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Waaree Energies Surges Over 11% on FTSE Index Inclusion Buzz
Equities, Markets - January 30, 2025

India's Infrastructure Sector Calls for Policy Reforms to Boost Growth and Sustainability

India’s Infrastructure Sector Calls for Policy Reforms to Boost Growth and Sustainability

The companies in the infrastructure sector in India are demanding for reforms in areas such as tax relief for clean technologies, expansion in fund spending on infrastructures such as ports, roads, and railways, reforms in GST regulations, and encouraging skill development projects in order to enhance skills of employees in the construction and infrastructure sector. It also aims for promoting public-private partnerships in infrastructure projects.

Expectations of participants in infrastructure sector
The various market participants in the infrastructure sector from segments such as real estate, urban development, construction, and transportation strongly believe that the government of India needs to make changes in its fiscal and other policies in order to reduce pressure on infrastructural plans.

Managing Director of Interach Building Products, Arvind Nanda emphasized on the need for reduction in tax rates, especially for various projects using pre-engineered buildings (PEBs). Further he states that to reduce the cost incurred on projects, the government should increase input tax credit (ITC) benefits for PEBs. It will also help in adoption of environment friendly methods like PEBs and in turn will lead to development in the sector. He states that the government of India must increase investment in skill development schemes under its mission of Skill India to enhance the efficient workforce in the country’s construction sector.

These various reforms such as promotion of green energy, skill development and tax relief will encourage participation of the private sector. It will also help India to achieve its target of sustainability as promotion of green energy will encourage investment and private companies to adopt this technology.

The efficient and fair use of capex in the infrastructure sector in different states of India will help to encourage stable growth in the country. Partner at Grant Thornton Bharat, Vivek Iyer states that the government of India can distribute its funds according to the specific needs of the particular states. It will ensure implementation of financial regulations and policies in line with promoting long-term development in the infrastructure sector of India.

The capex scheme for states with an interest free loan for the duration of 50 years will help to encourage stable growth in different states in the country and in turn will lead to progress of India.

Partner at JSA Advocates and Solicitors, Ashish Suman expects expansion of capital financing in infrastructure such as ports, roads, and highways for development of the transportation sector in India. In order to encourage investment by the private sector and to develop infrastructure in India, there must be expansion in capital spending on the road segment to about 10 percent and also promote undertaking of Build-Operate-Transfer (BOT) projects.

To encourage investment in small cities (Tier 2 and 3), it is important to strengthen public-private partnerships (PPPs) projects. Suman further states that investment challenges in PPP are observed in the development of urban infrastructure. To address these issues, the government can focus on efficient use of the fund provided by the Urban Infrastructure Development Fund. It should focus on building a strong municipal bonds market which will help in resolving the issues of urban local governments who require money for financing in infrastructure projects.

Leader for India & Subcon at LWT IMEA, Priya Rustogi stated that India is anticipated to record a growth in GDP by 6.5 percent. Along with urbanisation, India can emphasize on building affordable housing and development of infrastructure of the country. This will result in expansion in demand for new, eco-friendly and good-quality bathroom related goods. She further added that the government of India should do reforms in GST implemented on sanitaryware. It should also focus on encouraging eco-friendly construction methods in order to achieve milestones of conserving the environment.

In case of progress in decorative and industrial paints, the Director of Shalimar Paints, Kuldip Raina stated that reforms in regulations are needed to have efficient supply of raw materials, incentives for advancement in technologies and tax relief to boost Research and Development in the sector. It will help in lowering energy and production costs, and also encourage more players to come in the industry.

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Renewable Energy Sector Awaits Budget 2025 for Key Support Measures

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Hyundai Q3 FY2025 Sees 19% Profit Drop Amid Lower Sales and Rising Costs
Automobile News, Autos, Equities, Markets - January 30, 2025

Hyundai Q3 FY2025 Sees 19% Profit Drop Amid Lower Sales and Rising Costs

Hyundai Q3 FY2025 Sees 19% Profit Drop Amid Lower Sales and Rising Costs

Overview
On 28th January 2025, Hyundai published its third quarter reports of the financial year 2025 recording a contraction of 19 percent of consolidated net profit on a year-on-year basis. The PAT for the third quarter was about Rs.1,161 crore lower than the Rs. 1,425 crore for the previous financial year in the third quarter only. The reason for this is the fall in exports and sales at domestic level.

Performance of the company
In the third quarter of the financial year 2025, the company recorded a fall in total income to about Rs. 16,892 compared to its total income of about Rs. 17,244 crore in the same quarter of the previous financial year.

The company is popular for manufacturing hatchback models such as i20, Grand i10. It is also known for manufacturing Creta, which is a SUV model. In the third quarter of the financial year 2023-2024, the revenue of Hyundai was about Rs. 16,875. In the third quarter of the current financial year, it declined to about 1.3 percent which accounts to about Rs.16,648 crore of revenue.

