According to HSBC PMI index, during September manufacturing activity in India continued to shrink albeit at a slower pace while order flows, especially export orders remained weak, and employment fell
India’s manufacturing sector activity contracted for the second consecutive month in September as both output and new orders witnessed a decline, says a survey released by HSBC on Tuesday.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI) for the manufacturing industry stood at 49.6 in September, higher from 48.5 in August, but remained below the crucial 50 mark (below which it indicates contraction) for the second consecutive month.
“Manufacturing activity continued to shrink in September, albeit at a slower pace. Order flows remained weak, especially export orders, and employment fell,” HSBC Chief Economist for India and ASEAN Leif Eskesen said.
The overall rate of contraction was, however, marginal and eased since August, when it had slipped sub 50.0 reading (below which it indicates contraction) for the first time since March 2009.
Faced with fewer projects, companies reduced their workforce number for the first time since February 2012.
“Reflective of a further reduction in new order levels, Indian manufacturers cut their staffing levels in September,” HSBC said adding that “the latest fall ended a period of job creation that had lasted for one and-a-half years’’.
Although new orders fell at a slower and marginal pace, the contraction of export business was very significant.
According to HSBC, a depreciation of the rupee versus the US dollar had resulted in higher prices paid for inputs and limited firms’ ability to price “competitively’’.
The findings of the survey come at a time when the country is battling slower growth rate, wider current account deficit and a battered currency.
According to official data, high imports of gold and oil pushed the current account deficit (CAD) to 4.9% of GDP at $21.8 billion in the April-June quarter of the current fiscal.
“Despite the weak growth readings, the build-up in underlying inflation pressures suggests that the RBI has to keep its inflation guards up,” Eskesen said.
The Reserve Bank of India (RBI), in its 20th September policy review, had unexpectedly raised the policy rate by 0.25% as it kept its focus on controlling inflation.
Driven by costlier food items, the wholesale price inflation rose to a six-month high of 6.1% in August.
The new director of Financial Technologies has an interesting background
On 17th September, Financial Technologies announced the appointment of TC Nair as an independent director. This was at a time when dozens of independent directors, former Union secretaries, regulators, bank chairmen, industrialists and group senior officials were rushing for the exit door. On the face of it, Mr Nair seems a great catch. Financial Technologies was hunting for former regulators and, while many had turned down the offer, this former whole-time director of SEBI and ex-managing director at Bharatiya Reserve Bank Note Mudran Ltd was happy to accept. While other directors of the FT-MCX group were probably worried about the onerous new liabilities and punitive provisions of the Companies Act 2013, Mr Nair is probably relying on his hitherto charmed existence. In 2007, TC Nair was at SEBI and in charge of regulating the Stock Holding Corporation of India Limited (SHCIL) which was a quasi-public sector company indulging in a serious scam under a rogue CEO named R Jayaraman Iyer.
During my investigation, I discovered that SHCIL had leased and furnished an apartment belonging to Mr Nair at Palghat (Kerala) for use as a ‘guest house’ even though it had absolutely no business in that town. In fact, the flat was being maintained, with a caretaker, for Mr Nair’s use when he visited. Despite the disclosure, the then SEBI chairman, a close friend of Jayaraman Iyer, made no attempt to investigate or act.
In May 2008, Mr Nair ignored copious evidence about the Zee group’s involvement in the Ketan Parekh scam (manipulation of its shares, funds running into hundreds of crores of rupees borrowed and transferred to Parekh through Global Trust Bank and much more) and let it off with a warning. This at a time the group was negotiating a ‘consent decree’, haggling to ensure that it paid only Rs5 crore. This order was the basis for several other companies involved in the Ketan Parekh scam to get away too.
Mr Nair had similarly closed the case against the Central Depository Services Limited (CDSL), without even a warning, in the infamous IPO scam. With this background, he clearly believes he has nothing to worry about and plenty of perks to enjoy in the Financial Technologies group.
Too many committees and official statements, but little real action
In all the 66 years after independence, whenever a scam was unearthed, government actions have followed a certain pattern. There is a prima facie investigation; the case is quickly handed over to the Central Bureau of Investigation (CBI) and, after a big show of searches, raids and arrests, it dwindles into never-ending litigation. As the case drags on, key documents go missing; the CBI is unable to prove any of the tall claims that were made to back their initial arrests; and the evidence that is put out at trial is weak and inadequate. But the Rs5,300-crore National Spot Exchange Limited (NSEL) scam seems to be following a new pattern of inaction. Indeed, the enormity of the NSEL scam has unravelled slowly—first with the revelation that the bourse has no regulator; then, the trade guarantee fund of a few hundred crores of rupees suddenly dwindled into lakhs; and, finally, it transpired that there were no commodities in its warehouses across the country. Instead, all the data was fudged, as the bourse was running a simple funding operation offering high returns and no collateral.
Initially, the lack of action suggested a new maturity on the part of government. After all, in the previous scams, actions like arrests and remand hindered actual recovery of money. It appeared that, this time, the focus was on recovery. However, one now begins to wonder whether the so-called investigation and committee reports are just a sham to hoodwink NSEL’s rich investors who, many believe, can afford to lose the money (remember, some of the small investors have already received their money).
Consider this. New regulators are being asked to examine the scam and NSEL’s activities every few days, in a clear attempt to buy more time. Until now, these include the Reserve Bank of India, which declared that it has found only ‘minor systemic problems’ with NSEL, and the Enforcement Directorate, known to bully and arrest honest businessmen, set up a working group which found violation of the money laundering and foreign exchange management statutes. Strangely, it has done nothing. The Central Bureau of Investigation (CBI), probably for the first time, is only ‘verifying facts’, when it usually rushes into action first and then attempts to understand issues, mainly in the form of confessions by officials and brokers. Then, there is a committee headed by the economic affairs secretary, Arvind Mayaram, which is conducting its own leisurely investigation. Among the last to wake up are the auditors of Financial Technologies (FT)-MCX group companies, who suddenly announced that they are withdrawing their audit reports as unreliable. On 22nd September, all these agencies and the government knew that only 60% of the money lost is likely to be recovered in the form of assets seized from defaulters.
Yet, Jignesh Shah and his team continue to be in charge, conduct covert negotiations with leading brokers asking them to accept a 20% haircut, while investors remain in the dark. The Securities & Exchange Board of India (SEBI) has now got into the act of looking into the FT-MCX group companies, but is making no attempt to take action on the ‘fit and proper’ person issue. It is no longer about whether or not FT-MCX is being protected, but how many ministries are working at protecting FT-MCX group.