TMS Ep234: Chinese phones, GST collections, markets, Bharat NCAP rating
hello and welcome to the business standard morning show i'm vinu santo let's take a look at the stories for the day after its crackdown on some chinese phone makers for alleged tax evasion and money laundering the government is reportedly planning to reserve the entry-level phone category that is phones costing below 10 000 rupees for domestic players only the plan is to revive the domestic mobile device industry which is currently dominated by the chinese firms now what will be the impact of such a move let's find out as recently as 2015 indian brands like micromax lava carbon and intex adorn the shelves of phone shops across the country and sold like hot cakes but then chinese phones started pushing indian handsets off the shelves slowly but steadily cut to 2022 local firms have been decimated indian brands combined have a market share of less than one percent in overall smartphone shipments from all brands including america's apple and south korea samsung meanwhile the top four chinese brands have a 63 percent market share whereas in the sub 10 000 rupee segment the market share of indian brands is around three to four percent while that of chinese brands is almost 90 percent now while discussions on the strategy for reviving the domestic mobile device industry are on there is a growing consensus within the government around the idea that the lower end of the market should be reserved only for domestic players chinese brands like xiaomi realme oppo vivo and transient might have to exit the segment of india's mobile market that is made up of handsets priced below 10 000 rupees such a move would be part of the plan to create indian champions in the sector which is a key objective of the production-linked incentive scheme the strategy could be executed either through an enabling framework or negotiations one option is to encourage foreign oems to push electronic manufacturing services in india and co-develop and co-design affordable phones with homegrown brands but who will fill the world if chinese firms are uh if we remove china base brand then um in among global brands there's only one name that pops into my mind is samsung so samsung that brand has presence in almost all the prize bands and on top of that they have a very uh you know uh dedicated supply chain and manufacturing base in india they have been exporting a lot of uh devices uh smartphones from india and they have the capacity to uh you know you know to flood the market uh will that be enough um it's difficult to say so among indian brands um i can see one uh major player which is jio with the jio phone next that can um you know jio geophone next has been ramping up its production since past few quarters we have seen that and they uh they will be in a prime position to uh you know leverage this issue as well apart from these two brands there are lava micromax so lava has been looking to make a comeback like these all all other indian brands are looking for a revival and making a comeback uh you know since 2018 and 2017. this can be an opportunity for them as well but if you talk about why these brands have considerably been going down in this particular segment is the scale provided by the chinese players the supply may be a problem uh you know in a short term because we are not sure that the capacity that that the other brands have will be able to satisfy the consumer demand in the near term due to government policies chinese companies have localized their production making india the second biggest mobile manufacturer after china in fact nearly all the phones sold in india are manufactured domestically in march in a big boost to the pli scheme apple's vendors committed to a minimum incremental production of 25 000 crore rupees of mobile devices in f523 this threefold jump in commitment over fi 22 has been made possible by the indian entry of apple's third contract manufacturer pegatron domestic firms lava micromax padgett electronics and utl neolinks also participated in the pli scheme for making mobile devices however their chinese counterparts who are allegedly on a subsidy bench have out-competed them analysts say that they have also been unable to become contract manufacturers for mobile firms thus their production levels aren't enough to take the incentives on offer slowly and steadily uh the local value addition in the component ecosystem in india is all already growing and we can't deny the involvement and the contribution of these china-based brand that have done in in the overall making in india initiative so most of the you know display providers or camera module providers which have set up shop in india these have been brought by the likes of samsung and these chinese brands still at this point of time if you see we are quite dependent on the change in ecosystem of the chinese greater china ecosystem for the procurement of components i don't think this as an inflection point that now value addition will go uh you know exponentially high this development comes at a time when the government is looking into cases of alleged tax erration by oppo vivo india and xiaomi investigation agencies are also looking into alleged money laundering violations by chinese mobile makers brands that will be affected if the ban is implemented are realme xiaomi vivo techno itel and infinix whenever it is launched the jio phone 5g which will be reportedly priced between 9000 rupees and 12 000 rupees could benefit from such a ban meanwhile other brands including indian ones will have an opportunity to increase their capacity however that might not be possible in the short term which might lead to a supply shortage with five pesos investments in securities market are subject to market risks read all the related documents carefully before investing manufacturing phones domestically will also boost the government's revenue in the long run meanwhile gst continues to be a major source of revenue for the government though it is still a work in progress gst commons compensation remains a bone of contention between the centre and the states as gst collections sold will this hit the state's case which have been calling for its extension watch our next report to find out at this month's meeting of the niti ayog's governing council chaired by prime minister narendra modi chief ministers of some non-bjp rule states reiterated their demand to extend the gst compensation stress regime for another five years according to a working paper by the national institute of public finance and policy punjab goa and chhattisgarh may face the most revenue stress once the compensation regime ends but the centre remained non-committal there was no word on it even after the previous gst council meeting in june which had coincided with the completion of 5 years of the gst regime as many as 16 states spoke on the compensation with some pitching for extension of at least a few years if not for five years the gst compensation mechanism was designed to make up for the loss of states's revenue on account of the regime's implementation five years ago the five-year compensation period ended in june this year the goods and services tax collections have remained upbeat for the past few months staying above rupees 1.4 trillion for five straight months ending july in fact july's collection was the second highest since the rollout of the indirect tax regime the strong gst collections could weaken the state's demand to extend the compensation beyond june 2022. former finance