After its earnings report was released, the stock price of Hyundai Motor declined.

Further, the company recorded a contraction in net profit by about 16 percent consecutively. Its net profit was about Rs. 1,375 crore in the second quarter of the financial year 2025. Also, its topline was about Rs. 17,260 crore in the second quarter which declined to about 3.5 percent in the third quarter of the current financial year.

While, its EBITDA margin was around 11.27 percent in the third quarter lower than 12.88 percent in the previous year of the same quarter. The reason for contraction in margins is due to slowdown in demand as well as rising geopolitical concerns.
Sales performance of the company
In terms of volume, Hyundai Motors was successful in selling about 1,86,408 units of passenger vehicles in the third quarter. From this total volume sales of passenger vehicles, volume sales in the domestic market was about 1,46,022 units. It is mainly driven by demand for SUV vehicles.

The company was also able to register its highest sales of CNG-based vehicles in terms of volume which accounts to growth of about 15 percent in the third quarter compared to 12 percent in the past financial year of the same period.

In terms of sales volume in rural areas, it surged to about 21.2 percent in the third quarter, higher than 19.7 percent recorded in the same quarter of the previous financial year. Also, the exports level of the company was recorded to about 40,386 units of sales volumes in the third quarter.

Future Perspective of the company
Hyundai Motors firmly believes that it will be able to expand its future growth by using its full potential and also search for new opportunities to expand profitability and sales volume of the company.

The company is optimistic about the development of the Electric vehicle segment in India. It is taking steps towards making electric vehicles with a broader view.

The company also states that the recent launch of Creta Electric model will promote growth and also acts as a breakthrough in the Electric vehicle sector.

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India’s export in auto industry reach 19 percent

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Suzlon Energy Ltd: PAT rose 538% YoY to ₹1,279 crore, revenue jumped 85%
Equities, Markets - January 30, 2025

Renewable Energy Sector Awaits Budget 2025 for Key Support Measures

Renewable Energy Sector Awaits Budget 2025 for Key Support Measures

Overview
The renewable energy sector anticipates that Finance Minister Nirmala Sitharaman would announce more steps to encourage the production of local equipment, policies to encourage the adoption of green technologies, increased funding for renewables, and a duty differential to assist domestic companies.

Over the past two years, the fiscal support for the renewable energy sector has more than doubled. Compared to the revised budget estimate of ₹7,848 crore for FY 2023-24, the Ministry of New and Renewable Energy’s (MNRE) total allocation for FY 2024-25 climbed to ₹19,100 crore.

As India strives to reach 500 GW of green energy capacity by 2030, the Union Budget 2025–26, which will be unveiled on February 1, is anticipated to include a number of incentives for the renewable energy industry. The renewable energy sector in India is optimistic that the next Union Budget will provide a path for the fossil fuel-dependent economy to increase its green energy capacity in multiple ways, given recent geopolitical developments such as China’s export restrictions and the United States’ tougher sanctions on Russian oil.

Large budget allocation through PLI Schemes
Green energy stakeholders want a stronger domestic push, whether it is for output, storage capacity, new production-linked incentive (PLI) schemes with larger budget allocations for areas like battery infrastructure, or research and development promotion. This is especially important at a time when India may find it difficult to meet its 2030 target of 500 GW from non-fossil fuel sources.

According to Subburathinam P, Chief Operating Officer of TeamLease Services, many businesses in these industries are still in the pre-production or incubation stage. It is crucial that they enter the production stage in order to benefit from PLIs in the renewable energy industry. The industry anticipates a drive toward battery storage, which is essential for integrating renewable energy and guaranteeing a steady power supply.

Industry participants look for ways to solve implementation issues and encourage domestic production in new and developing renewable technology areas. To reduce reliance on imports, primarily from China, the government may propose support measures for the domestic battery manufacturing and supply chain.

PSUs in action
In order to meet the 2030 target and become Net Zero by 2070, more steps are anticipated to increase the involvement of corporate and public sector undertakings (PSUs) in the green energy transition. Given that these technologies have large capital expenditures and a ten to fifteen-year time horizon, a significant rise in resource allocation is anticipated for the adoption of renewable energy, the integration of green technologies, and waste reduction.

Solar Cells to be supported by incentives
Observers of the green energy sector believe that more incentives to support domestic production of solar cells and green hydrogen would be included in the Union Budget 2025. In order to increase research and development (R&D) activities in the industry and draw in foreign money, supporting measures can be proposed.

As the nation seeks to diversify its renewable energy portfolio, larger solar and offshore wind projects are probably going to receive larger budgetary allocations. In a similar vein, increased funding is anticipated for carbon markets, green hydrogen production, and future technologies.

Support for minerals
The government may focus on critical minerals such as lithium, copper, cobalt, and rare earth materials, which are vital for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics.

In the last budget, the government fully exempted customs duties on 25 critical minerals and reduced basic customs duties (BCD) on two of them to boost the processing and refining of such minerals. Any further friendly measures in this direction will ensure the easy availability of such critical minerals for renewable energy players.

