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<ul><li>The hospitality sector saw 23 <keyword id="142429" type="General" weightage="20" keywordseo="credit-rating" source="Orion">credit rating</keyword> upgrades, with no downgrades at all in FY24, says ICRA.</li><li>Auto, financial sector, power, realty and transport infrastructure also saw several upgrades.</li><li>Agriculture, chemicals, construction and apparel sectors saw the most downgrades. </li></ul> The fiscal year of FY24 continued the ‘upgrade momentum’ that was set into motion in FY22, said the credit rating agency ICRA. Two entities had been upgraded for every entity downgraded during the year, the rating agency said in a report released on Monday. The biggest winner for the year is the hospitality sector — with 23 upgrades and an upgrade rate of 37%. And, there were no downgrades at all. ICRA maintains a positive outlook on the Hospitality sector for FY2025 as well. The other sectors which saw the most number of upgrades include auto and auto components, finance, power, realty and transport infrastructure. On the other hand, sectors which saw the most number of downgrades are — agricultural food and other products, chemicals and petrochemicals, construction, textiles and apparel. Company-specific factors While entities in aviation, hospitality, auto &amp; auto components, and banks gained from the industry tailwinds in FY24 – that’s not the only factor behind most upgrades. “A large majority of rating upgrades were driven by company-specific factors such as expansion in market share or order book, improvement in the cost structure, reduction in project risk, or fresh equity infusion that strengthened the balance sheet,” says K Ravichandran, chief rating officer at ICRA said. Overall, credit profiles continued to improve last year. The number of instances of defaults dipped to five in FY24, compared with 22 in FY23 and 42 in FY22. “Corporate India has shown a high resilience to withstanding the rise in borrowing costs over the past two years and is seen to have the capacity to bear the current level of interest rates before the rate cut cycle likely begins in the latter part of the year,” said Ravichandran. Banks &amp; NBFC asset profiles at decadal best The financial sector has also been one of the best-performing sectors for the year in terms of credit profile. It saw an upgrade rate of 13%, next only to auto. Its downgrade ratio is also low at 2%. “The asset quality of banks and NBFCs has also been at its decadal best with the profitability and the capitalisation indicators expected to remain healthy in the near term. The series of proactive actions taken by the regulators (RBI and SEBI) in recent years would work to further strengthen the financial system and the capital markets,” opines Ravichandran. He, however, added that the key downside factors that could derail progress in multiple sectors are the monsoons and complicated geopolitical landscape. Two wars, the Red Sea crisis and sluggish exports had been weighing on India in FY24. “Yet, these did not feel heavier as domestic consumption demand across several sectors, government spending on public infrastructure, and healthy balance sheets lent support to the credit profiles of entities,” says ICRA. In FY25, the rating agency expects India’s GDP to expand by 6.5%, with the average retail inflation estimated to be moderate at 4.6%.

Two entities upgraded for every downgrade in FY24, hospitality sector records 23 upgrades: ICRA

New Delhi, The government's fiscal deficit at Rs 11 lakh crore at January end touched 63.6 per cent of the revised annual target, according to the official data released on Thursday. In the corresponding period last year, the fiscal deficit or gap between the expenditure and revenue was 67.8 per cent of Revised Estimates (RE) of the Union Budget 2022-23. For 2023-24, the government's fiscal deficit is estimated at Rs 17.35 lakh crore or 5.8 per cent of the GDP. The government's total receipts stood at Rs 22.52 lakh crore (81.7 per cent of corresponding RE 2023-24 of total receipts) as of January 2024, according to the data released by <keyword id="20408086" type="General" weightage="20" keywordseo="controller-general-of-accounts" source="keywords">Controller General of Accounts</keyword> (<keyword id="20408087" type="General" weightage="20" keywordseo="cga" source="keywords">CGA</keyword>). This comprised Rs 18.8 lakh crore tax revenue (net), Rs 3.38 lakh crore of non-tax revenue and Rs 34,219 crore of non-debt capital receipts. Non-debt capital receipts consist of the recovery of loans and miscellaneous capital receipts. The total expenditure incurred by the Centre was Rs 33.54 lakh crore (74.7 per cent of corresponding RE 2023-24), out of which Rs 26.33 lakh crore is on revenue account and Rs 7.2 lakh crore on capital account. As per the CGA data, Rs 8,20,250 crore has been transferred to state governments as devolution of share of taxes by the central government up to this period, which is Rs 1,52,480 crore higher than the previous year. Out of the total revenue expenditure, Rs 8,21,731 crore was on account of interest payments and Rs 3,15,559 crore on major subsidies. Commenting on the data, <keyword id="20028743" type="General" weightage="20" keywordseo="aditi-nayar" source="keywords">Aditi Nayar</keyword>, Chief Economist, <keyword id="19908266" type="General" weightage="20" keywordseo="icra" source="keywords">ICRA</keyword>, said: "While there may be some slippage in the disinvestment target and capex may trail the FY2024 RE, ICRA does not expect the revised fiscal deficit target of Rs 17.3 lakh crore for FY2024 to be breached." The Prime Minister Narendra Modi-led government in the interim Budget refrained from announcing populist measures, which is expected to help it trim the fiscal deficit to 5.1 per cent of the GDP next fiscal and 4.5 per cent in FY26. The nominal GDP growth for the next financial year has been pegged at 10.5 per cent against the 11 per cent estimated earlier. The nominal GDP as per budget estimate 2024-25 has been projected at Rs 3,27,71,808 crore, assuming 10.5 per cent growth over the estimated nominal GDP of Rs 2,96,57,745 crore, as per the First Advance Estimates of FY2023-24. Helped by an improvement in tax buoyancy, the government managed to achieve a fiscal deficit of 5.8 per cent against the budget estimate of 5.9 per cent for the current financial year.

