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Economic Survey projects 7 per cent growth rate for financial year 2019-20

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Economic Survey projects 7 per cent growth rate for financial year 2019-20

The Economic Survey, tabled in Parliament today (Thursday, July 4) by finance minister Nirmala Sitharaman has projected a 7 per cent growth rate for GDP (gross domestic product) in the 2019-20 financial year.

This indicates a higher than the estimated 6.8 per cent growth rate for the previous year ended March 31. The Economic Survey cited investment rate picking up in FY20 on higher credit growth and improved demand as the factors for the higher growth rate.

The projected growth rate could help India overtake China and regain the status of world’s fastest-growing major economy.

Prepared by Chief Economic Adviser (CEA) Krishnamurthy Subramanian, today’s Economic Survey is the first by the re-elected Narendra Modi government. The release of Economic Survey 2018-19 comes a day ahead of the presentation of Union Budget in Parliament.

“Given the macro-economic situation and the structural reforms being undertaken by the government, the economy is projected to grow at 7% in 2019-20. Growth in investment, which had slowed down for many years, has bottomed out and has started to recover since 2017-18,” the Survey said.

Growth is expected to pick up in 2019-20 as macroeconomic conditions continue to be stable while structural reforms initiated in the previous few years are continuing on course. The survey said India maintained its macro-economic stability by containing inflation within 4% and by maintaining a manageable current account deficit to GDP ratio. “The current account deficit to GDP was higher in 2018-19 as compared to 2017-18, primarily due to higher oil prices, which were about $14/barrel higher in 2018-19 vis-à-vis the previous year. However, the CAD started to narrow in the third quarter of the year,” it added.

It also highlighted that lower global oil prices are expected to decline in FY20. Lower global growth and increased uncertainty over trade tension may hit exports, it added.

Sharing his view on the survey, Prime Minister Narendra Modi tweeted: “The Economic Survey 2019 outlines a vision to achieve a $5 trillion economy. It also depicts the gains from advancement in the social sector, adoption of technology and energy security.”

CEA Subramanian said: “Our team has put in a lot of effort with a lot of dedication. I hope results are good, and we are able to contribute to the ideas for the economy.”

This year’s survey brings “an effective minimum wage policy that targets the vulnerable bottom rung of wage earners can help in driving up aggregate demand and building and strengthening the middle class,” he added.

In a series of tweets, CEA Subramanian stated that the survey “is inspired by (Mahatma) Gandhiji’s Talisman: ‘…Recall the face of the poorest man [woman], and ask yourself, if the step you contemplate is going to be of any use to him [her].’

He also mentioned that “one of the biggest hurdles to $5 trillion economy is poor enforcement of contracts and dispute resolution. Steps to speed up legal process should be top priority.”

He added that the survey “is imbued by the spirit ‘blue sky thinking’ in thinking about the appropriate economic model for India. This is reflected in the sky blue cover of the survey.”

“The theme of the survey – ‘Shifting Gears’ – is intended to achieve a sustained growth rate of 8 per cent. Using the learning from the Global Financial Crisis, the Survey departs from traditional thinking to view the economy in either a vicious or a virtuous cycle,” said Subramanian. “The Survey makes a sincere effort to live up to the expectation of being an indispensable guide for following, understanding and thinking about the Indian economy.”

Rural wages growth seems to have bottomed out and has started to increase since mid-2018. Further growth in rural wages should help spur rural demand, according to the Economic Survey.

Investment rate, which was declining from 2011-12, seems to have bottomed out and is expected to pick up in the year 2019-20 on the back of higher credit growth, said the Economic Survey.

The government stood by its path of fiscal consolidation in financial year 2018-19, stated the Economic Survey, which expects the general fiscal deficit at 5.8 per cent in 2018-19 as against 6.4 per cent in 2017-18.

The projections come after some disheartening trends earlier this year. In January-March, annual growth slumped to 5.8 per cent, the slowest pace in 20 quarters. Growth for the financial year that ended in March was 6.8 per cent, also a five-year low, and indicators such as plummeting industrial output and automobile sales have stoked fears of a deeper slowdown.

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Adani crash won’t affect investor confidence, Indian markets well regulated: Nirmala Sitharaman

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Union Finance Minister Nirmala Sitharaman on Friday assured that India’s markets were “well regulated” and she does not expect the rout Adani Group’s shares to adversely affect confidence of potential investors.

Adani Group has endured over $120 billion in market losses- nearly half of the conglomerate’s estimated value—since the damning report released by US short-seller Hindenburg Research last week.

Sitharaman told the media that India remained a “very well-regulated financial market” and “an absolutely well governed” nation. She said the public sector financial institutions had released detailed statements showing they had limited exposure to Adani Group and would not be significantly affected by its downward spiral.

Sitharaman dismissed the narrative that Adani Group’s plunging shares would have a negative effect on Indian markets in general and pointed out that one instance, however much talked about across the globe, is not an indication of how well Indian financial markets are governed.

She maintained that “investor confidence which existed before shall continue even now.”

Hindenburg Research published a report last week, accusing the Adani Group of indulging in improper use of offshore tax havens and stock manipulation while also raising concerns about high debt and the valuations of seven listed Adani companies.

The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law, adding that it has always made the necessary regulatory disclosures.

