The Financial Express (Delhi Edition)
Hunt for non-coal minerals gets a boost with new sops But actual spend could behalf t he expec te d R 1 lakh cr ore on savings, taxes
THE expected consumption bonanza from the 7th Pay Commission is unlikely to be more than half the R1 lakh crore most are looking at. Experts believe government employees are expected to save about a fourth of the amount while giving back around 25% in the form of taxes. The spend in FY17 will be close to R43,000 crore since the government will pay out
R85,000 crore, having postponed the payment of allowances to probably FY18.
While stocks of auto manufacturers, two-wheeler makers, home loan companies and property firms rallied smartly, the combined spend of R50,000 crore or roughly 0.66% of private final consumption, while not insignificant, may not boost demand quite as positively as in 2009 and 2010 when salaries rose following the 6th pay panel’s recommendations. As such there is unlikely to be a consumption boom that results in a spurt in demand for automobiles or consumer durables, this time, say experts. If, however, state governments follow up with their salary increases quickly demand could get another fillip. It is also not clear how soon the government will announce pay hikes for PSUS and, for instance, teachers.
“The overall effect on consumption and inflation are likely to be more moderate this time around than in 2009 and 2010 because the magnitude of the spends is somewhat smaller,” Saugata Bhattacharya, economist at Axis Bank, observed. “The recommended hike as a share of GDP was much higher at the time,” Bhattacharya said.
One reason the impact might be more subdued this time is because arrears will be be paid for just six or seven
IN a bid to attract private investments including foreign direct investment into the business of mineral exploration, the Cabinet on Wednesday cleared a new National Mineral Exploration Policy (NE MP) with various incentives for explorers, including a risk cover.
Under the policy, the mining ministry will auction off 100 non-coal, non-fuel blocks to private explorers in the next nine months. The move is expected to encourage high-tech exploration fir ms, especially those that focus on exploration rather than mining, to work seriously on the country’s largely unknown but presumably rich months whereas the last time arrears were paid for nearly three years (January 2006September 2008), estimated at around R44,000 crore.
Analysts at Kotak Institutional Equities believe other factors such as monetary stimulus — a cut of 425 basis points in the policy rate — and fiscal stimulus by way of halving excise duties on automobiles were a big factor deposits of base metals and diamonds.
Under NE MP, the mines ministry will carry out auctioning of identified mineral blocks for exploration by private sector on a revenuesharing basis. In case their exploration leads to auctionable resources, the data driving consumption after the sixth pay panel’s hikes.
Also, the payment of allowances has been postponed till a committee assesses the feedback from a section of government employees. In general, the economic environment in 2009 and 2010 was better despite the outbreak of the global financial crisis in late 2008. Economists observe the corporate sector was able to recover from the effects of the crisis and private sector investment remained reasonably strong. As such, earnings recovered helping create more employment opportunities and that contributed to a bounce in consumption.
Consumer goods manufacturers, not surprisingly, welcomed the hike. “The salary hike for officials would considerably help increase demand for all consumer sectors, including FMCG, consumer durable, auto and real estate, as there will be more disposable income in the hands of the employees,” said Adi Godrej, chairman, Godrej Group. created by them will be shared with potential end users who will be given mining rights through a competitive bidding process.
The explorer firms will be paid a part of the royalty by the miners during the lease period, likely 50 years.
“If the explorer agencies do not discover any auctionable resources, their exploration expenditure will be reimbursed on normative cost basis,” an official statement said. Either way, once the exploration work is over, states will take back the blocks from