Fiscal deficit at Jan-end touches 63.6% of full year target: Govt data

In a rather dampened <keyword id="19915531" type="General" weightage="20" keywordseo="forecast" source="keywords">forecast</keyword> for the Indian economy, <keyword id="19908266" type="General" weightage="20" keywordseo="ICRA" source="keywords" meta.keywordsubtype="org" meta.entityname="ICRA" meta.hostid="261" meta.entityid="ICRA">ICRA</keyword> has forecast a sharp <keyword id="20637625" type="General" weightage="20" keywordseo="slowdown" source="keywords">slowdown</keyword> in India's <keyword id="19972825" type="General" weightage="20" keywordseo="GDP-growth" source="keywords">GDP growth</keyword>. The credit rating agency has projected a year-on-year expansion of 6.0% in <keyword id="22106354" type="General" weightage="20" keywordseo="Q1-FY2025" source="keywords">Q1 FY2025</keyword> — the lowest in the last six quarters. In Q4 FY2024, India recorded an impressive 7.8%. The Reserve Bank of India had expected the growth momentum to continue this financial year as well. Earlier this month, the RBI governor had projected a 7.1% growth in Q1, while the growth rate for the entire financial year FY2024-25 was projected to be at 7.2%. The central bank had attributed this potential robust growth to improved agricultural activity, sustained buoyancy in services activity, healthy balance sheets of banks and corporates, thrust on capex by the government, visible signs of pick up in private investment, and improving prospects of global trade. However, RBI’s growth projections for this financial year were slightly moderated due to lower-than-anticipated corporate profitability, general government expenditure, and core industries output. As per ICRA, the sharp drop in GDP growth is primarily due to parliamentary elections and a contraction in government capital expenditure weakening urban consumer confidence. Another main cause could be the weakening urban consumer confidence, which reported a surprising downtick in the May and July 2024 rounds of the Central Bank’s Consumer Confidence Survey. “The lingering impact of last year’s unfavourable monsoon and an uneven start to the 2024 monsoon prevented a broader improvement in rural sentiment. Lower volume growth combined with diminishing gains from commodity prices weighed upon the profitability of some of the industrial sectors. The heat wave also affected footfalls in various service sectors, even as it provided a significant boost to electricity demand,” said Aditi Nayar, Chief Economist at ICRA. Despite the Q1 slowdown, ICRA expects economic activity to pick up in the latter half of FY2025, projecting an overall GDP growth of 6.8% for the full year, with a potential to exceed 7% in the second half. The agency expects decelerated growth in Gross Value Added (GVA) as well, easing to 5.7% in Q1 FY2025 from 6.3% in the previous quarter. This slowdown is primarily attributed to a decline in industrial growth, which is predicted to moderate to 6.4% from 8.4%, along with slight reductions in the services sector's growth and a modest improvement in agricultural GVA. The difference between GDP and GVA growth is expected to narrow to around 30 basis points (bps) in Q1 FY2025, down from 148 bps in the previous quarter, due to lower growth in net indirect taxes amid a rise in government subsidies. ICRA's analysis indicates that industrial GVA growth is likely to moderate in Q1 FY2025, with a slowdown in manufacturing and construction offset by growth in electricity, mining, and quarrying. Additionally, a contraction in government and state capital expenditure, along with a significant drop in new project announcements, has contributed to the overall slowdown. Manufacturing profit margins have also been under pressure due to rising global commodity prices and narrowing deflation in input costs, which, combined with slower growth in manufacturing output, suggests a deceleration in manufacturing GVA growth. In the agricultural sector, GVA growth is projected to be modest at 1.0% in Q1 FY2025, amidst declining output from most rabi and summer crops and a deficient rainfall in June 2024. With growing concerns around inflation and unemployment in India and across the world, the latest forecast could further fuel the fears around recession and slowdown in major economies. However, a much clearer picture will emerge with the actual quarterly estimates of GDP for Q1 from the National Statistical Office (NSO) next week. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/digital-initiatives-to-triple-indian-retail-borrowing-to-usd-2-5-trillion-by-2030-sp-global/articleshow/112263945.cms" data-type="tilCustomLink" target="_blank">Digital initiatives to triple Indian retail borrowing to USD 2.5 trillion by 2030: S&amp;P Global</a>

ICRA forecasts slowdown in India's economy: GDP growth expected to hit six-quarter low in Q1 FY2025

