Economy
Economy in motion, but private corporate investment recovery still missing
While the Indian economy is in motion, growth not accelerating as expected with private corporate investment recovery turning out to be the missing link, says a report.
 
In a report, India Ratings and Research (Ind-Ra) says, "The key factor that is holding the acceleration of industrial growth is investment recovery. Besides stepping up its own capital expenditure, the incumbent government has taken several initiatives to revive private investment as also the manufacturing sector growth in the country. However, all this has failed so far to rekindle the animal spirit in the economy. In fact, the Business Confidence Index of National Council of Applied Economic Research (NCAER), which had reached 148.4 in January 2015, slipped to 121.6 in April 2016. Corporates, particularly those engaged in infrastructure, power, iron and steel and textile sectors, are either repairing their balance sheets or saddled with stagnation or even decline in capacity utilisation. We, therefore, expect investments to grow 5.0% in FY17, mainly driven by the government capital expenditure."
 
 
Although the government has tried to do its bit to revive the investment cycle as can be seen from the FY16 and FY17 budgets, unfortunately the share of state and central government capital expenditure in the total capital expenditure in the economy is only 16%. As the balance 84% comes from the private corporate sector, which includes central and state public sector undertakings, Ind-Ra says it believes government capital expenditure can play only a limited role in reviving the capex cycle. 
 
In the absence of investment demand, Ind-Ra says, the key support to industrial growth is coming from the consumption demand. Moderation in both inflation and lending rates of banks is aiding the consumption demand in urban areas. Salary revision of central government employees due to the award of the recommendations of the Seventh Central Pay Commission will further aid the urban consumption demand. Also, with favourable monsoon so far, Ind-Ra says it expects even rural demand to recover in FY17. However, it will still not be sufficient to drive the industrial growth higher than the 7.4% witnessed in FY16.
 
 
The ratings agency says it also feels that the situation is more complex than hitherto believed. As in the aftermath of debt-fuelled expansion both banks and corporates are repairing their balance sheets, it has led to a virtuous cycle whereby banks are not lending and private corporate sector is not investing. The impaired asset ratio of the banking system is expected to inch up to 12.5%, including assets reconstruction companies’ receipts but excluding Discom bonds, by FY17.
 
"The median debt-to-equity ratio for infrastructure, iron and steel and textiles sectors increased to four to six times in FY15 from under two times in FY10. Ind-Ra says its estimates suggest that 240 of the top 500 borrowers belong to the stressed and elevated risk of refinancing categories and will remain exposed to significant refinancing risk during FY17. Clearly, there is no easy way out as the process of balance sheet repairing or cleaning will take time, it added.
 
 
The ratings agency also revised also revised its gross domestic product (GDP) estimate for FY17 upwards to 7.8% (FY16: 7.6%) from its earlier forecast of 7.7%. It said, "The upward revision has been prompted by the progress of monsoon and the sowing of kharif crop so far. With the exception of East and Northeast, the rainfall in other regions of the country has been more than long period average (LPA). Cultivated area under kharif crops on 19 August 2016 was 5.7% higher than the normal area (average of latest available five fiscal years). As a result, we now expect the agricultural gross value added (GVA) to grow 3.0% yoy in FY17 compared to the 2.8% forecasted earlier."
 

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Anil Ambani's son Anmol joins Reliance Capital board
The Board of Directors of Reliance Capital on Tuesday approved the induction of Anmol Ambani, the 24-year-old eldest son of Reliance Group Chairman, Anil Dhirubhai Ambani, on the Board of Reliance Capital as an Additional Director.
 
The induction follows the recommendation by the Nomination and Compensation Committee of the Board of Reliance Capital, comprising largely of Independent Directors, a company statement said. 
 
"The last two years have given me great learnings about the financial services business. I look forward to using this experience for scaling up our businesses and contributing towards their growth and progress," said Anmol Ambani.
 
An alumnus of Warwick Business School, Britain, he has been working in various financial services businesses within Reliance Capital since 2014.
 
He has also been a part of the interactions with Nippon Life for increasing stake in Reliance Life Insurance and Reliance Capital Asset Management in the last two years.
 
"Anmol's presence in any event evokes a lot of engagement and response. He likes to spend a lot of time interacting with local teams informally," said Sam Ghosh, Executive Director and Group CEO of Reliance Capital. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Airlines' route recast plan aims to lower fuel use, avoid Pakistani air space
In a bid to save fuel, cut emission and have better route utilisation, Indian carriers have suggested a new plan to the government that co-opts the air space controlled by the armed forces. It also calls for bypassing Pakistan while flying overseas to save navigation fees.
 
Called the Flexible Use of Airspace Initiative, under the larger aviation services management, it calls for: New, permanent routes for shorter navigation; grant of weekly permissions to operate shorter routes; and case-by-case approval by the defence Air Traffic Control to a pilot in air.
 
"If this is institutionalised, it will be a win-win-win for all: Less fuel use and lower emission -- which is good for the environment -- significant cut in fuel bills and shorter flying time for passengers," a top airline official said. "Avoiding Pakistani air space is part of the strategy."
 
The National Civil Aviation Policy that was unveiled in June also promises that the Ministry of Civil Aviation will strive to optimise the flexible use of airspace initiative in consultation with the Ministry of Defence. 
 
Sources said the Airports Authority of India has constituted a separate Directorate under the Department of Air Navigation Service Providers to look into the optimisation of the entire Indian airspace in coordination with the Aviation Ministry.
 
"Approximately 60 per cent of Indian airspace is under civilian operations. The rest is restricted and with the defence to operate. Due to this, most of the navigational routes for civil aircraft are not straight," said one official of an airline that has also sought the flexi plan.
 
"Take for example the Ahmedabad-Hyderabad sector. Currently, the route approved calls for around 590 nautical miles, since we have to fly over designated airport spaces. But under the flexi plan that we have proposed, it will get shorter to 480 nautical miles," the official said.
 
"Similarly, the Delhi-Goa sector requires us to fly over Mumbai, then along the coastline of the Arabian Sea to reach the destination. But what we have suggested is: We should be able to fly as the crow flies -- in a straight route -- over Madhya Pradesh, Maharashtra and Karnataka."
 
Explaining the same process on international routes, another airline official said flying from Ahmedabad to Dubai calls for Route Navigation Facility Charges of Rs 62,700 per leg, fuel of 7,800 kg and maximum pay load of 17,400 kg, or 166 kg per passenger.
 
But under the flexi plan, the navigation charges will get reduced to Rs 34,000 (as the Pakistan leg will be skipped), the fuel requirement will be 6,900 kg, while the pay load can be increased to 18,300 kg, or 174 kg per person. This translates into savings of Rs 100,000 per leg.
 
"Our air force and navy have to approve this. But this is quite common in the US and Europe."
 
As regards the third component -- called tactical air space management -- industry officials said this will neither be a permanent feature, nor can airlines use it in their route planning. Yet, on a case-by-case basis, it can yield some good savings.
 
Explaining the feature, an official said, the flight path between Delhi and Dehradun at present is slightly circuitous. "But if at a given point, the air space over Hindon -- which belongs to the Air Force -- is free, then for that particular flight the pilot can be given a fly-by nod."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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