Boosting the Green Sector
In order to encourage the public to embrace green energy, the government introduced legislative initiatives like the PM Surya Ghar Muft Bijli Yojana in the most recent Budget. In order to provide free electricity to one crore families, up to 300 units per month, the Yojana was started to install rooftop solar plants.

Last year, the increase of energy capacity in the renewable energy industry significantly improved. In the calendar year 2024, 27 GW of renewable energy capacity was added. In November 2024, the total installed non-fossil fuel capacity was 214 GW, a 14% increase over the 187.05 GW recorded during the same period the previous year. Of this, 47.96 GW came from wind energy and 94.17 GW from solar energy.

Ahead of the Union Budget 2025, pressure has continued to mount on leading renewable energy equities. Compared to their closing price on the NSE on January 1, the shares of major industry companies, including Waaree Energies, KPI Green Energy, NTPC Green, and Adani Green Energy, have dropped by as much as 60% since the start of the month.

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India’s export in auto industry reach 19 percent

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Contraction in Banking Stocks to around 6 percent due to RBI's repo rate cut
Equities, Markets - January 30, 2025

US Fed signals no rate cuts

US Fed signals no rate cuts

Overview
Jerome Powell, the chair of the Federal Reserve, stated that there would be no rush to lower interest rates again until inflation and employment data warranted it. The U.S. central bank left interest rates constant on Wednesday.

Rate Cuts on hold
Powell stated that it makes sense for the Fed to proceed cautiously after reducing interest rates by 100 basis points. He does, however, believe that the Fed’s current policy rate—which ranges from 4.25 to 4.25%—remains significantly higher than the neutral rate. This indicates that the policy is restrictive, which hinders growth and lowers inflation.

Trump’s Policy Changes uncertainty
With a sound set of macroeconomic fundamentals that haven’t changed much in recent months and impending Trump administration decisions on immigration, tariffs, taxes, and other topics that could prove disruptive, the decision and Powell’s remarks put Fed policy in a holding pattern at a time when the U.S. economy appears to be both stable and extremely uncertain.

Powell said Fed officials are waiting to see what policies are implemented before assessing the effects on inflation, employment, and overall economic activity. Powell made this statement after their first policy meeting during President Donald Trump’s second term in office. Until data indicates either a renewed decline in inflation or rising risks to the jobs market, there is no reason to further adjust rates.

Inflation is still elevated
Inflation has mostly moved sideways in recent months after the Fed cut rates three times in the latter part of last year, but it is still high, the central bank’s policy-setting Federal Open Market Committee said in a statement following a unanimous decision to maintain the benchmark overnight interest rate in the current range of 4.25% to 4.50%. Compared to the 40-year highs seen in the wake of the epidemic, recent key inflation measures are still at least half a percentage point above the Fed’s objective.

Although they have put rates on hold while they wait for data to support their belief, Fed officials say they mainly think the process in reducing inflation will resume this year. The economy has been growing steadily ever since. According to the Fed’s statement, labor market conditions are still strong and the unemployment rate has been stable at a low level in recent months. It further stated that the Committee will carefully evaluate incoming data, the changing outlook, and the balance of risks when determining the scope and timing of further adjustments to the federal funds rate target range.

Investors anticipate the central bank will postpone rate cuts until June, according to short-term interest rate futures. U.S. bond yields barely changed, and U.S. stocks ended the day down but still above their lows. In comparison to a basket of currencies, the dollar (.DXY) remained stable.

Market experts stated Fed’s position to be Midly Hawkish
After cutting the benchmark rate by a whole percentage point in 2024, the Fed’s rate decision on Wednesday was highly anticipated. The central bank is debating how much more rate reductions could be necessary, with officials expecting to drop rates by maybe two quarter percentage points this year.

According to Brian Jacobsen, chief economist at Annex Wealth Management, the Fed appears to believe that the economy is trapped with a low unemployment rate and high inflation. He went on to say that the comment might be interpreted as being somewhat hawkish, implying that the economy could be shaken out of this equilibrium by a slight change in interest rates.

Market Action
Ahead of Powell’s news conference and the Fed policy statement, the S&P 500 lost momentum and then stagnated in Wednesday’s stock market activity. Fed policy came second; Alibaba (BABA), the most recent Chinese corporation to unveil an unexpectedly competitive AI model, caused Nvidia (NVDA) to plummet. According to a Bloomberg News story, the Trump administration may propose strengthening chip limits.

Markets are presently pricing in only 18% odds of a rate drop at the March 19 meeting, down from 31% on Tuesday, following the Fed meeting. The likelihood of a rate cut at the Fed meeting on May 7 dropped from 51% to 42%.

