimulus-driven demand.

    Stimulus measures have boosted domestic demand for sure.

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    However, industrial growth was just 2.5% in November 2008.

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    India’s factory production in November was the fastest in 25 months, raising a debate on whether stimulus provided to spur the economy should continue.

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    Meanwhile, manufactured goods, which have around 80% weight in the Index of Industrial Production, which measures industrial growth, grew by 12.7% in November 2009 compared to 2.7% in the same month a year ago.

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    Within this category, consumer durable goods production expanded by 37.3% in the month against just 0.3% a year agoย  while industrial output in Q1 of 2009-10 stood at 3.8% and in Q2 at 9.2%.

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    Moreover, with better-than-expected performance in November,ย  industrial production in the first 2 months of Q3 now expanded at more than 10%, as it grew by 10.3% in October.

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    As such, if the trend is maintained in December, industry would expand at faster pace in the third quarter.

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    On the other hand, the continuous rise of industrial production gives enough hope that the recovery is on a firm footing.

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    Though it is going to fuel the debate whether stimulus provided by the government to boost the economy should be withdrawn now or not.

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    Market experts believe that with respect to stimulus, there could be some withdrawal on the indirect taxes side. This could be required to make up for the fiscal deficit.

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    As part of stimulus, government had cut excise duty by six per cent and service tax by two per cent, besides stepping up Plan expenditure taking the total value of stimulus to Rs 1,86,000 crore.

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    Centre’s Fiscal Deficit is Rs 2.45 Lakh Crore in First 7 months of 2009-10

    Centre's fiscal deficit exceeded Rs 2.45 lakh crore in the first 7 months of 2009-10.

    The Centre”s fiscal deficit more than doubled to Rs 2.45 lakh crore in the first 7 months of 2009-10.

     

    With this, fiscal deficit during April-October, 2009 reached over 61% of the targeted level of over Rs 4 lakh crore for the current fiscal.

     

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    However, the government projected fiscal deficit of 6.8% of GDP for the current fiscal while with GDP likely to increase with a high growth rate of 7.9% recorded in Q2, there is more room to contain the fiscal deficit within the targeted level.

     

    Meanwhile, the fiscal deficit already crossed over 87% of the targeted amount for entire 2008-09 as the government was expecting fiscal deficit of just 2.5% of GDP at this point of time last time.

     

    Notably, Fiscal Deficit is a economic phenomena when a government’s total expenditures exceed the revenue that it generates (excluding money from borrowings).

     

    Deficit differs from debt, which is an accumulation of yearly deficits.

     

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    Moreover, when excise duty was cut by 6% and service tax by 2% from December onwards and plan expenditure rose as part of stimulus package, the government revised its target to 6% of GDP, which later turned out to be 6.2%.


    The rise in fiscal deficit could be gauged from the fact that tax revenues decreased by around 8% to 2.13 lakh crore till October this fiscal against Rs 2.32 lakh crore a year ago.

     

    The Centre’s revenue deficit, which is a gap between revenue receipts over revenue expenditure like salaries, rose by 138 per cent to stand at Rs 20.76 lakh crore during April-October, 2009.

     

    Indian Stocks Rose After Govt Approved Disinvestment Plans

    Indian Stocks Rose After Govt Approved Disinvestment Plans

    Indian Stocks Rose After Govt Approved Disinvestment Plans

    Indian stocks rose, extending the benchmark indexโ€™s longest string of gains in five weeks, after the government approved a plan to sell more shares in state- controlled companies, helping it raise funds to boost spending.

    MMTC Ltd., Indiaโ€™s biggest state-owned trading company, surged 20 percent, the most in 10 months.

    Rico Auto Industries Ltd., an auto component maker that supplies General Motors Co. and Ford Motor Co., climbed 5.1 percent after workers ended a 45-day strike.

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    The Bombay Stock Exchangeโ€™s Sensitive Index, or Sensex, rose 94.38, or 0.6 percent, to 16,158.28.
    The measure this week gained 1.7 percent, snapping two weeks of losses.

    The S&P CNX Nifty Index on the National Stock Exchange rose 0.6 percent to 4,796.15.
    The BSE 200 Index added 1.1 percent to 2,011.08.

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    โ€œThe disinvestment move will help moderate Indiaโ€™s fiscal deficit,โ€ said Jagannadham Thunuguntla, head of equities at SMC Capitals Ltd. in New Delhi.

    โ€œAlso, it may help in higher GDP growth led by increased government spending.โ€

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    MMTC soared 20 percent to 36,146.85 rupees, the most since Dec. 17.
    State Trading Corp., the No. 2, leapt 15 percent to 353.6 rupees.

    NMDC Ltd., Indiaโ€™s largest iron-ore producer, climbed 10 percent to 338 rupees.ย 

    Hindustan Copper Ltd., Indiaโ€™s biggest copper miner, 99.59 percent state-owned, gained 10 percent to 256.35 rupees.

