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Yogi Adityanath is right. Route to UP’s $1 trillion GDP goal passes through hinterland

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A district map of Uttar Pradesh, India’s most populous state, makes for a compelling visual—that of a bull about to charge. Lalitpur in south-central and Sonbhadra in southeast that protrude into the neighbouring states appear strikingly similar to the hooves of a bull getting ready for a big leap.

But when it comes to the financial might, it is Gautam Budh Nagar, a tiny district in the western periphery, which is most bullish among the state’s 75 districts.

This doesn’t come as a surprise. Gautam Buddha Nagar has Noida and Greater Noida, Uttar Pradesh’s showpiece townships just off the national capital, peppered with high-street malls, glitzy corporate towers, and acres and acres of residential complexes. The Taj Expressway, connecting Delhi with Agra, runs right through the district.

Shravasti, in the east, on the other hand, recorded a DGDP of Rs 3,506 crore, 26 times lower than that of Gautam Budh Nagar. Little wonder then that Shravasti is among 117 “Aspirational Districts” that the NITI Aayog has identified for a focussed policy intervention.

For Chief Minister Yogi Adityanath, who wants Uttar Pradesh to be a $1-trillion economy with GDP targets identified for each district, it is the laggard districts that will need all the attention and hand-holding.

At Rs 21,906.86 crore, the DGDP of Varanasi, one of the oldest living cities in the world and Prime Minister Narendra Modi’s parliamentary constituency, is way behind Gautam Budh Nagar. Amethi, a pocket borough of Congress’s first family’s until this year’s Lok Sabha election when the then party president Rahul Gandhi lost the constituency to Union Textiles Minister Smriti Irani, ranks a lowly 65, with a DGDP of Rs 8,19,474 crore.

Prayagraj, earlier known as Allahabad, and Ayodhya have a lot of catching up to do in terms of economic activity measured by DGDP. Even having state capital hasn’t helped the Lucknow district, which has a DGDP of Rs 44,246.01 crore, not even half of that of Gautam Budh Nagar.

UP districtwise GDP_R

For Uttar Pradesh as well as India to make a decisive leap forward, these backward districts have to figure prominently when policymakers sit down in Lucknow to draw development plans.

According to Indicus Analytics, an economic research and data analytics firm which first came out with district-level GDP figures more than 10 years ago, such data provides granular insights into the Indian economy.

Last year, the Uttar Pradesh government launched the `One District, One Product’ (ODOP) scheme as part of a broader strategy of concentrated agro and industrial development focus on each district, offering an array of fiscal incentives, and credit, marketing and policy support.

While the large corporations housed in Noida are aggressively global, the road to Uttar Pradesh’s $ 1 trillion GDP goal lie in boosting incomes of small enterprises, local artisans and craftsmen, which is what the ODOP scheme seeks to achieve.

According to PHDCCI, an industry chamber, “micro and small units involved in ODOP need institutional intervention for strengthening marketing capabilities. The need of the hour is providing hand holding to micro and small units through formation of Special Purpose Vehicles (SPVs)”.

Adityanath’s focus on development at grassroots also fits into what some analysts say is the need o focus on identifying India’s next growth hotspots, away from metropolises.

According to global consulting major McKinsey & Company, there are commercial opportunities for companies to tap beyond the current growth centres, which require a smaller and a discrete approach.

“To get the most from this granular approach, companies need to develop customised strategies for each geographic sliver. To do so, they must map priority geographic segments to product categories and extensions,” McKinsey said in its 2014 report “India’s economic geography in 2025: states, clusters and cities”.

Adityanath’s emphasis on district-level GDP also gels with the “Aspirational Districts” programme of NITI Aayog, the Union government’s think tank, which seeks to improve the socio-economic status of 117 districts from across 28 states.

Eight of these—Balrampur, Shravasti, Bhairach, Siddharth Nagar, Chandauli, Sonbhadra, Fatehpur and Chitrakoot—are in Uttar Pradesh. In terms of DGDP, most of these districts occupy the bottom rung.

Among these “aspirational districts” Shravasti with a DGDP of Rs 3,506 crore is ranked 75th, behind Chitrakoot (74) with a DGDP of Rs 3,674 crore and Balrampur (70) with a DGDP of Rs 6,844 crore.  Chandauli (66) with a DGDP of Rs 7,443 crore, Siddharth Nagar (63) with a DGDP of Rs 8,535 crore, Bahraich (41) with a DGDP of Rs 11,797 crore, Sonbhadra (37) with DGDP of Rs 12,530 crore and Fatehpur is at rank 31 with a DGDP of 14,048.71 crore are the other “aspirational districts” in the UP, according to NITI Aayog.

Central and eastern regions emerge the worst in the state’s district DGDP sweep stakes. The ambition of the turning Uttar Pradesh into a $1 trillion economy—a five-fold jump from the current nearly $200 billion—will depend on these and other laggards leapfrogging into the upper-middle ranks, even as Noida and Greater Noida remain the jewels in the crown.

