WPI rose to 0.8 per cent in May from (-) 2.20 per cent
Wholesale price inflation rose to 0.8 per cent in May from (-) 2.20 per
cent a year ago, driven by higher food prices, making it difficult for the
central bank to reduce interest rates in the short-term.
This is the second month in succession that the WPI is remaining in
positive territory. Last month, inflation as measured by the wholesale price
index (WPI) was at 0.34 per cent, its first gain in 18 months, according to
data released by the Centre.
The acceleration in WPI, coming as it does after a quickening of retail
inflation in the same month, makes it even more unlikely that the Reserve
Bank of India will cut interest rates shortly, according to economists.
The WPI rose due to food inflation which shot up to 7.9 per cent from
4.2 per cent in April. The same trend could be seen in retail inflation as
well where only the food category accelerated inflation.
Food continued to push the headline print higher while the effect of
rising global commodity prices was also larger in the index due to its close
correlation with domestic prices.
The fuel and power segment in the WPI contracted 6.1 per cent in May
compared to a contraction of 4.8 per cent in April.
This was led bythe mineral oil segment, which contracted 9.6 per cent in
May compared to a contraction of 7.9 per cent in the earlier month.
Inflation in manufactured goods rose marginally to 0.9 per cent in May
from 0.7 per cent in April.
Overall, the view is that rising inflation coupled with poor industrial
growth is a worrying trend.
The model GST law brings all e-commerce transactions under GST
The model Goods and Services Tax (GST) law, made public by the Centre,
has clarified that all e-commerce transactions will attract GST and that the
tax will be collected by the service operator as soon as the supplier
While this has cleared the confusion surrounding the levy of the tax on
e-commerce transactions spanning different states, it will also make
operations more complicated for the e-commerce platform.
The model GST law — with 162 clauses and four schedules — will be
applicable for all those with an annual turnover of Rs.10 lakh or more. This
limit is Rs. five lakh in the north-eastern states.
The provisions of the model GST law that prescribes a GST threshold
limit which is so low as Rs.10 lakh (Rs.5 lakh for north east), may be a
zero sum game as the administrative cost of compliance on both ends would
equal the tax collected.
The model law also provides for an Authority for Advance Ruling to be
located in every state, comprising one Central GST member and one State GST
member to be appointed respectively by the Central Government and the State
In addition, the law provides for the creation of an Appellate Authority
in each state.
The GST model law also includes a ‘composition levy’, wherein a person
with an annual turnover of less than Rs.50 lakh on the sale of goods and
services in a single state will have to pay a tax of “not less than one per
Govt to review prize rise
Concerned over food inflation, Finance Minister Arun Jaitley will review
the situation and discuss steps to keep prices of essential commoditiesin
Retail prices of pulses are still ruling high at over Rs.170 per kg even
as the government is making efforts to boost supply . Even tomato prices
have doubled to Rs.80 a kg due to the crop damage. Potato rates have also
been on the rise.
As per the WPI data vegetable inflation rose sharply to 12.94 per cent
from 2.21 per cent a month ago.
The Finance Minister has called tomorrow a meeting with ministers and
secretaries concerned to discuss prices of essential commodities.
Consumer Price Index accelerated to 5.76 per cent in May
Retail inflation, as measured by the Consumer Price Index (CPI),
accelerated to 5.76 per cent in May, its highest level in 21 months.
CPI acceleration is driven primarily by rising food prices, making it
more unlikely for the central bank to cut rates in the near future
The index came in at 5.47 per cent in April 2016. It was 5 per cent in
May last year. The last time the retail inflation was higher was in August
2014 when it crossed 7 per cent.
Shortage in the sugar market has also moved up prices and could move up
further during the festival season.
Efficient management of the food basket is likely to become crucial for
any monetary easing in the future. Expect easing to commence only when the
RBI is sure of hitting the 5 per cent target in March next year.
The data, released by the Ministry of Statistics and Programme
Implementation on Monday, shows that inflation in the ‘food and beverages’
segment accelerated to 7.2 per cent in May.
Overall, only food inflation witnessed acceleration while the other
major segments in the index recorded marginal slowdown.
The housing segment saw a marginal easing of inflation to 5.35 per cent
in May, down from 5.37 per cent in April.