Chennai, Credit rating agency <keyword id="19908266" type="General" weightage="20" keywordseo="icra" source="keywords">ICRA</keyword> on Wednesday said <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword>'s Gross Domestic Product (GDP) would grow at 6 per cent in Q3 FY2024 from 7.6 per cent in Q2 FY2024. Further, the Gross Value Added (GVA) growth is estimated to ease to 6 per cent in Q3 FY2024 from 7.4 per cent in Q2 FY2024, driven by the industrial and agriculture sectors, amid an improvement in the services sector. According to ICRA, the anticipated deterioration in the industrial sector growth in Q3 FY2024 is partly attributable to an adverse base effect and a deceleration in volume expansion even as the continued deflation in commodity prices kept profitability of some sectors favourable. Additionally, a mild 0.2 per cent contraction in the total spending of Government of India and 25 state governments (all states except <keyword id="19915575" type="General" weightage="20" keywordseo="arunachal-pradesh" source="keywords">Arunachal Pradesh</keyword>, <keyword id="19895061" type="General" weightage="20" keywordseo="goa" source="keywords">Goa</keyword> and Manipur) in Q3 FY2024 is expected to have dulled the GVA growth in the quarter. "Lower volume growth for the industrial sector, flagging momentum in certain indicators of investment activity, a slowdown in Government expenditure and an uneven monsoon are expected to dampen the GDP growth to 6.0 per cent in Q3 FY2024 from 7.6 per cent in Q2 FY2024," <keyword id="20028743" type="General" weightage="20" keywordseo="aditi-nayar" source="keywords">Aditi Nayar</keyword>, Chief Economist, Head-Research &amp; Outreachs said. ICRA estimates the industrial GVA growth to record a broad-based moderation to 8.8 per cent in Q3 FY2024 from 13.2 per cent in Q2 FY2024, led by all four sub-sectors, namely, manufacturing, electricity, construction and mining and quarrying. ICRA projects manufacturing GVA expansion at a healthy 10 per cent in Q3 FY2024, twice as high as the 4.7 per cent seen in Q1 FY2024, albeit lower than the 13.9 per cent recorded in Q2 FY2024, amid a deceleration in volume growth as reflected in the manufacturing Index of Industrial Production (IIP). Owing to the decline in output across all major kharif crops projected by the First Advance Estimates, ICRA projects the growth in agriculture, forestry, and fishing to dip to a muted 0.5 per cent in Q3 FY2024 from 1.2 per cent in Q2 FY2024. This would be the lowest growth print for the sector since Q4 FY2019 (-0.9 per cent). In contrast to industry and agriculture, ICRA estimates the services GVA YoY growth to rise to 6.5 per cent in Q3 FY2024 from 5.8 per cent in Q2 FY2024, led by trade, hotels, transport, communication and services related to broadcasting.

India's FY24 third quarter GDP growth seen at 6%: ICRA

The Reserve Bank is unlikely to ease the benchmark policy rate from 6.5% during 2024, given the persisting uncertainty over <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">food inflation</keyword>, State Bank of India (<keyword id="19898108" type="General" weightage="20" keywordseo="SBI" source="keywords">SBI</keyword>) chairman C S Setty has recently said. The US Federal Reserve's first cut in <keyword id="20071327" type="General" weightage="20" keywordseo="interest-rate" source="keywords">interest rate</keyword>s in more than four years happened today, triggering central banks in other economies to follow suit. The Fed trimmed the interest rates by 50 basis point trim to its target interest rate range to 4.75-5%. "On the rate front, a lot of central banks are taking independent calls. While Fed rate cut would influence everyone, <keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> would be mindful of the food inflation before taking a call on interest rate cut," Setty, who recently took over the reins of the bank, was noted as saying. "Our view is also that the rate cut during the current calendar year may not happen. Probably, we may have to wait for Q4 (January-March 2025) unless there is a good improvement in terms of food inflation," he added. Notably, RBIs <keyword id="19913109" type="General" weightage="100" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC), headed by RBI Governor Shaktikanta Das is scheduled to meet next month, between October 7-9 and take a call on interest rate. The committee will largely take <keyword id="19999652" type="General" weightage="20" keywordseo="retail-inflation" source="keywords">retail inflation</keyword>, which inched to 3.65% in August, up from 3.54% in July, into account for making rate-related decisions On the other hand, India's wholesale price index (WPI) eased to 1.31% on an annual basis, which is also a 4-month low, down from 2.04% in July. The data, released recently by the government, also highlighted the stickiness of food price inflation, which stood largely undeterred at 3.11% in August, as compared to 3.45% in July. Although WPI rates do not directly impact RBIs decision making, it does affect the retail inflation rates, although it takes time to reflect the same. Says Rahul Agrawal, Senior Economist at ICRA Ltd, “The <keyword id="20198768" type="General" weightage="20" keywordseo="WPI-inflation" source="keywords">WPI inflation</keyword> eased to a four-month low in August 2024, with the fuel and power, core (non-food manufacturing), and crude petroleum and natural gas sub-groups together pulling down the headline WPI print by as much as 70 bps in the month vis-à-vis July 2024. The core WPI inflation dipped to 0.7% in August 2024 from 1.2% in July 2024, amidst a continued softening in global commodity prices. "While prices of most food items have eased further on a month-on-month basis in September 2024, an adverse base would push up the YoY inflation prints for the primary food articles category significantly in the ongoing month, exerting upward pressure to the headline WPI inflation print for September 2024", said Agrawal. The price of the Indian basket of crude oil has averaged 6.0% lower in September 2024 on a sequential basis, touching the lowest levels in 33 months, which would also help contain the uptick in the headline WPI inflation print in the month. We anticipate WPI to touch the 2.0% in September 2024 from 1.3% in August 2024", he continued. Amongst the food articles whose prices dipped during the month were cereals (8.44%), paddy (9.12%), pulses (18.57%) and onions (65.75%), it did little to tame inflation, which continued to stay put in double digits. On the other hand, prices of potato (77.96%) and fruits (16.7%) inched up. The dip in WPI was largely led by slowdown in prices of manufactured food products (3.61%), beverages (1.9%), pharmaceuticals (1.97%) and petrol (4.23%). "While there may not be a one-to-one correspondence between the WPI and the CPI data because of the items, size, number, and relative weights assigned, the CPI data will also down-trend in sync with the RBI’s medium-term target of 4 % for the second time in nearly five years. However high food prices will induce the RBI to be wary", notes Manoranjan Sharma, Chief Economist, Infomerics Ratings.

