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Jahangir Aziz of JPMorgan is expecting the government to maintain fiscal deficit target of 3.2-3.3 percent.

"We do expect the government to make it (fiscal deficit) to 3.2 whether it is through finding new sources of revenue in the last few months or through contraction expenditure, most likely you will get 3.3 or slightly higher than 3.3 for the central government," he said.

Indian economy is expected to grow at 7.2 percent in 2018-19 against 6.7 percent in the previous fiscal mainly due to improvement in the performance of agriculture and manufacturing sectors, the Central Statistics Office (CSO) said on January 7.

The CSO estimate is, however, a bit lower than 7.4 percent growth projected by the Reserve Bank for the current fiscal.

"I have stopped focusing on levels of growth numbers given the uncertainty associated with them. So let us just focus on the trajectory of it. We had a decent first half and clearly there is a slowdown in the second half. At least the slowdown in the second half is consistent with what is happening elsewhere in the economy, what is happening to credit numbers, what is happening to credit situation including what has happened to global trade, which has slowed down quite a bit. So at least we have the first half and the second half consistent, which is a relief. The way we are looking at it, this slowdown is probably going to continue till the second calendar quarter of 2019. So the first quarter of next year and then once the impact of the liquidity and the financial conditions tightening fade, we should see some recovery beginning in the second half of calendar 2019," said Aziz.

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India's sugar production increased by 7 percent to 110.52 lakh tonnes in the first quarter of 2018-19 marketing year that started in October, as mills in Maharashtra and Karnataka started operations early, industry body ISMA said on Friday.

"As on December 31, 2018, 501 sugar mills were in operation in the country and have produced 110.52 lakh tonnes of sugar, as compared to 103.56 lakh tonnes produced by 505 sugar mills as on 31st December 2017," Indian Sugar Mills Association (ISMA) said in a statement.

Maharashtra and Karnataka sugar mills started their crushing earlier this year and this resulted in rise in output in the first quarter of 2018-19 marketing year (October-December 2018).

"However, due to substantially lower rainfall and white grub infestation, Maharashtra will produce significantly lower quantity this year as compared to last. Overall, the country is expected to produce much less sugar this season as compared to last," ISMA said.

Earlier, the association had estimated that production could fall to 315 lakh tonnes in 2018-19 from 325 lakh tonnes in the previous year. The country's annual domestic demand is 260 lakh tonnes.

As per the data, mills in Uttar Pradesh have produced 31 lakh tonnes during October-December 2018, with an average recovery of 10.84 percent as compared to 33 lakh tonnes with an average recovery of 10.14 percent in the corresponding period of the previous year.

Although average recovery of sugar from cane is higher, the sugar production in UP would be lower as the sugarcane yield per hectare is lower than last season.

In Maharashtra, sugar production rose to 43.98 lakh tonnes from 38.39 lakh tonnes. The average sugar recovery so far is 10.50 percent as against 10.23 percent achieved in the corresponding period of 2017-18.

"Due to lower availability of cane in Maharashtra and an early start (of operation), the mills therein would be closing much earlier than last year," ISMA said.

Sugar production in Karnataka increased to 20.45 lakh tonnes from 16.83 lakh tonnes during the period under review.

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Indian companies have raised Rs 63,744 crore through various equity market routes in 2018, a slump of 60 per cent from the all-time high of Rs 1.6 lakh crore garnered in the preceding year, according to data analytics major Prime Database.

Apart from equity, firms have also mopped up Rs 29,944 crore through public issuance of bonds during the year.

Out of the cumulative Rs 63,744 crore garnered through public equity markets in 2018, a large chunk or Rs 33,244 crore has been mopped up from initial public offers (IPOs).

Besides, qualified institutional placement (QIP) accounted for Rs 16,077 crore, offer-for-sale (OFS) through stock exchange mechanism got Rs 10,678 crore and Infrastructure investment trusts (InvITs) helped raise Rs 3,145 crore.

As per the report, 24 mainboard IPOs collectively raised Rs 30,959 crore. This was a decline from Rs 67,147 crore raised through 36 IPOs in 2017.

However, small and medium enterprise (SME) platform witnessed hectic activities in the IPO space, raising Rs 2,254 crore in 2018, much higher than Rs 1,679 crore collected last year.

According to Prime Database Managing Director Pranav Haldea, the overall response from the public to the mainboard IPOs in 2018 was good.

The largest IPO this year was from Bandhan Bank for Rs 4,473 crore.

Many IPOs received mega response including that of Apollo Micro Systems, which was subscribed by 176 times, followed by Amber Enterprises (115 times), RITES (67 times), HDFC Asset Management (60 times), Galaxy Surfactants (14 times) and Bandhan Bank (11 times).

Of the 24 IPOs which got listed, Apollo Micro Systems gave a return of 65 per cent followed by HDFC Asset Management (65 per cent), Amber Enterprises (44 per cent), Lemon Tree Hotels (28 per cent), Bandhan Bank (27 per cent) and 15 per cent each by RITES and Galaxy Surfactants.

However, given the correction in the markets in the second half of the year, 15 of the 24 IPOs are presently trading below the issue price.

Going into 2019, not too much action is expected in the first half of the year till the conclusion of the general elections, despite the fact that the IPO pipeline is huge, as 59 firms already have Sebi's approval for Rs 63,170 crore-IPO and another 19 companies looking to raise Rs 18,067 crore are awaiting the regulator's go-ahead, Haldea added.

The report said fund raising through OFS fell to Rs 10,678 crore in 2018 from Rs 18,094 crore last year. The largest OFS was that of Coal India in October this year (Rs 5,274 crore) followed by Larsen & Toubro Infotech (Rs 1,846 crore).