IRCTC IPO may hit market on Sept 30, to fetch govt around Rs 600cr

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Indian Railway Catering and Tourism Corporation (IRCTC), a subsidiary of Indian Railways that handles its ticketing and catering operations, may launch its initial public offering (IPO) on September 30.

The company is expected to release the price band for its IPO on September 25, the report said . This stake sale is likely to bring down the government's share in the state-run entity by around 12.5 percent from almost 100 percent at present.

The stake sale is expected to help the government raise between Rs 500 crore and Rs 600 crore, The Financial Express. The government hopes to offload around two crore shares in the public sector undertaking (PSU) via this IPO. The report added that IDBI Capital, SBI Capital Markets and Yes Securities will be merchant bankers to this issue.

The development comes at a time when the country's stock market has rebounded following the Finance Minister's lowering of corporate tax and other fiscal steps taken recently. The Sensex has gained nearly 3,000 points since the corporate tax rate cut announcement on September 20.

In July, Finance Minister Nirmala Sitharaman had set a disinvestment target of Rs 1.05 lakh crore for FY20, up from Piyush Goyal's interim Budget target of Rs 90,000 crore. The IRCTC IPO is part of the same disinvestment programme.

In April, another railway entity Rail Vikas Nigam (RVNL) was listed. The government had raised about Rs 480 crore via the 12.2 percent stake sale in RVNL.

Next big thing: A successful InvIT from NHAI is a hot idea

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Infrastructure investment trusts (InvITs) of late have been attracting a lot of attention in India. For the uninitiated, InvITs are trusts, similar to mutual funds listed on a stock exchange, which raise funds from investors, acquire income yielding infrastructure assets, manage such assets and distribute regular yields to investors under a SEBI-regulated framework.

InvITs can be privately placed or public – Both the formats have to be listed on an Indian stock exchange. While privately-placed InvITs can raise funds only from institutional investors and have relatively relaxed investment conditions, the public ones can do so from retail as well as institutional investors and have more diversified and low risk investment conditions. There is also a third format recently introduced by SEBI, which is a privately placed and unlisted InvIT. However, in this article, given the context, we have focussed more on public listed InvITs.

While InvIT regulations were introduced by SEBI in July 2014 and related tax regulations through Budget 2015, InvITs as a product did not really take off until 2017. However, since 2017, there has been consistent activity in this space.

NameAssetTiming
IRB InvIT FundRoads2017
IndigridTransmission towers2017
Ind InfravitRoads2018
Orient Infra TrustRoads2019
India Infrastructure TrustGas Pipeline2019

The Indian government is keenly exploring InvITs as a possible means to monetise its infrastructure assets, perhaps because of the myriad benefits it brings for all the stakeholders involved while contributing to infrastructure development. Government bodies such as NHAI and PGCIL (Power Grid Corporation of India) have been experimenting with the InvIT route to monetise their road and power transmission assets, respectively.

According to recent media reports, while the proposal to monetise roads and highways through the InvIT route has been approved by NHAI, it is awaiting Cabinet approval. This InvIT is most likely to be a public InvIT, having private participation as well, and is expected to be cleared for implementation in the latter half of 2019, according to the reports.

While action on the ground is more visible now, the idea of use of InvITs for monetisation of such assets has been under consideration for a couple of years. The late Arun Jaitley, the then finance minister, in his Budget Speech of 2018 had said: “The government and market regulators have taken necessary measures for development of monetising vehicles like InvIT and Real Investment Trust (ReIT) in India. The government would initiate monetising select CPSE assets using InvITs from next year.”

More specifically, in the context of roads and highways, he added: “To raise equity from the market for its mature road assets, NHAI will consider organising its road assets into special purpose vehicles and use innovative monetising structures like toll, operate and transfer (TOT) and infrastructure investment funds (InvITs).”

There have been media reports in the recent past, citing that NHAI is under financial stress and its toll revenues may not be sufficient to service interest payments on its financial obligations. The Prime Minister’s office (PMO) had also written a letter to NHAI in August 2019, suggesting discontinuing construction of roads by NHAI and encouraging the private sector to take over the running of completed projects.

The idea is perhaps to overcome the unplanned and excessive expansion of roads and high costs for land acquisition and construction being incurred by NHAI. One of the suggestions to NHAI was also to monetise its existing assets through InvIT.

Given the ambitious Bharatmala project for providing seamless connectivity of interior and backward areas and borders of the country, NHAI has a huge task ahead to achieve. The proposed InvIT will surely provide the much-needed capital for this programme and help the state-owned entity.

