Economy
Weak demand, high debt limit credit ratings of Indian firms: S&P
Mumbai, Weak demand and high debt continue to pull down the credit profiles of Indian companies in an overall context of lacklustre economic conditions in the country, ratings agency Standard & Poor's (S&P) said on Tuesday.
 
"Companies still face anaemic demand and lower capacity utilisation, resulting in weak profitability," S&P said in a report titled "Revival In Domestic Demand Can Reduce Downside Risk For Indian Companies In 2016".
 
"Economic conditions in India remain lacklustre despite several government measures to boost investments in the economy," said S&P's credit analyst Mehul Sukkawala.
 
"If these companies can manage this (6-9 month) period without significant damage to their financial strength, we believe their credit profiles could have bottomed out," he said.
 
"The first six to nine months of 2016 will be crucial for rated Indian companies. This period will provide signs on whether domestic demand is reviving, government reforms are moving ahead, and global economic conditions are stabilizing," he added.
 
Indian companies with high levels of debt remain vulnerable to downgrades, while lower commodity prices have also reduced headroom for firms operating in commodity linked sectors such as metals and oil and gas, the American agency said.
 
S&P's said the credit quality of half its portfolio of 22 rated firms in India is expected to remain stable in 2016.
 
The report also said rated companies are at their peak debt levels following a significant increase in debt-funded investments over the past five years, thus limiting the scope for positive rating action.
 
On the fallout of global developments, S&P said the Chinese slowdown will have limited direct impact while higher US interest rates should be manageable.
 
"A slowdown in China is not a key factor for the credit profiles of most rated Indian companies because these companies target the domestic or developed markets.
 
"That said, any further slowdown in China could trigger significant turbulence in the global financial and commodity markets and hurt Indian companies," Sukkawala said.
 
The impact of a US interest rate hike on Indian firms would come largely through the exchange rate channels.
 
"The expectations of a rise in US interest rates should be manageable but any related fallout from sudden and significant depreciation of the Indian rupee could pose a bigger risk to our rated portfolio," said S&P.
 
The rupee slid on Friday by 30 paise to a new 28-month low at 67.59 owing to fresh US dollar demand from importers caused by continuous foreign capital outflows.
 
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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Government may miss FY16 fiscal deficit target
While the miss is due to lower than expected GDP, the absolute fiscal deficit is seen close to the budgeted figure at around Rs5.56 lakh crore, which is a rise of 8.5%, says India Ratings & Research 
 
The Indian government is likely to miss its FY2016 fiscal deficit mainly due to lower than expected gross domestic product (GDP), says India Ratings and Research (Ind-Ra), in a report. 
 
According to the ratings agency, the FY16 fiscal deficit is likely to rise to 4.1% of GDP, higher than the Indian government's budgeted target of 3.9%. While the miss is due to lower than expected GDP, the absolute fiscal deficit is seen close to the budgeted figure at around Rs5.56 lakh crore, which is a rise of 8.5%. Fiscal deficit for the first eight month of FY16 stood at Rs4.83 lakh crore, which is 87% of the budgeted deficit for the full year, it added.
 
Ind-Ra said, "The main reason for the higher than budgeted fiscal deficit as a percent of GDP is the likely lower nominal GDP growth rate in FY16 than the 11.5% nominal GDP growth assumed in the FY16 budget estimate. Nominal GDP growth FY16 is expected at 9.6%, weaker than budgeted due to the lower than expected inflation. We estimate that wholesale prices on an average have declined by 1.4% in FY16. Tax revenues for the period April-November stood at 50% of the full year budgeted, at Rs9.19 lakh crore."
 
The ratings agency said it expect the GDP to expand at 7.9% in FY2017 from 7.4% in FY2016. It said, "After bottoming out in FY13, the GDP so far has followed a steady growth trajectory and is expected to do so even in the medium term. All major sectors namely agriculture, industry and services are expected to contribute to the gross value added (GVA) growth. Under the assumption of a normal monsoon, the agricultural GVA is expected to recover and grow at 2.2% in FY17 compared with 1.1% in FY16. Since there has not been any past instance of three consecutive monsoon failures, the likelihood of a normal monsoon in 2016 is quite high. The information available so far indicates that La Nina, a phenomenon associated with good monsoons, will hold sway in 2016."
 