Markets predict a 73% chance of a rate decrease on June 18, which is not much different from Tuesday’s 75% possibility. That implies that the outlook hasn’t really changed. With a stable 39% chance of one rate cut or fewer, markets are still pointing toward 50 basis points in rate decreases for the year. Wednesday’s stock market action saw the S&P 500 drop 0.5%, closing about where it was before the Fed’s policy announcement at 2:00 p.m.

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India’s export in auto industry reach 19 percent

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Markets Plunge as Middle East Tensions Erupt: Oil Soars, Aviation and Equities Suffer
Equities, Markets - January 30, 2025

IOC Reduces Russian Oil Imports Amid US Sanctions

IOC Reduces Russian Oil Imports Amid US Sanctions

Overview
In the current financial year, India’s largest oil company Indian Oil Corporation (IOC) recorded a fall in the oil imports from Russia. The reason for this is the sanctions imposed on 10th January, 2025 by the US on producers, tankers, and insurers of Russia in order to contract the oil revenue of Moscow. The aim to control the revenue of Moscow was to block the use of this money for the Ukraine war.

The former Biden regime enforced sanctions on about 180 oil shipping tankers of Russia. It also imposed sanctions on oil producers such as Surgutneftegaz and Gazprom Neft. The purpose of imposing sanctions was also to control the group of tankers which secretly export oil without following the sanctions.

Impact on Indian Oil
When Russia started a war with Ukraine, many European countries blocked trade and enforced sanctions on Russia. During this time, India became the major importer of oil from Russia through sea route. Before the start of the war with Ukraine, the oil imports in India from Russia was only around 0.2 percent. However, it surged to about 40 percent in the years 2023 and 2024. In present times, it is around 30 percent.

In the current month, the imports of Russian have reduced. The company is projecting more reduction of oil imports from Russia. In the initial nine months of the financial year 2025, the amount of oil import was registered to around a quarter of the total crude imports of the company. It is lower compared to 30 percent of oil import in the previous financial year.

IOC’s approach
Following the implementation of sanctions on 10th January, 2025, the company has not yet signed any fresh spot contracts with Russian oil companies. Many Russian oil companies are suffering from sanctions imposed on them. This will not only affect the import levels of oil in China and India but also affect import levels of oil for different countries in the world. It could lead to possible contraction in Russia’s total exports level. This will result in a slight impact on India as well.

Currently, the company is finding out Russian oil which has not been imposed by sanctions. It is trying to find a complete supply chain which consists of tankers, suppliers, and insurers, free from sanctions. The firm is trying to search for the purpose of immediate delivery.

The Indian Oil company has decided to bridge the oil gap by importing from its other supply networks and markets. Also, it will import oil from Russia in case of fair discounts offered. In the month of December, the discount given on Russian oil was about 3 dollars per barrel but now it is about 2 dollars per barrel.

The company has taken the approach of diversifying its oil import sources. In current times, the company imports oil from about 39 countries which is higher than the 29 countries in the past. This approach is to protect from the adverse impact of sanctions on Russian imports. The company is not yet sure about the extent of adverse effects but it strongly believes that it will only slightly affect the supply of energy and oil availability of India.

The Trump’s regime made a public statement of increasing oil production in the US. The company is positive about increasing imports from the US. However, it will give importance to pricing points. The government of India also hinted at importing energy from the USA but at reasonable value.

For the upcoming six months to around one year, the company believes that the prices of oil will continue to be in between $75 to $80 per barrel. The reason for this is expansion in supply of oil in the international market.

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India’s export in auto industry reach 19 percent

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Bosch Ltd Q2 FY26: Auto Demand Boosts Sales, Profit Inches Up Despite Higher Costs
Equities, Markets - January 29, 2025

PLI scheme 2.0 can boost Indian automobile sector at full capacity

PLI scheme 2.0 can boost Indian automobile sector at full capacity

To boost Make in India movement in different sectors of the country, the Production Linked Incentive (PLI) scheme has acted as one of the solid foundations. The PLI scheme for Indian auto and its component industries has played a major role in their development. The PLI 1.0 scheme recorded a good response. Despite this, it also faced some challenges such as auto and its component companies must maintain a minimum 50 percent of domestic value addition. It also needs to increase its investment and sales levels on a yearly basis.

Concerns in terms of sales and investments
The PLI scheme for the auto industry creates different levels of investment goals for the firms to attain in a period of time. As the companies achieve these goals, the amount of investment increases for the companies. Its aim is to encourage huge capital investment in the sector. This scheme aspires for growth and development in automobile and its component industries. Except three-wheelers and two-wheeler auto makers, the segments under Champion manufacturers should expand investment levels from about INR 300 crore in the financial year 2023 to reach about INR 2,000 crore in the financial year 2028. Further, the three-wheeler and two-wheeler manufacturers who currently have to fulfill a requirement of INR 150 crore need to increase investment of about INR 1,000 crore. Similarly, the new entry firms and auto component manufacturers also have to maintain these investment targets.