Core inflation moved down imparting a downward bias to the overall
print. However, this decline could possibly be short lived as the seventh
pay commission is implemented and the base effect in certain categories
Microsoft CEO Satya Nadella outlined his thoughts on the LinkedIn buy
In an email to company staff, Microsoft CEO Satya Nadella has outlined
his thoughts on the LinkedIn buy, the biggest for the software giant.
The key questions that weighed on his were: Does it expand the total
addressable market of Microsoft? Is this asset riding secular usage and
“The answer to all of those questions with LinkedIn is squarely yes,” he
“This deal brings together the world’s leading professional cloud with
the world’s leading professional network,” he said.
As these experiences got more intelligent, the LinkedIn and Office 365
engagement would grow, he opined.
This would help create new opportunities for monetisation through
individual and organisation subscriptions and targeted advertising, he
Central Bank revised the norms for banks to undertake debt restructuring
The Reserve Bank of India (RBI) revised the norms for banks to undertake
debt restructuring if they feel the project is viable in the long run
Under the scheme titled ‘Sustainable Structuring of Stressed Assets
(S4A),’ at least 50 per cent of the debt should be serviced in the same
period as that of the existing loan.
The balance can be converted into equity or quasi-equity instruments.
Where malfeasance on the part of the promoter has been established,
through a forensic audit or otherwise, this scheme shall not be applicable
if there is no change in promoter or the management is vested in the
The scheme is applicable to projects that have commenced commercial
operation and where the banks’ exposure is over Rs.500 crore.
According to the norms, an advisory body called Overseeing Committee (OC)
will be constituted by the Indian Banks Association (IBA) in consultation
with the RBI.
Banks have to submit the resolution plan to the OC. The OC will review
the processes involved in preparation of the plan, etc. for reasonableness
and adherence to the guidelines and give an opinion , RBI said.
Public sector banks have increased their presence across the country
Public sector banks have increased their presence across the country—in
terms of ATMs and points of sale devices—far faster than private sector
banks have, recent data released by the Reserve Bank of India shows.
The data—comparing private sector and public sector banks shows that
public sector banks have steadily increased their share in most of these
parameters over the last four years.
There are 27 public sector banks and 19 private sector banks in
The data shows that there were 142,500 public sector banks (PSB) ATMs as
of March 2016, which amounts to 72 per cent of the total number of ATMs in
This is a vast improvement over the 58,000 PSB ATMs at the end of March
Private banks, on the other hand, only increased their number of ATMs
from 30,300 in March 2012 to 55,600 at the end of March 2016, effectively
seeing their share in the total fall 10 percentage points over the period.
One common view is that this increase in the number of ATMs by PSBs is
due to the government-mandated rural financial inclusion programme.
The data supports this, with PSB ATMs making up 86 per cent of all rural
ATMs at the end of March 2016, up from 77 per cent in March 2012.
Urban non-metro ATMs for PSBs grew from 62 per cent share in March 2012
to 72 per cent by end of 2015, while the share of private ATMs fell from 37
per cent to 27 per cent. Semi-urban India saw almost the same trend.
Private banks were the first-movers in POS devices (that allow card
transactions), having issued 85 per cent of these as of March 2012.
This proportion saw a significant change over four years. PSBs added
nearly four lakh POS devices to the market in that time, compared to an
addition of about three lakh by the private banks.
This saw the share of public sector POS machines grow from 8 per cent in
March 2012 to 34 per cent in March 2016. Private banks’ share fell to 62 per
The issuance of credit cards and the share in credit card transactions
are two areas where the private sector outshines the public sector.
There were 195 lakh credit cards in the country as of March 2012, 55 per
cent of which were from private banks.
The PSBs increased the number of credit card they issued in this time,
but the growth in their market share was only three percentage points, to
20.6 per cent.
Similarly, the private sector accounted for 45 per cent of credit card
transactions as of March 2012, which grew to 55 per cent by March 2016.
Real Estate Investment Trusts
REITs are similar to mutual funds. While mutual funds provide for an
opportunity to invest in equity stocks, REITs allow one to invest in
income-generating real estate assets.
REITs raise funds from a large number of investors and directly invest
that sum in income-generating real estate properties (which could be
offices, residential apartments, shopping centres, hotels and warehouses).