While NHAI has also been looking at other modes for financing such as ToT, collaborating with NIIF (National Investment and Infrastructure Fund), issuance of bonds to LIC and central budgetary allocations, given the ambitious target of expansion of roads and highways the government has set for itself, InvITs could still play a very significant role.

The proposed InvIT should help in attracting long-term and patient capital from foreign investors, who have shown a high degree of interest in other InvITs listed in India. In fact, InvITs have attracted foreign investors who had hitherto not invested in India. These foreign investors are typically pension funds, sovereign wealth funds and insurance companies which are hooked to the advantages InvITs offer in terms of corporate governance, stable long-term returns because of mandatory distribution rules, lower risks, high quality assets and tax benefits on income distributions.

The InvIT should also provide a breather to the Indian banking sector by providing an aid to refinance existing high cost debt of NHAI with long-term low-cost capital from investors and help banks free up or reduce loan exposure to the road builder. It’s seen to provide an efficient and optimum structure for financing and re-financing of road and highways projects and free up NHAI’s capital for reinvestment in other avenues.

A successful listing of such an InvIT by a marquee government body like NHAI could significantly boost investor confidence, which would help catalyse more InvITs in India, meaning more foreign capital.

Given the potential benefits, the proposed InvIT by NHAI is the next big thing in the Indian landscape and should play a pivotal role in propelling infrastructure growth, contributing towards realisation of the dream of a $5 trillion economy.

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In a bid to liberalise the coal sector, the government is planning to invite global players for the roll out of auction plan for commercial mining by December this year, Union Minister Pralhad Joshi said on Thursday.


The maiden move aimed at cutting coal exports is set to end the monopoly of domestic giant Coal India that accounts for over 80 per cent of the India's dry-fuel output.


"Hundred per cent commercial mining is approved. By December or so we are planning to roll it out," Coal, Mines and and Parliamentary Affairs Minister Joshi told reporters on the sidelines of the National Geoscience Award 2018.


He said that the government will invite global players for this, as 100 per cent FDI in coal will lead to more investors in coal mining operations with better technology.


"We are inviting global players. There is already 100 per cent FDI. More investors will come... We are hoping to get better technology. Whatever the shortcomings we have in this sector as far as mining coal is concerned that (commercial mining) will be a boost to address it. 100 per cent commercial mining is approved," Joshi said.


Coal is the most important and abundant fossil fuel in India. It accounts for 55 per cent of the country's energy needs and the government is trying to curb imports.


The country's coal imports increased by 28.7 per cent to 24.14 million tonnes in June as against 18.75 million tonnes in the corresponding month of the previous fiscal.


Total imports of thermal coal rose to 56.23 million tonnes during the quarter as compared with the year-ago period.


The country's coal imports swelled by about 13 per cent to 235.2 MT during the year-ended March 31, 2019.


Coal India along with the PSU Singareni Collieries Company Limited (SCCL) are the only companies that till now were allowed to mine and sell coal.


Coal India is the the single largest coal producer in the world, operating through 82 mining areas with seven wholly owned coal producing subsidiaries and a mine planning and consultancy company, it accounts for about 600 million tonnes (MT) annual production.


As per the Coal Ministry, commercial primary energy consumption in India has grown by about 700 per cent in the last four decades but the current per capita commercial primary energy consumption in India is about 350 kgoe/year which is well below that of developed countries.


On issues pertaining to iron ore mining, the Mines Minister Joshi said that the government is working on it and will see to it that there are no shortages of the mineral.

India to invite bids from global coal miners before end of 2019: Sources

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India plans to invite bids from global firms for the first time for coal mining blocks before end-2019, sources familiar with the matter said, a move that would end Coal India Ltd's near-monopoly for the fuel as the nation tries to cut imports.

Coal is among the top five commodities imported by India, one of the world's largest consumers of the fuel. Coal imports are surging after the government failed to open the industry to competition, despite having passed a liberalization policy 19 months ago.

The coal block auctions are intended to attract global miners such as Glencore PLC, BHP Group, Anglo American PLC and Peabody Energy Corp.

The government aims to allow companies with winning bids to begin development of the coal blocks - which hold proven reserves - by early 2020, the three sources said.

It is not clear when the government expects to see first output from the coal blocks. India's Ministry of Coal did not respond to a request for comment.

Total imports of thermal coal - used mainly for power generation - rose by about a third during the quarter ended June 30 to 56.23 million tonnes as compared with the same period last year, according to government data reviewed by Reuters.

Coal India and a small stated-owned company are the only firms currently allowed to mine and sell coal in India. India does allow some power, steel, cement and aluminium companies to mine coal for their own captive use.

Wholesale price-based inflation unchanged at 1.08% in August

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Wholesale price-based inflation was unchanged at 1.08 percent in August even as prices of food items rose, government data showed on Monday.

The wholesale price index (WPI)-based inflation was at 1.08 percent in July this year and 4.62 percent in August 2018.