RBI unlikely to cut interest rate in 2024, food inflation to be deciding factor, says SBI chief Setty

Rising awareness of <keyword id="20041501" type="General" weightage="20" keywordseo="financial-planning" source="keywords">financial planning</keyword> has fueled a 256 % increase in retirement mutual fund <keyword id="20019621" type="General" weightage="20" keywordseo="AUM" source="keywords">AUM</keyword> in the last five years, according to a report. Factors such as rising <keyword id="21344413" type="General" weightage="20" keywordseo="healthcare-costs" source="keywords">healthcare costs</keyword>, increasing nuclear families, and higher <keyword id="20188311" type="General" weightage="20" keywordseo="life-expectancy" source="keywords">life expectancy</keyword> are likely to fuel further growth in this sector, an ICRA Analytics report said. "Assets under Management (AUM) of these funds have grown by over 256 % in the last five years, reaching Rs 29,903 crore in July 2024, compared to Rs 8395 crore in July 2019," it said. ICRA said the growing awareness has led to a surge in the number of folios, which has increased by 17.44 % in the last five years to 29.36 lakh in July 2024, up from 25 lakh in July 2019. The number of schemes has also increased from 21 in 2019 to 29 as of July 2024. In July 2024, retirement funds received net inflows worth Rs 147.16 crores. The net inflows dipped in the month prior, standing at Rs 125.06 crore. Retirement funds have seen a consistent stream of inflows this year, with the January-March quarter recording inflows worth Rs 406.90 crore, which grew slightly to Rs 602.46 crore between April-June 2024. A retirement mutual fund is a specialized investment vehicle, also known as a solution oriented fund, which is designed to provide a secure and comfortable post-retirement life. The fund focuses more on equity, or growth opportunities early on in the tenure of the fund. But, in order to provide stability, the fund begins to rebalance and invests more in debt securities, as the individual ages and approaches retirement, where they will need a constant stream of income. These funds invest in both equity and debt, aiming to balance <keyword id="23041622" type="General" weightage="20" keywordseo="wealth-appreciation" source="keywords">wealth appreciation</keyword> and preservation offering a <keyword id="23041623" type="General" weightage="20" keywordseo="regular-income-stream" source="keywords">regular income stream</keyword> during retirement. The focus is largely on investing in steady instruments such as government bonds and more, in order to cushion any equity-related risks. Tpically, these funds have a lock-in period of five years or until retirement, which is generally between 58-60 years. However, experts note that a 5-year lock-in period could be discouraging for some investors. The average compound annualised returns on these funds stood at 26.21 %, 12.97 % and 14.09 % for a one-year, three-year and five-year period, the analysis found.

Assets under management of retirement mutual funds jumps 256% in 5 years

The just-announced <keyword id="22906567" type="General" weightage="100" keywordseo="Unified-Pension-Scheme" source="keywords">Unified Pension Scheme</keyword> for central <keyword id="19933272" type="General" weightage="20" keywordseo="government-employees" source="keywords">government employees</keyword> will be available only for those who are currently subscribers of the New Pension Scheme (NPS), including retirees. The new scheme guarantees employees 50% of their average basic pay over the last 12 months before retirement, as a pension for a minimum qualifying service of 25 years against a market returns linked payout under the NPS. According to the scheme approved by the Union Cabinet, the pension will be proportionate for a lesser service period of up to a minimum of 10 years. Also, assured pension of Rs 10,000 per month on superannuation after a minimum of 10 years of service will be provided. The scheme has been brought out to address the concerns of government employees over NPS, which came into effect from January 1, 2004. Under the <keyword id="3246232" type="General" weightage="20" keywordseo="Old-Pension-Scheme" source="Orion">old pension scheme</keyword> (OPS), effective before January 2004, employees got 50 % of their last drawn basic pay as pension. Unlike the old pension scheme, UPS is contributory in nature, wherein employees will be required to contribute 10% of their basic salary and dearness allowance while the employer's contribution (the central government) will be 18.5%. Under the NPS, the employer contribution is 14%, and the employee contribution is 10%. However, the eventual payout depends on the market returns on that corpus, mostly invested in government debt. Employees, under the OPS, were not required to make any contribution. They, however, contributed to the General Provident Fund (GPF). The accumulated amount, along with interest, was paid to the employee at the time of retirement. As the NPS was less attractive than the OPS, several non-BJP-ruled states decided to go back to the old pension scheme, which offered a DA-linked benefit. This prompted the Centre to constitute a committee in April 2023, under former Finance Secretary and now Cabinet Secretary-designate TV Somanathan to suggest improvement in the NPS architecture. Fulfilling the long pending demands of government employees ahead of assembly elections in Haryana and Jammu and Kashmir, the Union Cabinet on August 24 approved the UPS, which will provide assured pension to 23 lakh eligible central government employees. Those opting for the UPS will not be able to switch back. The UPS will put an additional burden of Rs 6,250 crore on the exchequer per year. The expenditure will vary every year according to variations in the number of employees. In addition, there will be an arrear of Rs 800 crore that has to be paid under the National Pension System (NPS) to employees retiring before March 31, 2025. If these retirees opt for UPS, they will receive arrears. "UPS is being implemented by the Central Government, benefitting 23 lakh central government employees," Information &amp; Broadcasting Minister Ashwini Vaishnaw said on X on Sunday. If states also adopt the UPS architecture, a total of over 90 lakh government employees, who are presently on NPS, would be benefitted, he added. On Sunday, Maharashtra, where assembly elections are due later in the year, became the first state to announce the adoption of the UPS for its employees. RSS-affiliate Bharatiya Mazdoor Sangh (BMS) said though the government has attempted to overcome the shortcomings of the NPS, there are still some issues compared to OPS. BMS will decide its future course of action only after a detailed study of the UPS after it is notified. All India Trade Union Congress (AITUC) said it is nothing but an extension of the existing NPS. The trade union expressed apprehensions that UPS will have a lot of aberrations once implemented. AITUC reiterated that it will continue to fight for the restoration of the non-contributory OPS. ICRA Chief Economist Aditi Nayar said assured pensions will add to the government's committed expenditure in the future while reducing the uncertainty for employees. "This will have to be built into the fiscal consolidation roadmap going ahead," Nayar added. The UPS reflects a thoughtful approach to long-term social security, addressing concerns about the adequacy and sustainability of pension benefits in a rapidly changing economic landscape, said Shardul Amarchand Mangaldas &amp; Co Partner Dorothy Thomas. "This move signals the government's commitment to providing robust support for its workforce, enhancing financial stability for millions of government employees across the country," Thomas said.

