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Maharashtra debt crosses Rs 5 lakh cr, economy to grow at 5.7%

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Despite the state debt crossing Rs 5 lakh crore, Maharashtra’s economy is expected to grow at 5.7 percent during 2019-2020, according to the Economic Survey of Maharashtra 2019-2020 tabled in the legislature here on Thursday.

The state’s debt stock stands at Rs 471,642 crore, or 16.4 percent of GSDP the interest component is Rs 35,207 crore.

The revenue deficit for the year was Rs 20,293 crore and fiscal deficit Rs 61,670 crore, or 2.1 percent of the GSDP.

However, all these are well within the cap of 24.4 percent of GDP set by the 14th Finance Commission.

The state economy is likely to grow at a rate of 5.7 percent during 2019-2020, or marginally below the projected 6 percent of the last financial year, as Deputy Chief Minster and Finance Minister Ajit Pawar prepares to present the state budget 2020-2021 in the legislature on Friday.

The state’s average share to the all India nominal GDP is 14.3 percent among all states.

The per capita income in the state is expected to be Rs 207,727 in 2019-2020 while the GSDP is likely to be at Rs 28,78,583 crore, said the survey.

The nominal GSDP is likely to increase by Rs 245,791 crore this year compared to 2018-2019.

The other highlight is the state reported a steep fall in FDI inflow at Rs 25,316 crore compared to Rs 80,013 in 2018-2019 and Rs.86,244 crore in 2017-2018. Accordingly, the state stood second to Karnataka in the country in terms of FDI this year.

Unemployment rate from January-March 2019 was 8.3 percent compared to 9.6 percent from October-December 2018.

The state recorded an average rainfall of 73.6 percent during 2018-2019, which was a reduction of 10.7 percent compared to 2017-2018. The outlook is good for agriculture and allied activities sectors which are estimated to grow at 3.1 percent in 2019-2020, compared to two consecutive years of negative growth of (-)2.2 percent in 2018-2019 and (-) 0.7 percent in 2017-2018.

However, there is gloom for the industry and service sectors which would grow at 3.3 percent and 7.6 percent respectively in 2019-2020, which will be slower than the previous year’s 5.5 and 8.1 percent respectively.

The survey also said that atrocities against women increased in the state with 37,567 crimes reported in 2019 compared to 35,497 in 2018 and 31,997 in 2017.

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India should make habit of entering sunrise sectors: Niti Aayog CEO

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India’s past mistakes in the electronics manufacturing, like entering the sector late after China and other countries have seized the market, should not be repeated when it comes to the area of electric mobility, Niti Aayog Chief Executive Officer Amitabh Kant said on Saturday.

Speaking at a roundtable event in Goa to promote electric mobility in India, Kant also said that India can use its push towards electric mobility to change its perception as a nation which enters sunset sectors, to one which invests in sunrise sectors.

“In the last 70 years India has always been getting into the sunset areas of industry. And by the time you get into the sunset areas of industry it is too late. By that time the Chinese and other countries have already taken the market and they have the size and scale,” Kant said at the roundtable meeting in Goa, which was organised by the Union Ministry for Heavy Industries.

“And once they have the size and scale you’ll never be able to penetrate global markets. Therefore we are saying that you get into the sunrise areas of the future and these are the areas if you get in you will become a global champion,” he further said.

Kant also said that only those countries which opt for the digital and environment-friendly path would attract investment in the future.

“Those countries that go digital and go green will attract valuation and attract investment and those that do not go green and digital will go dead. There will be no future for those countries. This disruption is absolutely clear,” he said, adding that by the year 2025 there would be no two and three wheeler vehicles which use combustion.

“One of the lessons we learnt was that in mobile phones, the market grew in India but we became import dependent. What we learned in solar, the market grew in India but we became import dependent. Let us not make that mistake in the world of mobility,” he said.

“We must make India the centre of manufacturing both for the Indian market and for the rest of the world. And that is now dependent on all of you and makes the states of India the centre of manufacturing,” he added.

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Omicron concerns: ‘Reverse Repo’ hike can wait, says SBI Ecowrap

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The need to raise ‘Reverse Repo’ rate during the upcoming monetary policy review “can wait” till concerns over Covid-19’s new variant –Omicron are addressed, said SBI Ecowrap report.

