India's GDP growth witnessed a trough in January-March quarter, but going forward the economy is expected to see gradual improvement in growth numbers primarily driven by consumption, says a Nomura report. According to the Japanese financial services major, consumption has recovered from the demonetisation "shock" and while external demand may be down, it remains supportive of growth. Some GST-related disruptions could spill into early part of the third quarter. But good monsoons, strong rural wage growth, pay hikes for state government employees, lower lending rates and a modest pick-up in external demand may push GDP growth to 7.1% in September quarter and further to 7.7% in the next quarter.
Meanwhile, with a day left for roll out of GST, the Finance Ministry has started notifying various provisions of law relating to interest calculation, input tax credit and valuation. Provisions in the Central GST Act (CGST), Integrated GST (IGST) Act and Union Territory GST Act and rules under them are being notified. Plus, the RCF divestment goes underway today.
Here's a look at nine macro-economic triggers that are likely to impact the market today
Govt Exiting Air India
The cabinet has cleared the decks for the divestment of loss-making Air India and approved the establishment of a committee headed by FM Arun Jaitley to decide on the extent to which it would exit from the state-run national carrier and how this would be achieved. The Jaitley committee will decide on the treatment of unsustainable debt, hiving off of assets to a shell company, demerger and strategic disinvestment of three profit-making arms, the quantum of divestment and the universe of bidders, the government said in a release. Air India's three profit-making subsidiaries are Air India Express (low-fare international carrier), AI Transport Services (ground handling unit) and AI-SATS (a 50:50 ground-handling JV with Singapore Airport Terminal Services).
RCF Divestment on June 29-30
The government will sell over 2.75 crore equity shares in Rashtriya ChemicalsBSE -4.01 % and Fertilisers (RCF) on June 29-30 for about Rs 200 crore as part of its plan to divest shares in PSUs. The government currently holds 80% stake in RCF and will offload 5% through the Offer for Sale (OFS) route. The floor price would be Rs 74.25 per equity share. The shares will be sold through a separate, designated window of the stock exchanges. On June 29, only non-retail investors can place their bids while on the following day, retail investors as well as non-retail investors who chose to carry forward their bids, can place them. Retail investors will be allocated offer shares at the discounted price, which is at a discount of 5% to the cut-off price. Twenty% of the offer size will be reserved for retail investors.
Allowances for Babus Cleared
The union cabinet on Wednesday approved the Seventh Pay Commission recommendations on allowances for government employees, clearing the way for payment of higher house rent and other benefits to 48 lakh of government employees. These will be effective from July 1. The revised allowances will cost the government Rs 30,748 crore per annum, Rs 1,488 crore more than Rs 29,300 crore estimated by the Pay Commission due to modification in recommendations made by the government.
Aadhar-PAN Linkage
The Big brother state is getting more assertive. Now, it is mandatory for those allotted permanent account number (PAN) to link it with their existing 12-digit biometric Aadhaar number as on July 1. Those applying for a new PAN will have to also mandatorily quote their Aadhaar number or Aadhaar enrolment ID. Both Aadhaar and PAN have already been made mandatory for filing tax returns, opening of bank accounts and financial transactions over Rs 50,000. The Finance Act for 2017-18 had made Aadhaar mandatory for filing income tax returns and provided for linking of PAN with Aadhaar. Linking Aadhar with PAN is expected to help check tax evasion through use of multiple PAN cards. Those who do not map their PAN with Aadhar will have their PAN cancelled, making it difficult for them to do transactions. Even those not required to file income tax return but having both PAN and Aadhaar are mandatorily required to link them as per section 139AA.
New Exploration Regime
India will launch a new exploration licensing regime from July 2018, offering acreages to companies for the first time in seven years, with new terms such as market prices for their output, freedom to carve out their block and share revenues, instead of profit, with the government. The Cabinet had approved the new policy, named Hydrocarbon Exploration and Licensing Policy (HELP), last year. The oil ministry has now put in place all components needed needed to operationalise the policy. HELP replaces New Exploration Licensing Policy (NELP) that governed India’s oil and gas sector for two decades but didn’t help produce much oil or gas.
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