BQuick On Jan. 7: Top 10 Stories In Under 10 Minutes  

This is a roundup of the day’s top stories in brief.

1. India On Course For Slowest Growth Since The Financial Crisis

The Indian economy is expected to grow at it’s slowest pace since 2008-09, in response to weakening consumption and stagnating private investment.

• GDP is expected to grow by 5 percent in 2019-20 compared to 6.8 percent last year, according to the first advance estimates released by the Central Statistics Office.
• Gross Value Added, which strips out indirect tax and subsidies, is expected to grow at 4.9 percent compared to 6.6 percent last year.
• More importantly nominal GDP is seen growing at 7.5 percent compared to 11.2 percent in the previous financial year.
• The nominal GDP growth forecast as part of the first advance estimates is much lower than the 12 percent growth used by the government for its fiscal calculations when it presented its budget in July.

Here are the key trends from the advance estimates released by the government.

2. Where Can The Government Cut Its Expenses?

The central government, faced with lower-than-projected revenue growth amid a weak economy, is asking ministries to curtail spending in the final quarter of the current financial year. By doing so, the government is trying to keep its fiscal deficit as close to the budgeted 3.3 percent of GDP as possible after missing its target last fiscal year.

• The attempt to curtail expenditure comes in the last quarter of the financial year, when a significant portion of budgeted spending has already been incurred. In particular, in recent years, the government has front-loaded spending after pushing forward the budget presentation to February.
• Data available on the CGA website shows most ministries have spent less than three-fourths of their budget allocation in the first three quarters of the financial year.
• This includes large spenders like the Ministry of Agriculture, Ministry of Road Transport and Highways and Ministry of Consumer Affairs, Food and Public Distribution.

Should the upcoming Union Budget chose to spend more or cut expenditure?

3. Oil Price Surge And A Silver Lining For India

Higher global oil prices often send the Indian currency tumbling and bond yields soaring. A surge in prices, particularly for an oil importer like India, can mean wider current account and fiscal deficits, elevated inflation and weaker growth. However, the degree to which a surge in oil prices will hurt India’s key economic indicators will be more modest than in the past, economists that BloombergQuint spoke with said.

• In case of fiscal deficit, a $10 per barrel increase in crude prices leads to a maximum additional spending of $12.5 billion, according to the RBI. However, due to deregulation, the impact will be lower.
• According to Saugata Bhattacharya, chief economist at Axis Bank Ltd., the decontrol of petrol and diesel prices means the fiscal deficit is unlikely to see an adverse impact from higher crude prices.
• Bhattacharya added that higher oil prices may actually benefit states by helping them shore up tax collections.
• Taxation on petroleum products is on an ad valorem basis, which means that tax revenues rise as prices move up.

See how the oil price surge may affect inflation and current account deficit.

4. Sensex, Nifty Arrest Two-Day Slide

Indian equity benchmarks recovered today from its worst fall in four months, led by the gains in HDFC Ltd., HDFC Bank Ltd. and Reliance Industries Ltd.

• The S&P BSE Sensex rose 0.59 percent or 192.84 points to end at 40,915.75.
• The NSE Nifty 50 rose 0.5 percent or 59.9 points to close at 12,052.95.
• The broader markets represented by the NSE Nifty 500 Index rose 0.6 percent.
• All 11 sectoral gauges compiled by NSE ended higher.

Follow the day’s trading action here.

Veteran fund manager Samir Arora thinks that equity is better than every other asset class in the country for the long term, but investors must bet on stocks that have better earnings outlook.

‘Just buy now and it will all work out in the end,’ Arora says.

5. U.S. Stocks Fall After Iran’s ‘Historic Nightmare’ Threat

Iran said it is evaluating 13 possible ways to inflict a “historic nightmare” on the U.S. for killing a powerful Iranian general, whose burial was postponed after dozens of mourners died in a stampede.

• “Even if the weakest of these scenarios gains a consensus, its implementation can be a historic nightmare for the Americans,” Ali Shamkhani, the head of Iran’s National Security Council, was cited as saying by Iran’s semi-official Fars news agency.
• The masses that met General Qassem Soleimani’s cortege ahead of his burial overwhelmed his southeastern hometown, leaving more than 50 dead and 213 injured, state TV reported.