Apart from investment targets, OEM have to maintain sales targets. The champion auto manufacturer has to reach the goal of INR 125 crore of sales in its first year. It has to fulfil the goal of expansion of annual sales by about 10 percent. On other hand, auto component makers have to maintain the target of INR 25 crore sales in the first year. It also has to achieve the goal of 10 percent growth annually. It becomes difficult for new entry firms to fulfil targets of savings and investments as they also have to work on their entry in the market and building production levels.

Requirements of domestic value addition
The scheme focuses on maintaining 50 percent of domestic value addition. It requires the companies to make the product from using atleast half of the domestic resources only. This target helps the government of India to fulfil the objective of contraction in import levels of raw material and also promote self-sufficiency. However, it adversely affects the development of high-tech auto technologies like advanced sensors, electric powertrains, and semiconductors.

It becomes challenging for new entry companies and small suppliers to keep up with the exhaustive documentation requirements. These documentation requirements track down the sources of supplier networks (consist of tier 2 and 3). Further, some suppliers are worried about possible disclosures of pricing information on purchases.

These meticulous documentation needs are due to challenges faced in schemes such FAME II. The postponement of SOP for DVA in the month of April 2023 caused issues in the efficiency of the scheme, even after an additional one year was given to resolve the issue.

Recommendation for PLI 2.0
The auto and its component companies make investments at different levels of progress of the project. It leads to creation of capital work in progress which is not completely used in the single financial year. To make precise calculation of total investments, it must be added too.

Following DVA target of 50 percent is crucial for global auto companies as they mainly acquire raw material through importing from other countries. It is also important to do thorough analysis of the prevailing supply network in India. In addition to this, digitization of documentation and verification processes will make it more transparent and easier. It is also important to give required training and help to small suppliers in the supply network in order to help them follow the rules with no worries of disclosure of pricing information.

The scheme can work on giving incentives for Research and development in areas of new technology and also for achieving the goal of technology transfer in manufacturing of the product. This will motivate international auto manufacturers to establish centers of Research and Development as well as do joint ventures across India. The scheme can also adopt providing stimulus based on achieving certain milestones. It will lead to injecting a small amount of financing when certain goals are achieved. Overall, it will help in promotion of production in the country.

The PLI 2.0 scheme with necessary changes in certain segments like compliance, stimulus structure, and timelines can help to promote investment in automobiles and its component industry in India. It can aid the development of the industry of production of electric vehicles to high-tech battery technologies.

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India’s export in auto industry reach 19 percent

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Interest Payment Burden to reduce in FY26
Equities, Markets - January 29, 2025

Understanding Revenue Deficit: Implications for Government Finance and Economic Stability

Understanding Revenue Deficit: Implications for Government Finance and Economic Stability

Overview
The revenue deficit indicates if the nation is borrowing money to make ends meet or if its regular income is sufficient to pay for daily expenses such as salaries, pensions, and subsidies. Consider a family that makes Rs 50,000 a month but spends Rs 60,000 on necessities. At first, that Rs 10,000 deficit might not seem like much, but in the long run, it could ruin their plans to save for a home or send their children to college. Similar to this, a revenue shortfall indicates that the government’s revenue is insufficient to cover its operating expenses, forcing it to borrow money for daily survival rather than for expansion.

Fiscal Deficit Vs Revenue Deficit
The fiscal deficit, which is a more comprehensive metric that accounts for all government borrowing and spending (including capital and revenue), is distinct from the revenue deficit. The revenue deficit particularly draws attention to the difference between daily operating costs and earnings, whereas the fiscal deficit represents the overall shortfall in the government’s budget. While the fiscal deficit provides a comprehensive picture of borrowing requirements and long-term financial health, the revenue deficit helps evaluate how well the government handles its monthly income and spending.

By leveraging capital receipts or other non-revenue sources to make up the whole difference, the government can also manage a sizable revenue deficit while maintaining fiscal control. For example, even if revenue receipts are insufficient, the fiscal deficit can be partially compensated by the proceeds from disinvestment or borrowing for infrastructure projects. A large revenue loss however still denotes inefficiencies since it shows that money is being borrowed for operating costs rather than profitable ventures.

Importance of Revenue Deficit
For the economy, revenue deficit is comparable to a doctor’s report. The government is borrowing to keep the lights on while the revenue deficit is consistently substantial, which is bad for long-term financial stability. India’s revenue deficit for the fiscal year 2024–2025 is estimated to be Rs 5.80 lakh crore, or 1.8% of GDP, which is a significant improvement from the 4% deficit in 2022–2023. This indicates that the government is cutting back on spending.

A revenue deficit indicates that the government is having to borrow money or draw from reserves in order to pay its debts because it is not making enough money to cover its operating costs. A government’s capacity to invest in long-term economic initiatives like infrastructure or education is diminished when it borrows money to cover a revenue shortfall. In terms of indicating inefficiency, a continuous income shortfall could be a symptom of ineffective revenue production or excessive expenditure on wasteful spending.

