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Economic Survey: Sensex up 300 pts: Govt retains FY15 fiscal deficit target


The News International Team

01:00pm The market extended southward journey after the government promised to keep the fiscal deficit target at 4.1 percent for FY15. The Sensex rose 318.35 points or 1.11 percent to 29065.00 and the Nifty jumped 106.60 points or 1.23 percent to 8790.45.

About 1652 shares have advanced, 972 shares declined, and 188 shares are unchanged on the BSE.

12:59pm Divestment is expected to bring in revenue in balance part of FY15. The government must meet medium-term fiscal gap aim of 3 percent of GDP.

Government started revenue mobilisation & augmentation efforts and expects surge in revenue from spectrum sale.

Enhanced revenue generation is a priority going forward. Eliminating or phasing down subsidy not feasible, desirable, says Economic Survey.

12:55pm Likely normal monsoon will help boost FY16 economic growth.

12:52pm Economic Survey: Stalling of projects is severely affecting the balance sheets of the corporate sector and public sector banks, which in turn is constraining future private investment, completing a vicious circle, characterised by an investment slowdown leading to less financing back to weak investment.

Despite high rates of stalling, and weak balance sheets, the equity market seems to be performing quite well. A plausible hypothesis being that equity valuations of affected companies are not being sufficiently priced in. Through an event study we show that the stalling of projects is indeed not having a significant impact on firm equity. This may potentially be due to the pure political economy reason that the market is internalising the expectations of bailouts.

12:50pm Economic Survey: The data shows that manufacturing and infrastructure dominate in the private sector, and manufacturing dominates in total value of stalled projects even over infrastructure.

The government’s stalled projects are predominantly in infrastructure. Unfavourable market conditions (and not regulatory clearances) are stalling a large number of projects in the private sector, and in contrast regulatory reasons explain bulk of stalling in the public sector. Also, clearing the top 100 stalled projects will address 83 percent of the problem of stalled projects by value.

12:49pm Economic Survey: The stalling rate of projects has been increasing at an alarmingly high rate in the last five years, and the rate is much higher in the private sector.

The good news is that the rate of stalling seems to have plateaued in the last three quarters. Moreover, the stock of stalled projects has come down to about 7 percent of the GDP at the end of the third quarter of 2014-15 from 8.3 percent the previous year.

12:48pm PSU Banks in focus: The government approved a new method to select PSU bank chiefs. For the first time, non-governmental candidates with minimum of 15 years experience can apply. Top jobs at 5 state-run banks are up for grabs.

12:47pm Buzzing: Rolta and BEL surged 5-12 percent today as a consortium which includes both companies is shortlisted for a Rs 50,000 crore mega defence order.

12:46pm Economic Survey says greater public investment in railway will boost manufacturing competitiveness, adding private investment must remain primary engine of long-term growth in India.

It expects food subsidy to total Rs 1.08 lakh crore in FY15.

12:43pm Economic Survey says excise hike in fuel products will increase revenue going forward.

“Growth will gather pace in FY17 following GST implementation. Liquidity conditions are expected to remain comfortable in FY16,” it adds.

12:41pm The Sensex rose 247.08 points or 0.86 percent to 28993.73 and the Nifty climbed 84 points or 0.97 percent to 8767.85.

About 1624 shares have advanced, 943 shares declined, and 193 shares are unchanged.

12:40pm The government needs medium/long-term fiscal policy framework. According to Economic Survey, inflation is likely to be below RBI target by 0.5-1 percent.

Lower inflation opens up space for monetary policy easing, it adds.

12:34pm Highway projects should shift to e-tolling, escrow accounts. Economic survey recommends revival of public investment in short-term to grow infra. Stalling rate of projects rose at alarming rate over last 5 years.

12:29pm Government needs modification in PPP model. It should transfer risk in PPP to those who can manage it. Efforts are needed to reform direct tax system. PPP financing structure should attract pension/insurance funds.

12:26pm Government needs to monitor risks from US monetary policy easing and needs to monitor risks from Eurozone turmoil.

12:23pm Divestment is expected to bring in revenue in balance part of FY15. Rationalisation of food subsidies needs more effort, says Economic Survey, adding rationalisation of non-plan expenditure will play vital role.

Expenditure compression may have to be made for fiscal.

12:20pm Savings-investment dynamics will be crucial for growth, says the government in Economic Survey. Government should ensure expenditure control to reduce fiscal deficit that has been retained at 4.1 percent for FY15.

Outlook for external financing is currently favourable and decline in oil prices provides incentive for overall growth, says Economic Survey.

12:17pm The government sees FY16 retail inflation in range of 5-5.5 percent and says will adhere to fiscal deficit target of 4.1 percent of GDP in FY15.

It estimates current account deficit at 1.3 percent of GDP in FY15.

12:15pm In its Economic Survey 2014-15, the government says it remains committed to fiscal consolidation. According to them, outlook for domestic macro-economic scenario is optimistic.

12:10pm According to Economic Survey 2014-15, savings-investment dynamics will be crucial for growth. The government sees FY15 GDP growth at 7.4 percent and FY16 growth at 8.1-8.5 percent.

12:05pm Economic survey says inflation shows declining trend during FY15. “There is scope for big bang reforms now. India farm output growth is likely to lag behind 4 percent aim and double-digit economic growth trajectory is now a possibility,” it adds.

12:00pm Market Check: It’s a strong session on Dalal Street. Equity benchmarks bounced back from yesterday’s lows as investors await the macro economic survey from the government.

The 30-share BSE Sensex rose 229.79 points to 28976.44 and the 50-share NSE Nifty climbed 83.15 points to 8767. The broader markets outperformed benchmarks, up more than one percent.

About 1565 shares have advanced, 892 shares declined, and 179 shares are unchanged on the BSE.

The government presented Economic Survey 2014-15 in parliament. The government says it remains committed to fiscal consolidation.


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