Lately, concerns have risen over Omicron’s impact on growth.

The monetary policy review is slated for December 6-8.

It is widely expected that RBI’s MPC will maintain a status-quo in key lending rates.

At present, the MPC of the central bank has maintained the repo rate, or short-term lending rate, for commercial banks, at 4 per cent.

Consequently, the reverse repo rate was kept unchanged at 3.35 per cent.

Besides, system liquidity remains in the surplus mode with the average daily net absorption under the liquidity adjustment facility (LAF) at Rs 7.6 lakh crore in November 2021.

However, the RBI has made a calibrated progress towards liquidity normalisation since the October policy with amount parked in overnight fixed reverse repo declining to Rs 2.6 lakh crore from Rs 3.4 lakh crore at pre-October policy.

“Against this background, we believe the talks of a reverse repo rate hike in the MPC meeting may be premature as RBI has been largely able to narrow the corridor without the noise of rate hikes and ensuing market cacophony,” the report said.

Furthermore, the report cited that RBI is not obliged to act on reverse repo rate only in MPC.

“Also, change in reverse repo rate is an unconventional policy tool that the RBI has effectively deployed during crisis when it moved to a floor instead of the corridor.”

“We believe, the RBI may deflate the hype around reverse repo hike in monetary policy by explaining the virtues of using reverse repo change as a pure liquidity tool and not a rate tool.”

Additionally, the report pointed out that US Fed has indicated accelerating the bond tapering program, thereby, ending it earlier than anticipated.

“Against this background, delaying normalisation measures is prudent in the current situation which would also give time for economic recovery to strengthen further.”

“Also, rate differential needs to emerge between ‘VRRs’ of different maturities so that Banks are incentivized to park funds in the longer term ‘VRRRs’. This can be achieved by reducing the amount available under auction in 7 days and reallocating the same to 28 days.”

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Tightening of norms may increase NBFCs’ headline NPAs: Ind-Ra

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Tightening of norms may increase non-banking finance companies’ (NBFCs) headline non-performing advances (NPA) by around one third, India Ratings and Research (Ind-Ra) said.

“The Reserve Bank of India’s (RBI) clarification on NPA accounting is likely to increase NPAs by around one third for non-banking finance companies (NBFCs),” the ratings agency said.

“However, the impact on provisioning could be modest, given NBFCs are using ‘IND-As’ and generally for higher rated NBFCs, provision policy is more conservative than ‘IRAC’ requirements.”

Besides, the agency pointed out that NBFCs would have to invest in systems and processes to comply with daily stamping requirements.

“Ind-Ra understands that NBFCs have presented to the RBI for providing a transition period on this requirement.”

On the other aspects of RBI clarification, the agency said that NBFCs generally classify an account as stage 3 when there is a payment overdue for more than 90 days. Typically for monthly payments, this would be when there are 3 or more instalments overdue on any account.

“However, when the borrower makes part payment such that the total overdue is less than three instalments, the account is removed from NPA classification and classified as a standard asset, although it remains in the overdue category in case not all overdues are cleared.”

“The RBI clarification would allow stage 3 assets to become standard only when all the overdues or arrears (including interest) are cleared.”

Furthermore, the agency pointed out that NBFC borrowers are generally a weak class of borrowers and have volatile cash flows which could mean that once an account has been classified as NPA, “it could remain there for a considerable period as the ability to clear all dues may be constrained”.

In terms of the provisioning trend, NBFCs have transitioned to the ‘Ind-As’ regime and the provision created on any account is based on the historical data on “roll backs and roll forwards” and the credit loss experienced on accounts in different overdue buckets.

“This is different from the provisioning created on the accounts as per the standard IRAC norms. The NPA provisioning under Ind-As depends on the asset class and the riskiness of the account.”

“During Covid times, NBFCs have increased their provisioning cover for standard as well as NPA accounts. The new norms would restrict the movement from stage 3 to standard category unless all the overdues are cleared. So, accounts which have paid some part of the overdues would remain in NPA category and have to be provided accordingly.”

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