Analysis of Cement Industry

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- India’s Wholesale Price Index (WPI) based inflation witnessed a reversal from -5.1 per cent in August 2015 to 3.4 per cent in December 2016 due to rising crude oil prices in the international market towards the end of 2016.

- The Consumer Price Index (CPI) based inflation witnessed a steep decline since July 2016, owing to lower prices of pulses as a result of a bountiful kharif crop production. The CPI based inflation averaged 4.9 per cent during April-December 2016.

3.4 GDP outlook for 2017–18

- The country’s economic growth is facing challenges such as subdued manufacturing, lower exports of services, and lower capital expenditure

- However, during FY18, cheap borrowing costs and fading impact of demonetisation could increase the private consumption and thereby drive economic growth

- The implementation of Goods and Services Tax (GST) is expected to improve tax compliance and governance, and might provide an impetus to the investments and growth in the country

Due to favourable indicators such as moderate levels of inflation, reduced Current Account Deficit (CAD), fiscal consolidation and transitory impact of demonetization, the country is currently characterized as a stable macroeconomic situation, the Government expects India’s GDP to expand at a growth rate between 6.75–7.5 per cent during 2017-18.

3.5 Public finance

- The fiscal policy for 2016-17 reiterated the Government’s commitment to cut down the fiscal deficit to 3.5 per cent of GDP and further contribute towards fiscal consolidation. With demonetization impacting the economy and additional burden being put on the revenue expenditure due to the implementation of the Seventh Pay Commission, the Indian fiscal experience is likely to be underwhelming.

Table 2. Non-debt receipts of the Union Government (April - November 2016)[pic 2]

Realisation rate, as per cent of

Growth %

Particulars

Budget Estimates (BE)

2015–16

2016–17

2015–16

2016–17

Gross tax revenue

53

57.2

20.8

21.5

Tax (net to Centre)

50.5

58.9

12.5

33.6

Non tax revenue

78.1

54.2

34.9

1.0

Non-debt capital

25.8

48.5

180.3

57.1

receipts

Total non-debt

53.9

57.4

20

25.8

receipts

- Non-debt receipts grew at 25.8 per cent during April-November 2016, exceeding the budgeted growth rate for the full year of 16.4 per cent. This could be attributed to the increased union excise duties and service tax due to additional resource mobilization.

- To meet the fiscal deficit target, the Government is expected to achieve 11.9 per cent increase in the gross tax revenue and make efforts in non-tax revenue and non-debt receipts.

- During April-November 2016, the Gross Tax Revenue (GTR) realisations as a ratio of the budget estimates stood at 57.2 per cent as against 53 per cent in 2015

- During April-November 2016, the devolution to states and Union Territories (UT) also kept pace with the tax collections. Fifty-eight per cent of the total budget estimates were transferred, registering a slight decline as compared to the previous year.

3.6 Monetary management and financial intermediation

- The Indian Government amended the Reserve Bank of India Act during 2016–17, according to which the Government in consultation with the Reserve Bank would set the inflation target every five years. As per the revised Monetary Policy Framework, the Government fixed the inflation target to 4 per cent with a tolerance level of +/- 2 per cent for the period 5 August 2016 to 31 March 2021.

- To manage the liquidity situation, the RBI provided durable liquidity through buying/selling Government securities and mopped surplus liquidity through variable reverse repo rate post the withdrawal of specified bank notes. The Government also increased the limit on securities under market stabilisation scheme from INR30,000 crore to INR6 lakh crore.

- Overall Non food credit growth was largely due to bank credit lending to agriculture and allied activities and personal loan segments during the current financial year. Credit growth to industrial sector remained below 1 per cent. Non food credit outstanding grew at below 10 per cent for the major part of the year.

- The performance of public sector banks followed a similar trend as seen in 2015–16 and continued to be subdued during 2016–17. Profit after tax contracted in the H1 2016–17 due to loan write-offs, decline in net interest income and growth in risk provisions.

- To strengthen the corporate bond market, RBI took a number of measures during 2016–17

- Commercial banks were allowed to issue rupee-denominated bonds overseas for their capital requirements

- Brokers registered with SEBI and authorized in corporate bond market were permitted to undertake repo/reverse repo contracts in corporate debt securities

- Banks were allowed to increase the partial credit enhancement on corporate bonds from 20 per cent to 50 per cent

- Primary dealers were allowed to act as market makers for