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    Budget Deficit

    The government owns 99.33 percent in MMTC and 91.02 percent in State Trading, while it holds 98.38 percent in NMDC, according to filings to the Bombay Stock Exchange.

    The government will use the money raised from the sale of shares of state companies for social spending.

    Indiaโ€™s fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target.

    The key Sensitive stock index has more than doubled from this yearโ€™s lowest level, in March.

    Govt’s stand to sell state assets and accept more overseas funds into insurance and banking, has strengthened, after Prime Minister Manmohan Singh resounding re-election victory in May.

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    Stock Markets to be Propelled by the NTPC Stake Sale :)

    stake sale in NTPC is expected to propel the stock markets :)

    Stake sale in NTPC is expected to propel the stock markets ๐Ÿ™‚

    The government’s nod for stake sale in state-run power utilitiesNTPC and SJVNL – is expected to bolster investor sentiment and propel the stock markets in days to come, experts said.

    The Cabinet Committee on Economic Affairs (CCEA) has approved five and 10 per cent disinvestments in NTPC and SJVNL respectively.

    Government seems to be confident and ready to adopt a more liberalised economic policy and looks like committed to increase investors’ wealth, experts said.

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    Marketmen believe, a follow-on public offer (FPO) of NTPC, the second most valued public sector unit with a market capitalisation of over Rs 1.77 lakh crore, would help increase trading volumes at the counter.

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    PSU stocks generally have less volume and low volatility.
    The market would now look at the issue price of the FPO and an increase in demand would help to shore up supply,” SMC Global Vice President Rajesh Jain said.

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    Meanwhile, it is expected that the stake dilution would increase liquidity in the scrip and would help in reducing the fiscal deficit of the economy, but it may at the same time, act as a dampener on the stock price.

    However, experts are waiting for the entire structure of the issue to be released for further clarity.

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    NTPC shares are currently trading around Rs 216 a share levels.

    Given the current market conditions, the company would be able to mop up around Rs 8,500 crore through the stake sale.

    After five per cent stake dilution, the government’s holding in NTPC would come down to 84.5 per cent from the current 89.5 per cent.

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    Positive Undertones in the Economy โ€“ Part 2 :)

    Positive Undertones In The Economy

    Extending to the yesterday’s post on the positive undertones of the economy in the markets and investors tips, here we coming up with the more factors which investors should use for picking up fundamentally good stocks.

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    1. Reality companies hike rates by 15%

    Reality sector is witnessing a substantial demand, especially in the mature markets, after the prices dropped a few months ago.

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    With the gradual return of residential property buyers, prices in NCR and Mumbai areas have moved up 10-15%.

    How long these prices will sustain is hard to determine, but this indicates the confidence of investors.

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    2. India..in Better Position

    India can be considered as โ€œbalancedโ€ in terms of investment and consumption with savings rate of 35% and consumption of 65% of its GDP.

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    The fastest growing China leans towards investment, whereas most of the western countries are weighted more towards consumption.

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    If we compare India’s Sensitive Index with its other Asian peers, Sensex is valued at 17.6 times estimated earnings where as China’s Shanghai Composite Index trades at 22 times earnings and the MSCI Asia Pacific Index is valued at 24 times.

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    So, India remains very attractive and it is an opportune time for Indian companies to grab market share.

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    3. Developments in the rest of the economy ๐Ÿ™‚

    If we see the positive economic numbers across the globe, it seems that world economy is moving towards recovery.

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    Australian economy surprised with a jump in growth in the second quarter.

    US have witnessed a growth in the current quarter GDP, US manufacturing and housing sectors appears to be gathering pace, quarter’s results came better than expected.

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    European economies like France and Germany continued their gradual emergence from the worst crisis in decades and company results showed an upturn.

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    4. Concerns Over Weak Monsoon!

    Everyone is expecting that poor rains would push up food prices in the short-term, due to the reduced yield of kharif crop and it would add to inflationary pressures.

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    But at the same time, we should also know that Indian agriculture is not limited to agro commodities only, but it is well diversified into horticulture, livestock and fisheries and their share in total output of the agricultural sector is increasing.

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    Total agricultural output accounts for only 18.5 % of the gross domestic product and the kharif crops like cereals, pulses and oilseeds account for only 20% of it.

    Moreover, government spending in rural areas will mitigate the effect of diminished monsoon rains.

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    So, Looking at the above factors, India growth story remains strong in the long run.

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    So, one can go for the companies, which will benefit from โ€œEconomic growthโ€ like power plants, roads, service providers like banking and engineering sector.