Over 23 lakh govt employees under NPS get option to choose unified pension scheme

<keyword id="6354387" type="General" weightage="20" keywordseo="jewellery" source="Orion">Jewellery</keyword> consumption, in terms of value, is expected to grow by 10-12 per cent in this financial year, mainly on account of increase in <keyword id="46002" type="General" weightage="20" keywordseo="gold-prices" source="Orion">gold prices</keyword>, a report said on Friday. Rating agency <keyword id="6354972" type="General" weightage="20" keywordseo="icra" source="Orion">Icra</keyword> has revised upward its forecast for the year-on-year (YoY) <keyword id="19910440" type="General" weightage="20" keywordseo="domestic-jewellery-consumption" source="Orion">domestic jewellery consumption</keyword> growth (in value terms) in FY24 to 10-12 per cent from the earlier estimates of 8-10 per cent, primarily driven by the rise in gold prices. Jewellery consumption is estimated to have risen by more than 15 per cent YoY in the first half of FY24, aided by stable demand during 'Akshaya Tritiya', a festival considered auspicious for buying precious metals, and higher gold prices. However, Icra projects the growth rate to moderate to 6-8 per cent in the second half of this financial year due to sustained tepid rural demand amid persistent <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword>. After remaining volatile between December 2022 and April 2023, gold prices were relatively stable in the first half of FY24, although up 14 per cent compared to the average prices during the year-ago period, noted the report. The elevated price levels supported revenue expansion of most jewellery retailers in the face of muted volume growth, it said. The ongoing tensions in the Middle East and the evolving global macro-economic environment could keep gold prices elevated in the near term. The spike in gold prices since early October 2023 and persistent inflationary headwinds remain key risks to demand, it stated. "Jewellers of the organised market is projected to record a healthy revenue expansion of 15-18 per cent YoY in FY24 on the back of their planned retail expansions and a gradual shift in consumer preferences towards branded jewellers. The organised jewellery retailers are expected to outperform the industry over the medium term supported by tailwinds from accelerated formalisation of the industry," Icra Vice President and Sector Head Sujoy Saha said. Icra has projected some moderation in FY24 in the operating margins of organised players owing to the front-loaded operating costs for planned store additions and increased advertising expenditure in the face of rising competition. Nevertheless, the benefits of economies of scale are likely to support the operating margins, which are estimated to hover in the range of 7.5-8 per cent in the near to medium term. Despite the projected increase in debt levels to fund the inventory for new stores, the debt protection metrics for the players are estimated to remain comfortable. "The organised jewellers had recommenced their retail expansion in FY23, after a brief hiatus in FY21 and FY22, with the store count estimated to have risen by more than 20 per cent during the year. The momentum is likely to continue over the near to medium term with an estimated increase in store count by 18-20 per cent YoY in FY24, supporting their revenue growth," Saha added.

Jewellery consumption to grow by 10-12 pc value-wise in FY24 amid rise in gold prices: Report