U.S. stocks dropped, while Treasuries were mixed as investors remained wary of an escalation in tensions with Iran. Oil continued its retreat from multimonth highs.

• The S&P 500 Index fell 0.2 percent as of 9:33 a.m. New York time.
• The Stoxx Europe 600 Index gained 0.2 percent.
• The Bloomberg Dollar Spot Index increased 0.1 percent.
• West Texas Intermediate crude dipped 0.8 percent to $62.79 a barrel.
• Gold was little changed at $1,565.49 an ounce.

Get your daily fix of global markets here.

6. India’s Integration With Global Bond Markets: A Tale Of Two Ideas

It appears the current administration hopes to push for India’s inclusion in a global bond market index and an intention to this effect may find its way into the upcoming budget, writes Ira Dugal.

• The increase in FPI limits may be necessary but not sufficient.
• An inclusion in global bond indices may dictate a whole bunch of other changes.
• The increase in benchmark-linked bonds flows is a double-edged sword.

Any commitment to keep easing up these limits as a pre-condition must be approached with India’s customary caution.

7. Air India Sale Gathers Pace

India finalised draft norms for inviting expressions of interest to sell Air India, according to a government official, after a similar bid to privatise the debt-laden national carrier failed last year.

• A Group of Ministers, led by Home Minister Amit Shah, approved the draft for inviting expressions of interest for divesting the government’s controlling stake in the carrier, the official told BloombergQuint after the meeting today.
• The final norms will be issued by January-end, the official said on the condition of anonymity as the information isn’t public yet.
• The meeting was also attended by Finance Minister Nirmala Sitharaman, Aviation Minister Hardeep Singh Puri and Commerce Minister Piyush Goyal.
• Puri, without divulging details, said the meet was “productive” and a statement would be issued soon.

There won’t be any change in the substantial ownership clause with an Indian remaining in control of the airline.

8. A 49% Haircut In Rare Debt Recast Plan

Creditors to a struggling non-bank financier, once controlled by former billionaires Shivinder Singh and Malvinder Singh, are finalising a rare debt recast in the sector by writing off almost half of the company’s loans, people familiar with the matter told Bloomberg News.

• Lenders to Religare Finvest Ltd., including State Bank of India, have agreed to take a 49 percent haircut on its Rs 5,800 crore ($808 million) debt, the people said, asking not to be identified as the information isn’t public.
• The restructuring may be implemented as early as the end of January, they said.
• Any debt restructuring at Religare Finvest, would be the first since the credit market squeeze started in 2018.

It may also be an early sign of a winding down of the crisis.

9. India’s Startup Slowdown

Fewer Indians took the entrepreneurial plunge in 2019 as early-stage funding slowed further.

• The number of startups registered in 2019 fell by over a third compared with the previous year, in step with a decline in angel and seed funding, according to data analytics firm Tracxn.
• In 2019, about 4,543 startups were founded, down from 7,711 in the year before that. In 2017, about 8,000 startups were registered.
• Another thing evident is the fall in deal volumes which tumbled from 1,264 in 2018 to about 985 in 2019.
• Early-stage funding—especially angel and seed—saw the worst crunch as the number of deals fell sharply.

Investors BloombergQuint spoke to suggested that the shift hints at the maturing of the startup ecosystem where the quality of companies has improved.

10. Musk Shakes A Leg As Tesla Kicks Off Its China Factory

Tesla Inc. kicked off production in China, marking a major step in Chief Executive Officer Elon Musk’s global push for electric-vehicle domination and heralding what could be the dawn of real competition in the world’s largest EV market.

• Musk presided over a ceremony on Tuesday at a new multibillion-dollar plant near Shanghai — its first outside the U.S. — where the American company handed over the first China-made Model 3 sedans to the public, the first one being a white sedan going to a man from the nearby city of Wuxi.
• Technically, deliveries began last week but those were to employees.
• Tesla is storming into China with prices that aren’t much higher than those local manufacturers such as NIO Inc. and Xpeng Motors, while undercutting global giants such as BMW AG and Daimler AG.

Local production could help Musk build on recent momentum for the company in China.