The trusts are listed in stock exchanges so that investors can buy units
in the trust. REITs are structured as trusts. Thus, the assets of an REIT
are held by an independent trustee on behalf of unit holders.
The trustee has duties as laid out in the trust deed for the REIT. These
typically include ensuring compliance with applicable laws and protecting
the rights of unit holders as well.
The investment objective of REITs is to provide unit holders with
dividends, usually generated from rental income and capital gains from the
profitable sale of real estate assets.
Typically, the trust distributes 90 per cent of its income among its
investors by issuing dividends.
REITs originated in the U.S. to give investors an opportunity to invest
in income-generating real estate assets. After its introduction in the U.S.,
several countries such as Singapore, Australia and Hong Kong have
REITs, as a concept, have been on the horizon for a while now.
India’sregulations in 2014 for the sector have not been able to attract
investor interest. REITs obtained exemption from dividend distribution tax
in the Budget, a step towards making them attractive for the investors.
A report by real estate consultancy firm Cushman and Wakefield estimates
that Indian commercial real estate (like office, retail assets) offers
investment opportunities for REITs worth $43 billion – $54 billion (Rs, 2.88
lakh crore – Rs. 3.60 lakh crore) across top cities.
The current SEBI guidelines for REITs permitinvestments only in
For investors who are averse to investing in physical purchase of
property due to the risks involved, REIT is an alternative. Investors
purchase units of REITs which are traded on the stock exchange, as against
physical purchase of property.
Therefore, investors can buy and sell units of REIT on the stock
exchange as and when required, making investment easier to liquidate
compared to physical property transaction.
The minimum required to be put into an REIT is Rs.2 lakh. It could
provide an opportunity for investors who, otherwise, do not get the
opportunity to invest in commercial real estate because of high capital
Since 90 per cent of the profit generated needs to be distributed as
dividend in REIT, it could provide a stable income for unit holders.
Short-term capital gain tax is applicable for unit holders at the rate
of 15 per cent. While nterest is tax-exempt for REITs, it is taxable for
The registration charges for every purchase and sale of property is
still applicable. Saraf says such factors can impact the profitability and
attractiveness of REITs in India.
REITs units are listed on, and are subject to the vagaries of the stock
exchanges, resulting in negative or lower returns than expected.
As in mutual funds, retail investors in REITs have no control over
investments and exits being made by the trust.
Exim Bank looking to disburse $10 billion to Africa in the next three years
The country’s premier export finance institution Exim Bank, which is
looking to disburse $10 billion to Africa in the next three years.
This is a shift from Exim Bank’s credit disbursal strategy to Africa —
which was mainly to help build infrastructure and industrial projects.
India’s strength is in services, especially in sectors such as
healthcare, information technology, education and even agriculture-related
services. So we want to help in increasing India’s services exports to
The change in approach follows the government giving a greater say to
Exim Bank in identifying India’s best interests while it promotes economic
Exim Bank has been extending credit to Africa through concessional Lines
of Credit, Buyer’s Credit (meant to finance imports of overseas buyers, in
this case African buyers, from India) and through other lending mechanisms.
Exim Bank’s new office in Ivory Coast is to service West Africa. It has
an office in Addis Ababa (Ethiopia) for the Eastern and Central African
region, in addition to the one in Johannesburg to take care of the needs in
Exim Bank has set up Kukuza Project Development Company (KPDC) in
Nairobi (Kenya), along with IL&FS Group, African Development Bank and State
Bank of India, to ensure greater Indian participation in infrastructure
projects in Africa.
The aim now is to kick-start KPDC’s operations by the time Prime
Minister Narendra Modi undertakes his African visit in July covering Kenya,
South Africa, Mozambique and Tanzania, Mr. Mathur said.
Exim Bank has extended around $300 million to finance the setting up of
electric transmission lines in West Africa and is ready to give another $200
million for the same, he said.
India-Africa goods trade in 2014 was around $75 billion with Africa
exporting $40 billion to India and India exporting around $35 billion to
that continent, according to International Trade Centre data.
This had fallen to about $60 billion in 2015 with Africa exporting $34
billion and India exporting $26 billion, data showed.