In April, the <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) governor Shaktikanta Das referred to <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> as the ‘elephant in the room’. He said, “The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis… Elephant moves slowly, and last mile inflation tends to be sticky.” On Friday, the Indian government data showed that the year-on-year inflation rate based on the Consumer Price Index (<keyword id="20468215" type="General" weightage="20" keywordseo="CPI" source="keywords">CPI</keyword>) for June 2024 stood at 5.08 per cent — rising from 4.75% last month. This was the first time the headline inflation had risen since December 2023! Looks like the elephant decided to stop and look back on its way to the forest. The question remains, what’s next — will it return to the forest or return to the room to haunt us again? <h2>Food price inflation at a record high</h2> The major driver for the higher inflation figures this month has been the rising <keyword id="19960157" type="General" weightage="20" keywordseo="food-prices" source="keywords">food prices</keyword> across India. In fact, food price inflation almost doubled year-on-year in June, rising to 8.36 per cent last month compared to 4.63 per cent in June 2023. Inflation in the food basket was 9.36 per cent in June, up from 8.69 per cent in May, according to the data of the National Statistical Office (NSO). Government data showed that <keyword id="513422" type="General" weightage="20" keywordseo="retail-inflation" source="Orion">retail inflation</keyword> for all food segments, including cereal, meat, eggs, milk, oils, fruits, vegetables, pulses, sugar, spices, prepared snacks, and sweets, increased month-on-month. This was the main cause for retail inflation hardening in June, diverging from the previous months' moderation. While the inflation rate based on the all-India CPI for June 2024 stood at 5.08%, rural and urban inflation rates also spiked to 5.66 per cent and 4.39 per cent, respectively. “Barring the food basket, inflation is indicating signs of bottoming out broadly across the non-food categories, also seen in the inflation in the core categories averaging at 3.5% in the last six months. A stable monsoon will play an important role in stabilising food prices and inflation levels over the next few months,” said Vivek Rathi, National Director Research, Knight Frank India. In May, annual retail inflation was at a 12-month low of 4.75%, slightly down from April's 4.83%. In December last year, retail inflation stood at 5.7 % and had been moderating until June. On the other hand, the US CPI rose only 3% on an annual basis in June versus expectations of 3.2%. Month-over-month, the US CPI declined 0.1%, on expectations for a 0.1% rise. <h2>There goes the chance of an early rate cut?</h2> While European central banks started to cut interest rates last month, hopes of such policy moves seem to have been derailed by these inflation figures. Indian central bank, RBI, has remained cautiously focused on inflation as the growth prospects remained robust. It has been waiting for the final phase of disinflation to materialise before considering rate cuts. The situation, however, does seem rather peculiar — as long as inflation does not align with the central bank's 4% target, the interest rates may remain rather high. However, the current economic environment is not gloomy at all, characterized by a robust GDP growth rate, estimated at 8.2% for 2023-24. Hence, the RBI adopts a wait-and-see approach. And the wait is likely to continue a little while longer. This year, food prices have become a significant issue for policymakers in India, and the RBI governor pinned his hopes on a good monsoon season to alleviate the food price inflation concerns. So far, the monsoon has stood up to our expectations, yet the food prices have remained stubbornly high, mainly due to extended heat wave conditions in June. "The CPI inflation came marginally higher than our expectations. While the <keyword id="67286" type="General" weightage="100" keywordseo="food-inflation" source="Orion">food inflation</keyword> risks will continue to dominate in the near term, we expect better sowing patterns and spatial distribution of rains to eventually ease the price pressures beyond these volatile months. Having said that, the central bank will be in no hurry to ease <keyword id="20104157" type="General" weightage="20" keywordseo="monetary-policy" source="keywords">monetary policy</keyword> given the headroom from robust growth in the backdrop of near-term inflation risks," said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank. India's retail inflation remains within the Reserve Bank of India's (RBI) comfort range of 2-6% but exceeds the ideal 4% scenario. While inflation is a global concern, India has so far managed its inflation trajectory relatively well. Since May 2022, the RBI has raised the repo rate by 250 basis points cumulatively to combat inflation. However, over the last eight policy cycles, the central bank has kept the rates consistent at 6.5%. The next monetary policy meeting of the RBI is scheduled for early August. And with the higher-than-expected inflation data, the central bank is likely to keep the rate unchanged next month as well for the ninth consecutive month. However, hopes are still alive for a rate cut towards the end of the year. "We are not ruling out a stance change in October 2024 and a 25 bps rate cut each in December 2024 and February 2025, followed by an extended pause, if the food inflation outlook turns decidedly favourable on the back of a normal magnitude and favourable distribution of rainfall in the rest of the monsoon season, and there are no other shocks, either global or domestic," said Aditi Nayar, Chief Economist at ICRA. (With inputs from ANI and PTI) <div type="Article" hostid="261" msid="110784179" title="Monetary Policy Committee keeps repo rate unchanged at 6.5%, confirms RBI governor Shaktikanta Das" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div> <div type="Article" hostid="261" msid="110788776" title="RBI retains inflation projection for FY25 at 4.5%" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div>

Inflation spikes in June 2024 due to high food prices; Likely to affect RBI’s decision on interest rate

<ul><li>Incremental credit growth expected to remain robust at Rs. 16.5-18.0 trillion in FY2024, despite marginal slowdown.</li><li>NIMs expected to compress by 20-25 bps, though benign credit costs and lower operating expenses to provide support.</li><li>Asset quality is likely to remain benign as GNPAs and NNPAs are expected to decline further by March 2024.</li></ul> Analysts may be worried about rising stress in the retail assets of banks, but <keyword id="6354972" type="General" weightage="100" keywordseo="icra" source="Orion">ICRA</keyword> is of the view that the sector is resilient and that credit growth is expected to remain strong. Given that deposits have been repriced after the <keyword id="6375120" type="General" weightage="50" keywordseo="monetary-policy-committee" source="Orion">Monetary Policy Committee</keyword> of the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> delivered six interest rates hikes. However, ICRA does not expect this to impact profitability of the sector negatively. In a note, the agency said: “While the upward repricing of the deposit base is likely to lead to a moderation in the interest margin, benign asset quality pressures would support lower credit costs and earnings.” Accordingly, in ICRA’s view, the banking sector is expected to continue generating sufficient internal capital to largely meet its growth needs while improving the capital cushions. The retail segment is likely to remain the key contributor to credit growth although the sustainability of asset quality hinges on macroeconomic conditions remaining favourable. ICRA expects the headline metrics of the banking sector to remain on an improving trajectory on the back of controlled net additions (net of recoveries and upgrades) to non-performing advances (NPAs) and reasonably strong credit growth. Accordingly, ICRA expects the gross NPAs (GNPAs) and net NPAs (NNPAs) to decline to 2.8-3.0% and 0.8-0.9%, respectively, by March 2024 from 3.96% and 0.97%, respectively, as on March 31, 2023, which would remain the best in more than a decade. Notwithstanding this, ICRA remains cautious about the impact of macroeconomic shocks on asset quality, if these were to materialise. Commenting further Anil Gupta, Senior Vice President &amp; Co-Group Head, ICRA said: “Credit growth remains robust despite some moderation. Even at the anticipated pace of growth for FY2024, incremental credit expansion would be the second highest ever at Rs 16.5-18.0 trillion, next only to the record level of Rs 18.2 trillion (+15.4%) last year.” Credit costs are estimated to remain at 1.0% of advances in FY2024, in line with FY2023. This should allow banks to comfortably withstand a compression of 20-25 bps in the interest margins, which would lead to a mild moderation in the return on assets (RoA) to 1.0% in FY2024 from 1.1% in FY2023. At these levels, the RoE would remain healthy at 13.0-13.1% in FY2024 against 13.8% in FY2023. Furthermore, supported by internal capital generation and lower <keyword id="4105639" type="General" weightage="20" keywordseo="NNPA" source="Orion">NNPA</keyword> levels, the capitalisation and solvency profiles of private and public sector banks would remain comfortable. ICRA projects the Tier-I capital of the banking sector at 14.6-14.7% (14.4% as of March 2023) and an improvement in the solvency levels to 7% (8% as of March 2023) by March 2024. Over the last decade, credit growth in the retail segment remained buoyant and a key driver of overall credit expansion. As retail growth outpaced other segments, its share in bank credit rose to 32% as on March 31, 2023 from 18% in March 2013. Moreover, the corporate book witnessed underperformance in recent years, including weaker asset quality levels and muted expansion, resulting in slower growth trends relative to the retail segment. The Covid-19 pandemic was a stress test event on the asset quality across segments and defaults and losses were relatively higher in the unsecured segments. With more insight on the borrowers’ repayment behaviour during the pandemic, lenders can take better decisions while growing unsecured retail loans. Moreover, the retail segment continued to report resilience despite volatile macro-economic conditions, including rising interest rates and surging inflation, which impacted disposable income. Gupta added: “Even as the retail segment has performed well, the material weakening of macro-economic conditions could exert pressure on the debt-servicing abilities of borrowers and we remain watchful of its impact on the asset quality of lenders. Nonetheless, banks have strong operating profits and capital positions. Consequently, they are much better placed at present for navigating through such a scenario.”