Hindenburg Research hit back at the Adani Group, day after the business house dubbed the New York-based firm’s report as “calculated attack on India.”

In a response titled “Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised,” Hindenburg Research accused the Adani Group of holding back India’s progress by draping itself in the Indian flag while systematically looting the nation.

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Adani-Hindenburg row: PIL in Supreme Court seeks action against US short-seller for defrauding investors

A Public Interest Litigation (PIL) was filed, Friday, in the Supreme Court seeking probe against US-based short seller Hindenburg Research whose scathing report led to rout in Adani Group shares since last week.

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Adani-Hindenburg row

A Public Interest Litigation (PIL) was filed, Friday, in the Supreme Court seeking probe against US-based short seller Hindenburg Research whose scathing report led to rout in Adani Group shares since last week.

The PIL, filed by Advocate Manohar Lal Sharma seeks action against Hindenburg Research and its founder Nathan Anderson for “defrauding innocent investors” of the Adani Group and sought compensation for the said investors.

In the petition, Advocate Sharma has asked the top court to issue directions to the Central government for launching an investigation against the short-seller and its founder in India and outside, and prosecute them for forgery under section 420 of the Indian Penal Code (IPC) read with section 15HA of the SEBI Act.

A penalty of up to Rs 25 crores or thrice the amounts of profits made by indulging in fraudulent and unfair trade practices relating to securities, is provided under the aforementioned act.

The PIL has alleged that Hindenburg Research exploited “innocent investors via short selling under the garb of artificial crashing”. The petition has asked the Supreme Court to declare short selling an offence of fraud and urged the court to issue directions to recover their turnover of short selling with a penalty to “compensate investors in the interest of justice”.

Meanwhile, Adani Group’s woes continue to mount as the National Stock Exchange (NSE), Thursday, put Adani Ports, Adani Enterprises, and Ambuja Cements under additional surveillance measure (ASM) framework from February 3 (Friday). This will require 100 precent margin to trade in their shares and will likely curb short selling.

Adani Group has endured over $100 billion in market losses till Thursday, creating panic about the potential systemic impact this would have over the market in general. On Wednesday, the group called off its Follow-On Public Offering (FPO) returned money to its investors.

Hindenburg Research published a report last week, accusing the Adani Group of indulging in improper use of offshore tax havens and stock manipulation while also raising concerns about high debt and the valuations of seven listed Adani companies.

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The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law, adding that it has always made the necessary regulatory disclosures.

Hindenburg Research on Monday hit back at the Adani Group, day after the business house dubbed the New York-based firm’s report as “calculated attack on India.”

In a response titled “Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised,” Hindenburg Research accused the Adani Group of holding back India’s progress by draping itself in the Indian flag while systematically looting the nation.

Hindenburg said it believes that India is a vibrant democracy and an emerging superpower with an exciting future. However, the research group alleged that the country’s future was being held back by the Adani Group, “which has draped itself in the Indian flag while systematically looting the nation.”

Hindenburg stressed that it’s a firm believer in the fact that fraud is fraud even when perpetuated by one of the wealthiest individuals globally.

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Hindenburg effect: NSE puts 3 Adani firms under surveillance

The Adani Group’s woes continue to mount as the National Stock Exchange (NSE), Thursday, put Adani Ports, Adani Enterprises, and Ambuja Cements under additional surveillance measure (ASM) framework from February 3 (Friday).

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Adani Group

The Adani Group’s woes continue to mount as the National Stock Exchange (NSE), Thursday, put Adani Ports, Adani Enterprises, and Ambuja Cements under additional surveillance measure (ASM) framework from February 3 (Friday). This will require 100 precent margin to trade in their shares and will likely curb short selling

The NSE explained the measure on its official website, stating that “Additional Surveillance Measures (ASM) on securities with surveillance concerns based on objective parameters viz. Price / Volume variation, Volatility etc.”

The stock exchange elaborated that the applicable rate of margin shall be 50 percent or existing margin, whichever is higher, subject to maximum rate of margin capped at 100 percent w.e.f. February 6, 2023 on all open positions as on February 3 and new positions created from February 6.

It said that stocks under surveillance shall be retained in Stage-I as applicable for a minimum period of 5 trading days and shall be eligible for review from 6th trading day onwards.

The NSE’s move comes after the conglomerate’s shares continued to nosedive due to the fallout of the damning report by US short seller Hindenburg Research last week.

Adani Group has endured over $100 billion in market losses till Thursday, creating panic about the potential systemic impact this would have over the market in general. On Wednesday, the group called off its Follow-On Public Offering (FPO) returned money to its investors.

Read Also: 348 mobile phones seized in raids across Delhi jails during 2.5 months: Authorities

The NSE explained that if derivative contracts in securities end up in the ban list, if they cross 95 percent of the market-wide position limit.

The NSE directed that that all clients/members shall trade in the derivative contracts of the said security only to decrease their positions through offsetting positions, warning that any increase in open positions shall attract appropriate penal and disciplinary action.

The market-wide position limit, set by stock exchanges, is the maximum number of outstanding open positions (buy and sell) in the F&O contracts of a security. If the open interest in a stock crosses 95 percent of the market-wide position limit, its F&O contracts enter the ban period.

During the ban, traders are not allowed to take fresh positions in stocks but can start reducing their positions. The ban rule helps reduce speculation in stocks and curb short selling.

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