secretary hasmok adiya in a recent interview with the business daily said that if the compensation is continued for too long it will act as a disincentive with increasing collections and lead to laxity of state bureaucracy the centre also said it had already cleared arya's worth rupees 85 000 crore and will front load the remaining so that states don't face any cash flow problem even if the compensation were to be extended there is the question of how it would be funded though the gst compensation says will be levied till 2026 it will only be used to repay the gst compensation says shortfall that arose in the last two years due to the pandemic the center had borrowed rupees 1.1 trillion in 2020 21 and rupees 1.59 trillion in 2021-22 in loans from the market to provide compensation to stress the gst collection especially in the last five months or so have been very very robust and when gst collections are robust they are robust not only for the central government they are also robust for the state government now there could be a need for states requiring more finances to fund their development schemes all states have also had significant health care costs on account of the two years of you know bank so there may be a genuine need for states to have more funds at their disposal to fund various development schemes and health care schemes and others but the need for more funds may not necessitate an extension of the compensation system because as i said earlier look one the collections are updates second for businesses the compensation says period it's already extended till 2026. so if now the compensation says spirit for the states is extended by let's say two years that means for businesses it gets extended till 2028 or 29 which possibly businesses have not bargained even all businesses which were subjected to compensation says all products which are subject to compensation says did their planning and pricing on the basis that this is a tax for five years and it will come to an end in june 2022. now it hasn't been extended for four years you know from that date so i would
ideally say that from a business perspective it should not be extended further at work on the other hand some states argue that their finances have not recovered yet from the pentemic state says revenue receipts declined by 0.6 percent in f521 and a similar decline was seen in fy 20. a recent rbi report highlighted that states's fiscal positions deteriorated sharply in 2020 and there are warning signs of building stress states relied on compensation to achieve 23 of the guaranteed revenue in 2019-20 and 36 percent in 2020-21 then there's also the question of whether the gst regime has helped in incremental revenue for states according to an india ratings report the state says gst on an average grew by 6.7 percent during fy 18 to fi 21 lower than the 9.8 percent growth recorded by the taxes subsumed under gst during fy 14 to fi 17. during fi 19 to fi 22 odisha was the only state having average sgst collection exceeding 14 with a total of 17 major states recording average sgst growth of below 10 percent the report said the compensation was promised based on the assumption that the state's gst growth rate will be 14 in the base year of 2015-16 does this warrant for a compensation extension here's what nr murthy vice chancellor dr br ambedkar school of economics university has to say you know what we see in the recent trends like increase in gst collections may be a kind of um aberration in a way where this increase is largely due to increase in the buoyancy of gst tax so that may be showing up in the overall connection but um it still um would say dent on the state fiscal positions um you know compared to what is promised that 14 you know growth in moral gst so there is in fact there are somebody estimated that there's almost some 30 dent on the overall revenues for the states so i think given that kind of situation there is a need for the central government to handle the states at least for a few few more months or few more quarters but i am not certainly saying that you should continue for five years clearly experts say there is no case for extension of compensation for another five year period but states need some support at least for a few more months in return state tax officers also need to be vigilant to check evasions and further improve gst realizations to move away from compensation support with five pairs out investments in securities market are subject to market risks read all the related documents carefully before investing let us now turn our attention to global central banks which are jacking up interest rates to bring down inflation so should you buy on dips or sell on a rally and which sectors are likely to do well here's you are part co-founder and director of alpha native fintech in a conversation with business standards puneet vadhva on his interpretation of the latest developments and the sectors he thinks that may do well going forward let's listen in hello and welcome to the show i am and we have with us today is co-founder and director at alphanet fintech welcome to the show it's about for the next two years do you think that the market is the bulk of the pain behind us now or will they continue to model along because the past few sessions we have seen a good rally in the global equity markets including india well i think because after a long time after some negotiations we saw some grain coming out of the war zone so i think that is something that the market cheered but at the same time you had this visit by the u.s speaker to taiwan and you know there are some repercussions of that so we do not know how far it will go uh there are some styles that are formed within the the japanese uh economic zone and stuff like that um so therefore i think if this is all contained and if if the new war doesn't develop and if the world war sort of tapers down then i think we are in for reasonably i mean we are getting into normal series really quickly but if that is not the case i think a deep recession is on the cards and then i think things will be quite bad and coupled with the quantitative tightening that we're going to see more aggressively as we go along on its part the reserve bank also has outlined its strategy to combat inflation uh other measures outlined in the policy announced recently uh what the markets expected one two do you think that the money will now you know move out from equity markets to safer zones like a fixed deposit where in the uh there's a short return and probably now it will not now be higher but i think the bank has handled the situation quite competently uh whether it is through um accommodation in the past quantitative accommodation through liquidity accommodation in the past and of course uh recent uh couple of hikes that we have seen over the last few months but i think even the latest policy has increased interest rates but uh in fact they are talking about uh inflation probably