 
To achieve the 3.9% fiscal deficit target, fiscal deficit will have to be compressed by Rs21,100 crore. Ind-Ra said it believes this can be achieved only by deferring parts of the subsidy payments to FY17, cutting down capex or a combination of both. Cutting down capex, when the need is to step up government investment, will be counterproductive, it warned.
 
According to the medium-term fiscal policy statement published along with the FY16 budget, the fiscal deficit target for FY17 and FY18 is 3.5% and 3.0%, respectively. However, Ind-Ra says it believe achieving these targets in view of the likely acceptance and implementation of the recommendations of the Seventh Central Pay Commission will be difficult. 
 
Ind-Ra expects the fiscal deficit of FY17 to come in at 3.9% of GDP. This will push the attainment of the fiscal deficit target of 3% of GDP to FY19, a year later than envisaged in the fiscal policy statement. In the past also, pay revisions have pushed fiscal consolidation targets. Accordingly, the fiscal deficit targets are likely to be 3.9%, 3.5% and 3.0% in 2016-17, 2017-18 and 2018-19 respectively.
 
"In view of the above, stepping up government capex is indeed going to be challenging. Yet, we believes the government will have to catch the bull by the horns and find ways to step up public investment," the ratings agency concluded.

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COMMENTS

Ganesh Kamat

1 year ago

1)Start-up needs protection from BABUS,
Babus Harassing the youth,
Traders,Farmers, Voters.. who wants to work.
Babus are ruthless as they
pay "Protection Money" to......?
for Posting/ Promotion/ Permit...
Administrations Reform is a Must,
2)Farmers suicide can get reduced,
by encouraging them to sell their
farm products on Railways to commuter
& roads to motorists, also we need
more Passenger Train, to help farmers
to sell farm products, to nearby Towns.
3) For Big Tax collections
take 1% Tax from 20 Taxpayers
than 20% Tax from one Taxpayer.
4) So with 1% Tax on gross Receipts,
the Taxpayers will work to improve Business
R.&D,Social work.So more Employment,
make in India, less Farmer Suicide,
No Black Money & Peace of mind to the people.
5) Average say on Rs. 30 L Receipt,
Pay Rs. 0.3 Lac Tax per year.
If Taxpayers = 60 Cr.
Tax collection will be 18 L- Cr.
So Big Tax Collections.

Siva Kumar Dattu

1 year ago

crude oil price declining will help government increase excise duty.So government may achieve it's target.

What Ails Healthcare Services in Mumbai? - Part 1
Despite crores of funding from MCGM, more doctors, hospitals and other facilities, health care indices of Mumbai are poor. What ails healthcare in Mumbai? This is first part of a three-part series
 
The Municipal Corporation of Greater Mumbai (MCGM) is a very rich corporation. Its annual budget exceeds that of many states like Kerala, Goa, Chhattisgarh, and Jharkhand. It is probably the only Municipal Corporation in Asia to run—not one but three medical colleges, with the fourth one in the offing. It is also one of the rare government bodies, which spends a very high amount on health and medical education. At one time nearly 15% of its revenue expenditure was spent on healthcare but it has now dwindled to about 8% or so. 
 
In absolute terms, the MCGM has presented a budget for the year 2015-16 wherein its income is Rs33,000 crore and expenditure is Rs31,000 crore. Out of this expenditure, it has allotted Rs2,552 crore for health and medical education for the total population of 1.3 crore people. The percentage works out to be nearly 8%. It has allotted a little more than Rs600 crore for primary healthcare, Rs744 crore for its peripheral hospitals, another Rs108 crore for TB (100) and Acworth leprosy (8) hospital. However, it is spending a whopping Rs1,100 crore for its three medical colleges and their hospitals and one dental college. These are tertiary care hospitals and, no doubt, some of the best medical centres in India, offering CT scans, endoscopy, laparoscopy, angiography, angioplasty, open heart surgery, neurosurgery paediatric surgery, ICUs, nephrology, dialysis, kidney transplants, all sorts of emergency services and what not!
  