    Thanks ๐Ÿ™‚

    Positive Undertones in the Economy – Part 1 :)

    positive undertones of economy

    We had a positive Q1FY10 result, which boosted the sentiments of investors regarding the economic recovery.

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    But are we actually out of it?

    Though the earnings were encouraging but if we analyze it, the results had a โ€œbottom-line growthโ€โ€ฆ may be because of the lower costs of raw material, huge cost cutting, profit from other sources like stake sale or stock market trading etc.

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    With lower interest rates, government spending in rural areas and lower base year, I am very much optimistic for Q2FY10 that these results would be โ€œrevenue drivenโ€.

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    Top line growth is not only good for the company and stock market but also for the economy as a whole.

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    Apart from the Q2FY10 numbers, there are positive undertones in the markets and investors should use these undertones for picking up fundamentally good stocks.

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    Those are :

    1. Measures for fiscal deficit

    The GoI is taking several measures to reduce the fiscal deficit.

    Disinvestment is high on the priority list.

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    As private spending is increasing, Govt. is reducing need for stimulus.

    A large part of deficit is contributed by the oil subsidy.

    For this, the ministry of petroleum is lowering the subsidy burden in Kerosene and LPG.

    Recently, improved tax compliance with new tax code and enforcement through the recently initiated Unique Identification Project are other steps to control the deficit.

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    2. Accelerating production

    India’s industrial production posted the fastest pace in the last 16 months in June, which shows that India has endured the worst of the global recession.

    The reason can be low interest rates, which has given confidence to the consumers to borrow to buy vehicles or other factory-made goods.

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    3. Capital flows to India

    Another positive trigger can be the capital flows to India, which is expected to increase because of better medium-term growth and faster recovery prospects.

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    The Q1FY10 early indicators suggest that NRI deposits, FII portfolio inflows and inward FDI flows have generally been strong, as compared to the net capital outflows witnessed in the last two quarters of 2008-09.

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    4. Exports seen at $167 bn in FY10

    For Indian Export Organisations, India’s exports are expected to touch around $167 billion, almost the same level of last year in FY10.

    The commerce ministry looks ambitious and optimistic and has come up with foreign trade policy for the next 5 years, whereby; it aims to have an export of $ 200 billion by FY11.

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    This will ultimately improve the declining trend of exports and will give thrust to employment-oriented sector like Textiles and Gem Jewellery.

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    5. The New Tax Code

    The new tax code has simplified the tax laws and will result in better compliance and a broader tax base.

    The resulting incremental tax revenues will first reduce the fiscal deficit. This is a net positive.

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    People, there are many other factors and Positive undertones in the economy which indicates towards the betterment of the economy and stock market.

    We would come up with the rest of factors in Part 2 of the topic in next blog. ๐Ÿ™‚

    Stay Tuned ๐Ÿ˜‰

    India’s industrial production posted the fastest pace in the last 16 months in June, which shows that India has endured the worst of

    the global recession. The reason can be low interest rates, which has given confidence to the consumers to borrow to buy vehicles

    or other factory-made goods.

    KEY FEATURES OF BUDGET 2009-2010

    UNION BUDGET 2009-2010

    CHALLENGES

    To lead economy to high GDP growth rate of 9 per cent per annum at the earliest

    ย• To deepen and broaden the agenda for inclusive development to improve delivery mechanisms of the government.

    OVERVIEW OF THE ECONOMY

    ย• Growth rate of Gross Domestic Product dipped from an average of over 9 per cent in the previous three fiscal

    years to 6.7 per cent during 2008-09.

    ย• Whole sale price index rose to nearly 13 per cent in August, 2008 and had an equally sharp fall to zero per

    cent in March, 2009.

    ย• The structure of Indiaโ€™s economy changed over the last ten years with contribution of the services sector to

    GDP at well over 50 per cent and share of merchandise trade doubling to 38.9 per cent of GDP in 2008-09.

    ย• Recognising economic recovery and growth as co-operative effort of the Central and State Governments,meeting with Finance Ministers of States held as part of preparation of the Budget. This is intended to become an annual feature.

    Highlights of Union Budget 2009-10

    * Govt plans to bring back economy to high growth of 9%

    * GDP growth dipped to 6.7% in FY’09

    * FM to make pre-budget talks with state FMs annual affair

    * Fiscal deficit up from 2.7% to 6.8% of GDP

    * Return to fiscal prudence at the earliest

    * ‘Aam admi’ is focus of all programmes and schemes

    * IT exemption limit raised; Rs 15,000 for Sr.citizens

    * Limit raised by Rs 10,000 for tax payers, including women

    * 10% surcharge on personal income tax scrapped

    * Fringe Benefit Tax abolished

    * No change in corporate tax

    * Defence gets Rs 1,41,703 cr, up 34%

    * Total fiscal stimulus in 2008-09 amounts to Rs 1,86,000 cr

    * IIFCL to evolve mechanism for increased funding of infra

    * IIFCL to re-finance commercial bank loans up to 60 per cent in critical projects through PPP to tune of Rs 1,00,000 cr