Interest rate hikes unlikely to have negative impact on earnings of banking sector: ICRA

New Delhi, <keyword id="20748494" type="General" weightage="20" keywordseo="domestic-commercial-vehicle" source="keywords">Domestic Commercial Vehicle</keyword> (CV) volumes are expected to dip 4-7 per cent year-on-year next fiscal with high base effect kicking in, rating agency <keyword id="19908266" type="General" weightage="20" keywordseo="icra" source="keywords">Icra</keyword> said on Tuesday. The volumes are expected to remain muted through the January-March quarter on account of a perceived pause in the infrastructural activities as the model code of conduct kicks in ahead of the general elections. "Icra estimates the domestic CV industry volumes to register 2-5 per cent year-on-year growth in volumes in FY24. Subsequently, the industry's sharp <keyword id="20748180" type="General" weightage="20" keywordseo="upcycle" source="keywords">upcycle</keyword> is expected to plateau in FY25, with a decline of 4-7 per cent in volumes," the rating agency stated. <keyword id="20277974" type="General" weightage="20" keywordseo="icra-ratings" source="keywords">Icra Ratings</keyword> Vice President &amp; Co-Group Head <keyword id="20322347" type="General" weightage="20" keywordseo="kinjal-shah" source="keywords">Kinjal Shah</keyword> said he expects the long-term demand for CVs to remain intact. The continued focus on infrastructure capex, emphasis on private participation in infrastructure, construction, defence and manufacturing activities would remain a long-term positive for the CV industry, he said. "However, in the near term, Icra expects the volumes to plateau on a high base, amid the transient moderation in economic activity in some sectors with the onset of the general elections," he added. Overall, the domestic CV industry's ability to scale previous peaks hinges on sustenance of the macro-economic environment, improvement in infrastructure activity and increased demand for last mile transportation, Icra stated.

Domestic commercial vehicle industry to see 4-7% dip in volumes next fiscal: Icra

Mumbai, The domestic air passenger traffic is expected to surpass the pre-Covid levels of 141.2 million and reach 150-155 million this fiscal, registering an estimated growth of 8-13 per cent, credit ratings agency <keyword id="19908266" type="General" weightage="20" keywordseo="icra" source="keywords">Icra</keyword> said on Wednesday. Icra also projected a significant reduction in industry's net loss for the next two fiscals and was also of the view that supply-chain challenges and engine failure issues may remain near-term headwinds. Icra maintains a "stable" outlook on the domestic aviation industry, amidst the continued recovery in domestic and international air passenger traffic, and relatively stable cost environment, it said. The momentum in traffic growth is expected to continue in FY2025 as well, with a similar estimated year-on-year growth, aided by rising demand for both leisure and business travel and improving airport infrastructure, it said. The international passenger traffic for Indian carriers surpassed the pre-Covid levels in FY2023, although it trailed the peak levels of 25.9 million witnessed in FY2019, according to Icra. It is expected to cross this level in the current fiscal, with an estimated 25-27 million passengers, representing a <keyword id="19921444" type="General" weightage="20" keywordseo="yoy" source="keywords">YoY</keyword> growth of 7-12 per cent, the ratings agency said, adding the same is expected to further grow by 7-12 per cent to 27-29 million in FY2025. "The industry has witnessed improved pricing power, as reflected in increase in yields and thus the spread between revenue per available seat <keyword id="20544428" type="General" weightage="20" keywordseo="kilometre" source="keywords">kilometre</keyword>-cost per available seat kilometre (RASK-CASK) for the airlines. "The same is expected to remain favourable, aided by a decline in aviation turbine fuel (ATF) prices and the relatively stable foreign exchange rates," said <keyword id="20849526" type="General" weightage="20" keywordseo="suprio-banerjee" source="keywords">Suprio Banerjee</keyword>, Vice President and <keyword id="20225498" type="General" weightage="20" keywordseo="sector-head" source="keywords">Sector Head</keyword> for corporate ratings at Icra. The industry is thus estimated to report a significantly lower net loss of Rs 300-4,000 crore (Rs 30-40 billion) in FY2024 and FY2025 compared to Rs 170-175 billion in FY2023, he added. According to the ratings agency, the ATF prices and indian rupee-US dollar movement have a major bearing on the airlines' cost structure. The average ATF price stood at Rs 103,547/KL in the April-February period of FY2024, which is a YoY decline of 15 per cent compared to Rs 120,978/KL in FY2023, it said. However, this was 60 per cent higher compared to an average of Rs 64,715/KL during FY2020, as per Icra. Fuel accounts for around 30-40 per cent of the airlines' expenses.