Revenue Deficit so far
The Balance of Payments crisis in 1991 brought attention to the revenue deficit. With declining reserves and growing debt, India was on the verge of an economic collapse. This turning point resulted in extensive reforms and made budget discussions more focused on budgetary restraint. The revenue shortfall has since emerged as a crucial indicator of a government’s sound financial management. Prior to the pandemic, when the revenue shortfall of the GDP was 7.3%, the revenue deficit had been declining. Since then, the recovery has been rigorously monitored, with a revenue deficit of about 1.8% of GDP.

Revenue Deficit in Budget 2025
Observe the government’s goal for the fiscal year’s revenue deficit and the actions it intends to take to lower it. Seek ways to increase non-tax revenue streams, rationalize subsidies, or improve tax compliance. Additionally, to comprehend the government’s overall financial aims, compare it with the fiscal deficit target.

The government’s ability to finance development initiatives is directly impacted by the revenue shortfall, which is a crucial sign of its financial health. You can better grasp the difficulties of balancing the nation’s accounts and how it may impact your pocketbook if you know how it operates and how it differs from fiscal deficit.

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India’s export in auto industry reach 19 percent

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Govt Raises Agri Credit Target to ₹28 Lakh Cr, But Efficiency Concerns Remain
Equities, Markets - January 29, 2025

Govt Raises Agri Credit Target to ₹28 Lakh Cr, But Efficiency Concerns Remain

Govt Raises Agri Credit Target to ₹28 Lakh Cr, But Efficiency Concerns Remain

Overview
The government raises the agriculture credit goal for banks each year, usually when the Union Budget is unveiled. The government set the agriculture credit target for FY 25 at 27.5 lakh crores, which was 11% higher than the previous year, in the Union Budget 2024 as well. About 75% of the total loan allocated for farmers is given by commercial banks, with cooperative and regional rural banks providing the remaining portion. The government is expected to raise the banks’ agriculture lending objective in the next Union Budget as well, raising the total aim above Rs 28 lakhs.

Agri Credit Target set in 2024-25
Due to a greater formalization of the rural credit system, commercial banks’ and regional rural banks’ lending to the agriculture sector is expected to surpass Rs 28 lakh crore in the current fiscal year, setting a new record, Shaji KV, chairman of Nabard, stated on Sunday. The flow of agricultural finance has grown by 13% annually on average during the past ten years. In the current fiscal year, we will surpass Rs 28 lakh crore in loan flow, Shaji informed FE.

A record Rs 27.5 lakh crore was set as the agri-credit disbursement target for 2024–2025, 31% more than the FY24 objective of Rs 21 lakh crore. In 2023–24, banks disbursed Rs 25.49 lakh billion in term and crop loans, a 15% increase over FY23. This year’s growth is predicted to reach about 10%.

Government Initiatives gear up for Agri Credit
The informal sector’s percentage of credit disbursements is decreasing as agri-credit flows increase. On the sidelines of Grameen Bharat Mahotsav, which Nabard is organizing in partnership with the Department of Financial Services, he stated that this signifies the formalization of rural credit, which will guarantee many margins with the rural populace.

The finance ministry has set aside Rs 11.5 lakh crore for term loans and Rs 16 lakh crore for short-term crop loans, which will be paid out in 2024–2025. Seventy-five percent of the total credit, or Rs 20.62 lakh crore, will come from commercial banks. Rs 4.2 lakh billion of the entire agri-credit flow has been set aside for short-term loans to the dairy, fishery, and poultry industries.

The agriculture ministry’s Agri Stack effort, which would generate a farmer registry, village land maps, and crop sown data, would be used by the National Bank for Agriculture and Rural Development (Nabard) to digitize farmers’ credit records in order to rectify this imbalance in loan flow, Shaji stated.

At Rs 4.39 lakh crore, or 17.6% of the total credit disbursal in the country, Tamil Nadu received the largest credit disbursal in the previous fiscal year. Andhra Pradesh came in second with Rs 2.96 lakh crore, or 12% of the total. According to Shaji, Nabard wants to introduce the second phase of the Rs 1,000-crore Nabventures fund, which is intended for entrepreneurs in the agricultural and related industries. A Rs 750-crore agri fund for start-ups and rural businesses was introduced last year by Nabard in partnership with the agricultural ministry.

To satisfy their working capital needs, farmers with Kisan Credit Cards can receive loans up to Rs 3 lakh at 7% annual interest under the modified interest subvention scheme. The program lowers the effective interest rate to 4% by offering an extra 3% interest subvention for timely repayment.

Trend in Bank Credit to Agriculture
Banks are already heavily involved in agriculture and related fields. From an outstanding balance of Rs 13.3 lakh crores in FY21 to Rs 22.2 lakh crores in FY24, bank credit to agriculture has soared in recent years. That amounts to around 13% of the entire bank credit. According to the most recent data, bank lending to agriculture increased 15.3% year over year through November of last year, compared to 18.1% during the prior similar period. Nonetheless, the growth is significantly higher than the average loan growth, even at 15.3%. There are currently 22.2 lakh crores in outstanding agri-loans.

