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QBiz: RBI Likely to Hold Rates; National Flag Exempt From GST

The Quint’s roundup of the nation’s top business news of the day. 

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1. Successful Demonetisation Will Help up Revenues in Long Run: World Bank

Successful demonetisation will help in raising revenues on sustained basis as more and more people will come under the tax net, says a World Bank report. During 2016-17, India generated additional tax revenues as unreported cash identified both through the amnesty scheme and demonetisation were brought under the tax net. Gross tax revenue, including states’ share, surpassed budgeted target (of 10.8 percent) at 11.3 percent, which was mostly due to higher-than-expected excise collections on petroleum products.

Even though, demonetisation had only a neutral effect on direct taxes, which fell within the budgeted target of 5.6 percent of the gross domestic product (GDP), it said. “Going forward revenues may increase permanently if demonetisation is successful in raising the amount of income reported to tax authorities,” World Bank said in a chapter titled ‘India’s Great Currency Exchange’ in its latest ‘India Development Update’.

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2. Q4 Results: Sales Pick up but Input Costs Take a Toll

Indian companies reported a pick-up in net sales in a silver lining to corporate performance in the March quarter, but rising material costs crimped their profit growth. Analysts say it’s difficult to predict a timeline for a significant earnings recovery in light of the upcoming implementation of the goods and services tax (GST), which may disrupt growth in the near term.

A Mint analysis of the earnings of 2,348 companies, for which comparable data is available for 12 quarters, showed that aggregate net sales increased 5.07 percent from a year ago in the three months to 31 March, the best performance in three quarters, and net profits after adjustment for extraordinary items dipped 3.7 percent. The analysis excluded extraordinary profit and loss items. Financial and energy companies were excluded from the analysis because they follow a different earnings model.

Source: Livemint

3. RBI Seen Leaving Policy Rates Unchanged but Softening Hawkish Tone

The Reserve Bank of India (RBI) is expected to keep rates unchanged in this week’s monetary policy review, but soften its hawkish stance amid slower economic growth and record-low inflation, according to a Mint poll of 12 economists. While the current growth-inflation dynamics may warrant an easing of monetary policy to stimulate the economy, RBI’s monetary policy committee (MPC) will likely wait longer for proof that the trend is sustainable before changing its neutral stance, the economists said. The MPC will unveil the policy on Wednesday.

Economic growth slowed for the fourth consecutive quarter in the three months ended March, mirroring the impact of the November demonetisation of high-value banknotes on key sectors such as construction and financial services. Gross Domestic Product growth slowed to 6.1 percent in the fiscal fourth quarter from 7 percent in the third.

Source: Livemint

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4. World Bank Says Trade, Manufacturing to Boost 2017 Global Growth

The World Bank on Sunday maintained its forecast that global growth will improve to 2.7 percent this year, citing a pickup in manufacturing and trade, improved market confidence and a recovery in commodity prices. The update of the multilateral development lender’s Global Economic Prospects report marked the first time in several years that its June forecasts were not reduced from those published in January due to rising growth risks.

The World Bank’s 2017 global growth forecast of 2.7 percent compares to its 2.4 percent estimate for 2016, a figure that was increased by a tenth of a percentage point since January. The World Bank said advanced economies were showing signs of improvement, especially Japan and Europe, while the seven largest emerging markets – China, Brazil, Mexico, India, Indonesia, Turkey and Russia – were again helping to drive global growth.

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5. Khadi Yarn, Gandhi Topi, National Flag Exempt From GST

Khadi yarn, Gandhi topi, India's national flag will not attract any tax under the GST regime, while imitation jewellery, pearls and coins will carry 3 percent levy from the next month.

Besides, the GST Council decided to include rudraksh, wooden khadau, panchamrit, tulsi-kanthi mala, panchgavya, sacred thread and vibhuti – sold by religious institutions – in the definition of 'puja samagri' and maintained that these items would be exempt under the Goods and Services Tax (GST).

Also chandan tika, unbranded honey and wick for diya have been exempt under the new indirect tax regime, which is scheduled to kick off form 1 July. In the textiles category, blankets and travelling rugs, curtains, bed linen, toilet linen and kitchen linen, of terry towelling or similar terry fabrics costing below Rs 1,000 will attract a 5 per cent tax. Also napkins, mosquito nets, sacks and bags, life jackets costing below Rs 1,000 would be taxed at 5 per cent.

Source: PTI

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6. 3% GST on Gold to Hit Unorganised Sector, Say Industry Experts


The GST Council’s decision to impose a 3 percent GST on gold will not only make jewellery costlier but also lead to a higher incidence of illegal gold trade, industry experts have said. They also said bringing the unorganised gold sector into the GST ambit will be a challenge.

“With GST, the total duty has become very high and the customs duty maybe revisited,” said Ajay Sahai, director general at Federation of Indian Export Organisations. “The duty could be one of the highest among major gold consuming countries, which could lead to high incidence of smuggling.”

On June 2, the GST Council also fixed a GST rate of 3 percent on silver, gold jewellery and processed diamonds, which is higher than the industry estimate. With an existing 10 percent import duty, consumers will have to pay an effective duty of 13 percent on gold jewellery, up from the earlier 12.5 per cent, which comprised 10 per cent import duty, 1 percent value-added tax, 1 percent excise duty and 0.5 percent cess.

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7. Inventus Capital May Raise Independent Fund to Invest in Indian Start-Ups

Venture capital (VC) firm Inventus Capital plans to separate its India and US units and raise an independent fund for investing in Indian start-ups, two people familiar with the matter said. Inventus’ three executives in India – Parag Dhol, Rutvik Doshi and Samir Kumar – plan to raise a new $60-80 million fund to invest in start-ups here, the people quoted above said on condition of anonymity. A new name for the fund, which is likely to retain the Inventus brand, will make it clear that it is set up specifically for India, the people said.

Inventus was founded in 2007 by Kanwal Rekhi, Samir Kumar and John Dougery. The investment firm has offices in Bengaluru and California and has raised two funds totalling $158 million. Its investment successes include bus ticketing platform RedBus and Insta Health, which were acquired by Naspers and Practo, respectively.

Source: Livemint

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8. BSE SME IPO Index Surges 53%, Outperforms Broader Market

Shares of companies that listed in the one year ending 2 June on the BSE’s platform for small and medium enterprises (SMEs) have gained more than those that listed on the main exchange, data shows. The S&P BSE SME IPO index gained 52.85 percent in the year ending 2 June while the BSE IPO index gained 40.22 percent and the BSE small Cap index rose 36.76 percent. During this period, the benchmark Sensex rose 16.50 percent.

BSE SME IPO index measures performance of SMEs listed via IPOs on the BSE SME platform for a period of one year. BSE IPO index tracks current primary market conditions in the Indian capital market and measures growth in investor wealth for one year after IPO.

Source: Livemint

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9. SS Mundra for Creation of Data Bank on Large Borrowers to Fix Bad Loan Mess

Reserve Bank of India (RBI) deputy governor SS Mundra called for the setting up of a national information grid which will act as a central repository of data from all regulators and lenders pertaining to large borrowers. Speaking at the Mint South Banking conclave on Friday, Mundra said such a grid will help reduce the information asymmetry currently exploited by some borrowers.

RBI had set up a similar Central Repository of Information on Large Credit (CRILC) in 2014 to help banks identify early warning signs of distress in a borrower through information shared among banks.

Source: Livemint

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