pre-leading off from uh from the sort of near peak levels that we see now so that being the case um we can probably see that india if you see most of these statistics as far as india is concerned whether it is gst collection whether it is petroleum consumption things are looking reasonably all right the only problem that we have seen of late is that 100 billion dollar trade deficit that we saw in the first quarter of fi 23 which is a cost of concern but i think uh if that is brought under some control because the rupees also has adjusted to this new reality quite well and if that is handled well then i think india would be seen as an island of growth where we have serious problems as far as growth is concerned elsewhere in the world so therefore i think indeed the indian market will continue to do reasonably all right despite the fact that elsewhere in the world we have serious problems but don't you think that the possible hikes in raid by the rbi could take demand well it would but despite all that we still have seen robust growth because there is uh we are coming from a low base that that is something that we have to appreciate so from that low base i think things are looking all right uh because economic activity gst collection is the best indicator of economic activity and that seems to be gathering steam and if that gathers team i think the fiscal position would probably be slightly better than what what it was envisaged earlier and uh while interest rates would have some influence on demand but that is not probably going to be very serious because but a lot of the inflation that was there was an account of uh supply constraints and those supply constraints are being addressed if you see the shipping shipping costs they come down dramatically over the last few weeks and so if these things sort of uh ease out then i think raw material costs input costs will come down and that would probably and even commodity prices have come off quite a lot so all these things will ensure that inflation is probably under reasonable control and even the hikes in interest rate might not be as steep as we initially thought so harford investors build an equity coppers now are still are the large caps still a safer option or the exposure to mid caps and small caps is advisable at the current juncture there is a huge uncertainty looming uh in the global scene uh with between the you know western world and uh the communist world fair so i think that is something that we have to watch very closely given this sort of uh heightened uncertainties i think it's much better to be in um well-managed large caps uh than in the middle and small caps because the meat and small caps require a lot more of research and a lot more of understanding of the business uh than the the blue chips as it were so therefore given the level of uncertainty i would uh advise retail investors to concentrate on the big large gaps which probably can whether any a potential store much better than the million million smaller cap stocks any particular sectors that you find the investment worthy of the current structure well i think the one that one sector that has improved dramatically over the last few quarters has been banking and financial services they've done extremely well even even june quarter results have been extremely good so it is uh basically banking financial services uh they are enablers of growth in a manner of speaking in the economy and they have they are in reasonably good shape now i think that is one sector that one one has to be invested in plus of course um capital goods uh infrastructure these are good sectors to be invested in because there's a lot more of investment that is going to come in modernizing the economy so on that road we'd like to thank you mr bhatt for joining us today we hope to see you soon my pleasure thank you very much or investment ids we download five pesa now investing easy and reporting with five pesos investments in securities market are subject to market risks read all the related documents carefully before investing you are bhatt believes that the indian economy is on a strong footing and can withstand the headwinds one of the parameters to assess the health of any economy is its road network roads are said to be the arteries of an economy india has the second largest road network in the world after the us but there's a flip side to it too our country also sees the maximum number of road accident deaths in the world and to prevent that the government will implement bharat end cap from april 1 next year here's more on it indian roads are the most lethal according to an estimate at least 14 people get killed every hour on the roads here the government recently told the parliament that the country accounts for the maximum number of road accident deaths the government's plan to introduce bharat new car assessment program or ncap is being seen as a step towards minimizing these casualties in line with the global standards union road transport minister nitin gatkari recently approved a draft notification of bharat encap new car assessment program the bharat encap is a rating based safety assessment of indian cars based on various parameters it will be aligned with global benchmark testing protocols once the bharathan cap program is adopted cars will be assigned a safety star rating from one to five and consumers will be able to make informed choices getting star ratings to their cars is a global standard followed by many leading automakers while different regions and countries have their own encap programs a global end cap was formed in 2011 to enhance cooperation between various end caps and promote vehicle crash testing in emerging markets how is the star rating assigned the star rating will be assigned to cars based on the scores achieved in various parameters the global end cap conducts front and side impact crash tests and the cars will be evaluated on various assessment tests such as child and adult occupant protection for instance in november 2021 the mahindra xuv 700 received a 5 star rating from global end cap for adult occupant protection and 4 stars for child occupant protection for bharat and capstar rating 2 the vehicles will be evaluated on adult occupant protection child occupant protection and safety assist technologies union minister gatkari said the star rating of cars based on crash tests will not only ensure structural and passenger safety in cars but also raise the protection of exports it will also act as an incentive for car makers as they move to advanced safety technologies to earn higher ratings i'm backed by the nation's trusted bank sbi the banker to every indian meanwhile senior executives of maruti suzuki have expressed concerns that the new safety regulations may lead to a rise in car prices and will deter first-time buyers that's all for today for more news and analysis please log in to our website www.businesshealthinstandard.com
and we'd also be back tomorrow morning with more stay tuned and thank you for watching if you like this video share it and subscribe to business standard for more news views and insights log on to www.business-standard.com do also follow us on youtube twitter facebook instagram telegram and linkedin
2022-08-12 16:50