The MCGM has a network of health services and, despite all its deficiencies, it has one of the best health services in the country- probably exceeded only by Tamil Nadu. The network consists of primary health services consisting of 174 dispensaries, 168 outreach health posts, 15 RCH health posts, and 30 maternity homes. Secondary health services comprise 18 peripheral hospitals, in addition to five speciality hospitals, namely, one ophthalmic, two ENT, one for TB and leprosy each, besides one large Infectious diseases hospital—Kasturba Hospital. Tertiary care, as mentioned above, is offered by three major teaching hospitals, which also offer complete secondary care too. 
 

All this is ably assisted by state government hospitals like JJ hospital (a teaching hospital) and four other secondary hospitals. There are many other state and central health services and their hospitals, which cater to specific groups—their own workers. There are two Railway hospitals, a Naval Hospital, CGHS, BARC (atomic energy), ESIS scheme hospitals, and Port-Trust Hospital. These, however, are not available for the public. 
 
Yet, the health care needs of the Mumbai population are hardly satisfied and private sector has expanded like never before. Earlier, till the year 2000, it was the small hospitals or nursing homes, which rapidly increased in number, especially in suburban areas. This was because, as is seen in the map above, public sector hospitals were concentrated in the island city till 1980. 
 
It was during Municipal Commissioner BG Deshmukh’s time that peripheral hospitals were established in suburban areas, the number rising to 18. The total population at that time (in 70s) was around 52 lakh. But in this century, tertiary care hospitals are growing very rapidly in the private sector, due to high expectations of the people from modern technology and its affordability among the increasing percentage of Mumbaiites. 
 
At least 30% are now covered by insurance or re-imbursement by their employers. They do not feel the pinch of steep rise in the cost of health care but the rest of the population suffers heavily as the cost rises for them, too. The private sector in Mumbai comprises of around 1500 hospitals—mostly small or big nursing Homes- but now- at least a dozen major tertiary Hospitals with all modern High tach. Facilities have sprouted in various regions of the city. The total number of beds available are 12,000 in MCGM, 8,000 in government and 21,000 under private hospitals.
 
The total of 41,000 beds or more fall too short for the population of 1.3 crore, with a ratio of 1 to 3,000 when the minimum ratio should be 1 to 1,000. It is strange and highly regrettable that we do not have any authentic data as to the number of (allopathic) doctors in Maharashtra and especially in Mumbai. MCGM is stuck with the figure of 80,000 doctors since the year 2002. But, if we consider that 16,000 students pass MBBS every year in Maharashtra alone, the number ought to reach one and a half lakhs by now. 
 
Mumbai has 10% of the total population but doctors are more concentrated in this city than elsewhere. Presuming that just 15% of the doctors’ practice in Mumbai—it must be more—it still means that there are more than 22,000 doctors in Mumbai – a ratio of 1 doctor per 600 people. It could well be 1 to 500-- almost the same as for UK.  
 
Thus, Mumbai has enough budgetary provision for health services, the corporation is spending 8% of its budget on health, there is a good network of health care centres and public sector caters to 50% of the city population, there are more than enough doctors and almost all facilities that a developed nation has. One should expect that health care indices of Mumbai should be very good at par with the developed nations. Unfortunately, it is not so. 
 
(Dr Sadanand Nadkarni, is former Dean of Lokmanya Tilak Municipal Medical College (Sion Hospital), author of several books, a serious thinker of medical issues and hugely respected for a series of path-breaking ideas on improving the delivery of medical services to the aam aadmi. His book “Management of the Sick Healthcare System” is among the first to speak out about medical malpractice and other issues.)

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