Because it is required by law, banks are increasing their financial flows to the farm sector. Banks are required to lend 18 percent of their adjusted net bank credit to agriculture under the priority sector lending (PSL) standards. This includes lending for agricultural infrastructure and auxiliary operations as well as farm finance, which covers agriculture and related industries.

Agriculture Sector’s efficiency unlikely to improve
According to the report, unpredictable weather patterns and an unequal monsoon spatial distribution in 2023 caused Gross Value Added (GVA) in the agriculture sector to grow more slowly even with this rise in credit. To put it another way, greater funding isn’t always translating into greater efficiency. The monsoons are one of several factors that affect the sector’s success. The issue cannot be resolved by money alone.

Banks, primarily state-run lenders, will have a lot to worry about in the coming days about their farm loan books if these loans go bad. Investors may therefore find it beneficial to closely monitor the agribook performance of banks, particularly state-run banks.

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RBI's Revised Co-Lending Norms Set to Transform NBFC Growth
Equities, Markets - January 29, 2025

MPC must maintain stable policy rates in the current scenario

MPC must maintain stable policy rates in the current scenario

Overview
In the month of February, the Reserve Bank of India’s Monetary Policy committee will take a decision on policy rates based on the effectiveness of the current policy rates on the economy. Under the guidance of new RBI governor, Sanjay Malhotra, the committee will take into consideration recent data of growth in GDP and consumer price index-based inflation.

In the third quarter of the financial year 2025, the CPI was around 5.6 percent which was higher than the target set but in order of the projections of RBI. While the expected actual growth in GDP is about 6.4 percent in the financial year 2025 in check with the GDP projection of the RBI which is 6.6 percent. Based on these aligned results, MPC will prepare future projections on inflation risks and growth aspects.

Recent Condition of India
After the MPC meeting in the month of December, there has been an increase in threats about short-terms risk in price stability. In present times, the Indian rupee faced depreciation of about three percent. The reasons for this are rising uncertainty about the USA position on tariffs, increased strength of dollar in the market, high fluctuations in the financial markets have resulted in affecting inflation level and rates.

In the year 2025, the Federal Reserve of USA has decided to maintain a hawkish stance and hints at not many reductions in rates. It led to development of cautious sentiments in the investors.

Baseline Projections of RBI
It states that the overall inflation in India is projected to be more than the target of 4 percent for the upcoming six months. There will be high food inflation but with a gradual decline in it. In contrast to this, core inflation will remain consistent. Both food and core inflation will be in between 4.5 percent to 5 percent in the upcoming 6 months. The depreciation of the rupee acts as an upside risk to these forecasts.
Comparatively inflation in India is high leading to overvaluation of the Indian Rupee and which in turn makes export of the country expensive. To resolve this issue, India needs to lower the value of the rupee in nominal terms. It also has to be cautious about price stability as steps taken for disinflation can lead to a burden on the cost of imported goods.

Projections of GDP
RBI’s projection on GDP is strong growth. According to it, India will speed up its growth in GDP from the second half of the financial year. In the financial year 2024-2025, its expected actual GDP is below the previous financial year’s GDP growth. While the nominal GDP is projected to remain the same for the current financial year as well. It was 9.6 percent in the previous financial year and is expected to be 9.7 percent in the current financial year. The reason lower actual growth is probably due to rising inflation levels. It has adversely affected demand levels in urban areas. It hints at the requirement of vigilant monetary policy steps towards the situation.

The expectation of the IMF is about 6.5 percent growth in the upcoming two years in India. The anticipation seems reasonable in nature. It will be aided by fixed financing by the upcoming budget. The government of India is also focusing on aspects like consistent growth in tax collection and fiscal consolidation.

Factors affecting growth
In the current financial year, lower capital expenditure led to moderate growth in investments which in turn led to cutting of development in nearly half. However, this scenario will possibly change as capex increases. On the other hand, private consumption is going to be supported by continuing return to health in rural demand. The growth in the service sector will help to boost urban demand.

Overall, the growth perspective of the financial year is going back to its potential growth level. It was earlier higher than 7 percent for three years in a row. In this scenario, it is better for India to maintain a cautious approach.

Liquidity issues
RBI must focus on keeping the weighted average call rate in the range of policy rates. From the second half of December, the country is facing an issue of liquidity deficit. The RBI took the decision of reducing CRR to about 50 basis. It also has taken actions such as daily variable rate repo auctions. Even in the condition of prevailing liquidity deficit, it has helped in keeping the call rate in the range of 6.50 percent of repo rate and 6.75 percent of marginal standing facility. Overall, it is able to keep the short-term rates at a secure level. Also, rates of deposits and credits of banks are at steady levels. Despite contraction in loan growth of the bank which was 12.5 percent, it is higher than nominal growth in GDP. The trend of government and corporate bond yields is also stable.