Domestic air passenger traffic to surpass pre-Covid levels to reach 150-155 mn this fiscal: Icra

<ul><li>There is a suggestion to grant tax-free status to annuity income from the <keyword id="20240872" type="General" weightage="20" keywordseo="national-pension-scheme" source="keywords">National Pension Scheme</keyword> (<keyword id="19919089" type="General" weightage="20" keywordseo="nps" source="keywords">NPS</keyword>). </li><li>There is a proposal to simplify the capital gains <keyword id="6383566" type="General" weightage="20" keywordseo="taxation" source="Orion">taxation</keyword> structure by introducing a uniform holding period across domestic equities and <keyword id="6357979" type="General" weightage="20" keywordseo="mutual-funds" source="Orion">mutual funds</keyword>. </li><li>Providing relief from double taxation on dividends is anticipated to receive positive feedback from the <keyword id="31671" type="General" weightage="20" keywordseo="markets" source="Orion">markets</keyword>. </li></ul>The FY 2025 budget is around the corner and it is expected that Finance Minister Nirmala Sitharaman will fulfil some of the wishes of both the industry and the common people. A report by <keyword id="19908266" type="General" weightage="20" keywordseo="icra" source="keywords">ICRA</keyword> analytics lists down some changes they foresee when it comes to taxation and other investment products. Taxation The persistent call for the removal of the security transaction tax (<keyword id="20204742" type="General" weightage="20" keywordseo="stt" source="keywords">STT</keyword>) in financial markets has gained momentum in recent years, and as GST collections have risen, this demand has once again become a focal point. The potential elimination of STT is seen as a measure to attract more investors to participate in domestic equity markets. Another significant concern in the taxation landscape is the issue of double taxation on dividends. Under the current system, companies pay taxes on their profits, and simultaneously, the government levies additional taxes on dividends in the hands of shareholders. This results in double taxation on dividends. Addressing this issue by providing relief from double taxation on dividends is anticipated to receive positive feedback from the markets. <keyword id="6354432" type="General" weightage="20" keywordseo="pension" source="Orion">Pension</keyword> and <keyword id="35450" type="General" weightage="20" keywordseo="insurance" source="Orion">Insurance</keyword> In the domain of pension and insurance, there is a proposal to raise the minimum pension floor for unorganised sector workers under the Atal Pension Yojana (APY). The rationale behind this proposal is that the current pension amount may not attract enough potential subscribers to enrol in the scheme. Additionally, there is a suggestion to grant tax-free status to annuity income from the National Pension Scheme (NPS). This move is particularly crucial as senior citizens heavily rely on annuity income during their retirement years. Considering the rise in medical expenses and the financial well-being of senior citizens, providing tax-free status to annuity income is seen as a step towards supporting this demographic. Further, proposing a distinct tax deduction for life insurance premiums, separate from Section 80C, could boost the adoption of insurance products, encouraging people to secure their family's financial future through life insurance investments. Furthermore, there is a recommendation for the government to review the 18% Goods and Services Tax (GST) imposed on health insurance policies. Markets In the financial markets, one of the pressing issues is the need for a comprehensive policy on cryptocurrency regulation. With the rising popularity and usage of cryptocurrencies, a regulatory framework is considered essential to ensure orderly and secure participation in the crypto market. Another area of interest is the potential reintroduction of sovereign green bonds in the budget. Sovereign green bonds play a crucial role in addressing the funding requirements for sectors like wind, power, and hydropower, promoting sustainable investments. Additionally, there is speculation about the allocation of a significant capital outlay for an Energy Transition Fund. The focus of this fund would be on new-age fuels such as green hydrogen, ethanol, and other biofuels, aligning with the government's emphasis on energy transition and net-zero objectives. Mutual Funds Within the mutual funds sector, there are several proposals to address taxation-related disparities and encourage a more investor-friendly environment. There is a call for parity in taxation between equity mutual funds and Unit Linked Insurance Plans (ULIPs). Achieving parity between equity Fund of Fund and equity-oriented mutual funds for taxation is also under consideration. Furthermore, there is a proposal to simplify the capital gains taxation structure by introducing a uniform holding period across domestic equities and mutual funds. This move is expected to enhance compliance and streamline the tax treatment for investors. Lastly, there is a suggestion to revisit the tax changes introduced for debt funds last year. The amendment, while creating a level playing field between bank deposits and debt mutual funds, inadvertently affected certain categories of funds. However, a depositor in fixed deposits secures guaranteed returns regardless of fluctuations in interest rates, whereas an investor in debt funds is susceptible to both interest rate fluctuations and credit risk in the event of issuer defaults. Moreover, the elimination of the previous indexation benefit adversely impacted the tax-friendliness of global equity funds, equity fund of funds, gold funds, and hybrid funds with less than 35% equity exposure. Consequently, there is a possibility of revisiting the tax changes to address these issues. This revision aims to address unintended consequences and restore a tax-friendly environment for investors.

You Searched For "icra" and got 13 results

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