    * Allocations for highways being stepped up by 23 per cent

    * Funds for housing, amenities for urban poor up Rs 3,973 cr

    * Funds for JN Urban Renewal Mission up 87% to Rs 12,887 cr

    * Assistance for storm-water drainage project up by Rs 300 cr

    * Farm credit target up at Rs 3,25,000 cr from Rs 2,87,000 cr

    * Interest rates incentive to farmers to repay loans on time

    * Additional Rs 1,000 crore for accelerated irrigation scheme

    * Export Credit Guarantee scheme extended till March 2010

    * 2% interest subvention (IS) scheme extended till March 2010

    * IS scheme to cover 7 job-oriented sectors, including textile, handicrafts and handlooms.

    * Commodity Transaction Tax abolished

    * New pension system trust exempted from STT; DDT

    * Minimum Alternate Tax hiked to 15% from 10%

    * Tax holiday on petro sector extended to natural gas.

    * 100% tax deduction on political donation * Stimulus for print media for another six months

    * Fertiliser subsidy to be nutrient-based, not price

    * Expert Grp to form viable pricing for imported petro goods

    * Banks and insurance firms to remain in public sector

    * Rs 100 cr one-time grant to expand banks in unbanked areas

    * Govt committed to provide Rs 100 a day as wages under NREGA

    * Allocation of Rs 39,100 cr to be made for NREGA

    * NREGA coverage increased to 4.74 crore households in FY’09

    * Work National Food Security scheme has begun

    * Allocation for Bharat Nirman being raised by 45 per cent

    * Rs 2,000 cr rural housing fund under National Housing bank

    * Mission for female literacy with focus on minorities, SC/ST

    * 50% of all rural women to be brought into SHG programmes

    * Full interest subsidy for students in select institutions

    * Five lakh students to benefit

    * Modernisation of national exployment exchanges

    * Action for social security to unorganised sector workers

    * New pension benefits for 12 lakh jawans and JCOs from July

    * One lakh dwelling units for paramilitary forces personnel

    * Unique Identification Card to citizens in 12-18 months

    * Provision of Rs 120 crore for UIC project

    * Rs 2,113 crore allocated for IITs and new IITs

    * Rs 3472 cr for Commonwealth Games from Rs 2112 cr

    * Customs, excise and service tax base rates unchanged

    * For Indira Awas Yojana, allocation increased 63%

    * IT returns to be made simpler

    * 8 missions being launched under Plan on climate change

    * Allocation for market development assistance scheme up 148%

    * Allocation for Rural Health Mission raised by Rs 257 cr above interim budget

    * Rs 500 cr for rehabilitation of Sri Lankan Tamils

    * Rs 1,000 cr for infrastructure in cyclone-hit area in WB

    * Total expenditure crosses Rs 10 lakh cr for first time

    * Share of direct taxes in revenue increased to 56% in FY’09

    However, the failure of Finance Minister Pranab Mukherjee’s Budget in slashing securities transaction tax, the status quo when it came to short-term capital gains tax, no substantial increase in exemption level for calculating personal income tax and no complete tax exemption on interest income earned by senior citizens was a huge letdown.

    I would rate this Budget at 5 on a scale of 1 to 10.

    Fiscal Deficit will not be in Double Digits: Montek Singh Ahluwalia

    Fiscal Deficit will not be in Double Digits: Montek

    Fiscal Deficit will not be in Double Digits: Montek

    Seeking to mollify the fears of banks that high government borrowing would not allow interest rate to come down, the Planning Commission on Sunday said the fiscal deficit will be high but not in “double digits”.

    “Bankers are always concerned about the size of the government’s borrowing. Because it is very very large, many of them think that the interest rate on government debt will rise and they would rather retain liquidity now in order to invest in high-yielding government bonds,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

    He, however, advised bankers to wait as nobody knows what the government borrowing would be till the Budget and added that “I feel it will be possible to accommodate a reasonable fiscal deficit.”

    He stressed, “should not look for a return this year to the normal fiscal deficit, which used to be 3 per cent. It should be significantly higher.”

    Fiscal deficit, which is roughly the difference between total expenditure and total receipts, is an indicator of government borrowing.

    On account of various stimulus packages announced by the government to arrest the impact of the global financial meltdown on the country, the fiscal deficit during 2008-09 shot up to over 6 per cent of gross domestic product (GDP) as against the original estimate of 2.5 per cent.

    He pointed out that all over the world countries are running high fiscal deficits.
    Admitting that the monetary policy stance does have a bearing on interest rates, he said, “I am sure the Finance Ministry and the RBI are in close contact on this issue.”