In the month of October, RBI had a liquidity surplus of about Rs. 4.885 trillion. In present times it is contracted to Rs. 64,350 crore. It can lead to higher rates in the economy. Also, policy cuts without sufficient liquidity can lead to weak impact on the economy.

Focus on Price Stability
In case the sale of dollars leads to contraction in liquidity, RBI can do open market buying of government bonds as it has already reduced CRR rates. In the current scenario of the US uncertainty, RBI must concentrate on price stability to maintain stability in the economy.

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Barriers for India to make Deepseek
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Barriers for India to make Deepseek

Barriers for India to make Deepseek

In recent times, there is a rising question about why India is not able to catch up with the USA like China in terms of advancement in science and technology. There is always a concern about why India is not able to become an international manufacturing hub like China. Though several efforts were taken by various Prime Ministers over a period of time.

In contrast to this, China has not only reached the same level as the USA in terms of science and innovation but has possibly overshadowed the USA. While, India is still struggling to reach the same level.

Development of China
China is aggressively engaging in a competition with the USA in various fields of science and technologies such as Nuclear Fusion, Editing Gene of plants and humans, Quantum Computing, designing and manufacturing chips, Artificial Intelligence (AI), and many more. In the previous several years, China was able to successfully stand at the same level with the USA in areas such as Artificial intelligence and quantum computing. When China was prohibited from importing advanced computing chips from the USA, it started to develop its own advanced GPU design for the purpose of the AI model. Though in terms of comparison, chips made by Huawei are not as great as the advanced chips of Nvidia.

In the past, one of the Chinese scientists was imprisoned for working on creating babies through gene editing embryos. However, he is now free and back to his work. It possibly means China did not want to make this research and its progress known in the world.

Apart from this gene editing research, China was quite open about its other areas of research and technology. It created a nuclear fusion reactor known by the name ‘Artificial Sun.’ It resulted in China making a world record in building a high confinement plasma.

China has made many innovations in the fields of Drones, Quantum Computing, AI, Robotics, and designing of chips. It has also built its capacity in terms of military advancement by creating the sixth generation of fighter jet. It also developed the biggest solar farm which is floating on water in the world.

Development of India
India is struggling in terms of innovation in the field of science and technology. In recent times, India is more focused on creating applications for AI models instead of creating high tech AI models. The research work in Quantum Chemistry is ongoing but no significant achievements so far. It was able to send a rover to the moon in the past. Due to dependence on other nations, its development in military technology is hampered. Few years back, India built Tejas Mk 2 but it is not helpful for the Indian Air Force as it is heavily dependent on the USA for engines. In the year 1987, India began to work in the field of nuclear fusion with a stable state of progress. Despite this, it is not able to create significant advancement.

India has a big base of graduates in STEM fields but it mainly focuses on developing applications and not pure research. In terms of building applications, it is not so much of an innovator.

Reason for India’s struggle in Science and Technology
India does have talent for science and technology. Many research papers in the USA are mostly co-written by Chinese and Indian scientists only. Also, many innovations in the USA are due to the work of Indian scientists and researchers. One of the major reasons for the struggle of India is due to its lack of financing in the area of Research and Development.

The contribution of financing in R&D is about 0.64 percent from India’s GDP in contrast to R&D investment in the USA and China is about 3.47 percent and 2.41 percent, respectively. Further, the private sector investment in R&D in India is about 36.4 percent only. While the USA and China have contributions of about 75 percent and 77 percent, respectively.

Another reason is various governments in India over the period of time did not have much of a goal to become international leader in the field of science and technology. In contrast to this, China has taken a strong stand in terms of developing science and technology in the country many years ago. Since the 1990s, it has made necessary changes in its education as well as other systems. It has worked on building facilities and opportunities for development in science and technology from the ground level of primary schools to the top level of high-tech universities. Even though it is a communist country, it has taken necessary efforts to promote business in science and technology by providing state incentives and creating high goals. It has also worked on trying to get Chinese scientists back in China who were employed in the USA.

Pre and Post 1970s for India
Until initial 1970s, India had a strong position in terms of innovation in science even in the pre-independence period. This is the efforts of TATA groups to build research institutions and also establishment of institutions like DRDO, ISRO, and many more. It was not only the efforts of the Nehru government but also Indian scientists like Homi Bhabha and Vikram Sarabhai who chose to work in India rather than going abroad.

Since the 1970s many Indian researchers have gone to Europe and USA due to better facilities and the education system also lacks focus in STEM fields.

In the present times, this same situation is still prevailing in India. Many IITians go abroad or start a startup or go for conventional jobs. These startups are not based on creation of new products. Even big companies like Infosys and TATA are not ready to fund pure research even though TATA has a history of doing it in the pre-independence period. The reason might be because these companies are expecting government actions. It is time for the Government to take actions for the development of science and technology.

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