Inflation in food articles rose to 7.67 percent in August from 6.15 percent in July this year mainly on account of rise in prices of vegetables and protein-rich items.

Vegetable inflation too rose to 13.07 percent in the month under review as against 10.67 percent in July 2019.

Inflation in protein-rich items like egg, meat and fish rose to 6.60 percent last month from 3.16 percent in July.

However, fuel and power basket continued to witnessed deflation at 4 percent in August as against 3.64 percent in July.

RBI creates database for stressed loans of NBFCs

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The Reserve Bank of India (RBI) has built a database of stressed non-banking finance company (NBFC) loans, similar to the Central Repository of Information on Large Credits (CRILC) that it has built for banks in 2014, sources privy to the developments told CNBC-TV18.

According to multiple people familiar with the development, the central bank has directed the NBFCs to inform the RBI database about SMA 1 and SMA 2 loans since last year.

SMA 1 refers to those loan accounts in which the instalment or interest is overdue for 1 month from 31st day to 60 days. SMA 2 refers to accounts in which the instalment or interest is overdue for 2 months from 61st days to 90 days.

For the past year or so, the data given by the NBFCs to the central bank is methodically arranged, plus the RBI has other data too, sources in the know told CNBC-TV18.

NBFCs, including housing finance companies (HFCs), came under stress following a series of defaults by the group companies of IL&FS in September last year.

India's fuel demand rose 2.8% YoY in August

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India's fuel demand rose 2.8 percent in August compared with the same month last year.

Consumption of fuel, a proxy for oil demand, totalled 17.04 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed.

Sales of gasoline, or petrol, were 8.9 percent higher from a year earlier at 2.57 million tonnes.

Cooking gas or liquefied petroleum gas (LPG) sales increased 13.0 percent to 2.40 million tonnes, while naphtha sales surged 3.7 percent to 1.15 million tonnes.

Sales of bitumen, used for making roads, were 23.8 percent up, while fuel oil use edged lower 15.9 percent in August.

PM Modi, K P Oli jointly inaugurate Motihari-Amlekhganj petroleum product pipeline

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Prime Minister Narendra Modi and his Nepal counterpart K P Sharma Oli on Tuesday jointly inaugurated the Motihari-Amlekhganj petroleum product pipeline via a video link.

The over 60 km-long pipeline is the first-ever cross-border petroleum product pipeline in the South Asia region, according to a video presentation made before the inauguration.

As of now, tankers carry petroleum products from India to Nepal as part of an arrangement which is in place since 1973.

"This India-Nepal energy cooperation project is a symbol of our close bilateral relations. It will help to enhance the energy security of the region and substantially cut down on transit costs," the Prime Minister's Office had said on Monday.

Divorce insurance: Is it time for Indians to secure alimony settlements?

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Ashmit Gupta, a 38-year old Kolkata businessman who has filed for a divorce, must arrange Rs 30 lakh for the alimony his ex-wife has sought. While he has investments worth Rs 10 lakh that will pay a part of that amount, he is still to arrange Rs 20 lakh within the next few months.

Countries like Egypt are now contemplating a law to make divorce insurance mandatory to ensure that men are able to pay alimony to their ex-spouses without having to face a financial burden. Considering the financial costs linked to a divorce and subsequent payments to the spouse, it could be time for Indians to seek insurance to cover divorces as well.

While India still has among the lowest divorce rates, the numbers have doubled over the last one decade. As per Census 2011, there were 1,362,316 divorces in India. While the number is low compared to other countries, it is still a significant number.

If the average alimony amount per divorce stood at Rs 15 lakh, it is a whopping Rs 2.04 lakh crore in settlements itself for the 1.36 million divorces. Over and above that are the legal expenses and child support which would run into several lakhs of rupees.

It is estimated that the alimony payment amount in India has risen by 35 percent over the last five to seven years.

Taking an insurance policy that pays for the divorce proceedings is a financially-prudent idea. Usually taken at the time of marriage, this insurance product will provide for all financial costs pertaining to a divorce.

The premium payable depends on the earning capacity of the individual and the income profile of the couple. There is usually a period of initial two to three years during which a claim is not admissible.

As a starter, policies with a standard cover of Rs 25 lakh or 30 lakh could be offered. These would be priced at less than Rs 15,000 per annum. If any individual seeks additional insurance, top-up plans could be offered.

The amount and duration for which alimony is payable depends on how long the marriage existed. Marriages that last more than 10 years are even entitled to get a lifelong alimony.

In India, there is no cap on the amount of alimony that can be sought by the wife. In case of a lump-sum settlement, the amount could go up to one-third of the husband’s net-worth.

With Indian couples being far more open to the idea of a divorce than a decade ago, it is imperative that the financial costs will also be considered. Having insurance products available for this purpose could help sort out the financial matters and help the couple focus on other crucial matters including property division and child custody.

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