A total of 25 companies mobilised Rs 16,677 crore through QIPs. This was 73 per cent lower than Rs 61,148 crore raised in the previous year. The largest QIP of 2018 was from Idea Cellular that raised Rs 3,500 crore.

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Bringing Christmas cheer for tourists, the Western Railway (WR) on December 25 introduced a special heritage train on the picturesque Patalpani-Kalakund section in Madhya Pradesh's Ratlam district.

Railways ministry had decided to create infrastructure to preserve the British era Patalpani-Kalkund metre gauge rail line, which is part of Western Railway's Ratlam division, a senior WR official said on December In26.

The metre gauge line has since been converted into broad gauge line.

The 9.5-km route passes through several tunnels offering a spectacular view of waterfalls and lush green mountain ranges.

The previous metre-gauge line had been constructed by Britishers about 150 years ago, the official said.

"Stations, rest houses and other service buildings on the Patalpani-Kalkund section are being decorated along with the development of about two dozen tourist spots on WR's first heritage section in Ratlam division between Patalpani and Kalakund stations, to attract tourists around the globe," said WR Chief Spokesperson Ravinder Bhakar.

Four tunnels and 29 sharp curves along the Patalpani-Kalakund route makes it a memorable trip for tourists.

The heritage train will depart from Dr Ambedkar Nagar station at 11.05 AM and will reach Kalakund at 1.25 PM. It starts from Kalakund at 2.55 pm and will arrive at Dr Ambedkar Nagar at 3.40 pm.

The train has two coaches, one reserved and another unreserved one, Bhakar said.

"The fare per passenger for 12 seats in first three rows in the reserved coach is Rs 240 for the entire to and fro journey while the same is Rs 200 per person for the rest of the rows of the coach. The fare will be Rs 20 per passenger in unreserved compartment," Bhakar said.

A statement issued by the WR said Railway Board chairman Ashwani Lohani had directed railway officials to develop the route as a heritage section.

Lohani had directed the officials to run the special heritage train during his last inspection conducted in September this year, it said.

WR General Manager A K Gupta supervised the works on developing the gauge conversion.

More than 25 workers from Lower Parel workshop in Mumbai were deployed in the Bikaner workshop who contributed in refurbishing the heritage train coaches, the statement said.

Bhakar said Patalpani railway station is the first station constructed on Dr Ambedkar Nagar-Khandwa metre gauge section during 1874-1878.

"In 2008, Union cabinet approved the proposal of converting this meter gauge section into a broad gauge section after which railway decided to preserve this section by converting it into a heritage railway section", he added.

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India should have three broad tax slabs of zero, 5 percent and a standard rate, which will replace 12 and 18 percent Goods and Services Tax (GST) rate, finance minister Arun Jaitley said today.

As an exception, luxury goods such as big cars and demerit goods such aerated drinks and tobacco products, could be taxed at a higher rate.

“A future roadmap could well be to work towards a single standard rate instead of two standard rates of 12 percent and 18 percent. It could be a rate at some mid-point between the two,” Jaitley said in a blog post.

Currently, 1,216 goods and services fall into four broad tax slabs- 5, 12, 18 and 28 percent. Broadly, 183 items are taxed at zero rate, 308 at 5 percent, 178 at 12 percent and 517 at 18 percent and 27 items at the highest tax bracket.

The 28 percent slab is now a dying slab, Jaitley said, adding that the overhaul of tax slabs will take ‘reasonable time’ when tax collections ‘rise significantly’.

Jaitley’s comments come soon after the GST Council on Saturday slashed rates on 17 goods and six services, such as televisions, movie tickets, video games, among others, restricting only 27 items in the highest tax slab of 28 percent. New rates will be applicable from January 1, 2019.

“Our next priority will be to transfer cement into a lower slab. All other building materials have already been transferred from 28 to 18 and 12 percent. The sun is setting on the 28 percent slab,” he said.

Apart from reducing rates, the Council also rationalized and made clarifications related to certain goods, a move that is expected to boost consumption. Essentially, the 28 percent slab will mainly consist of demerit goods such as aerated drinks, tobacco products and automobile and auto parts, along with other items such as cement, air-conditioners, molasses and dishwashers.

In the last one and half years, the Council has significantly pruned the list of 226 items placed in the highest tax slab of 28 percent.

The revenue impact of the rate rationalisation exercise will be Rs 5,500 crore annually and Rs 1,375 crore for the remaining three months of the financial year 2018-19.

It is also learnt that some states had opposed rate cut in the last Council meeting as they wanted move’s impact on revenues to be fleshed out in greater detail before levies are lowered.

Taking a jibe at Congress, Jaitley said ‘those who oppressed India with a 31 percent indirect tax and consistently belittled the GST must seriously introspect. Irresponsible politics and irresponsible economics is only a race to the bottom’.

He further said that new indirect tax regime has helped in controlling inflation as well as tax evasion, which was rampant in the pre-GST regime, where there was a cascading effect of tax on tax.

“The rate of taxation were exorbitantly high. The standard rate of VAT and excise was 14.5 and 12.5 percent respectively. To this could be added the CST and the cascading effect of tax on tax. The standard rate thus became 31% on a large number of commodities. The assessees had only two options – either to pay a high rate of tax or evade it,” he said.

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The Goods and Services Tax (GST) Council will meet on December 22 amid heightened expectations that the panel will cut rates on several items, although some states want the move’s impact on revenues to be fleshed out in greater detail before levies are lowered.

A discussion on the revenue position of the Centre and states, easing refund-related rules for exporters, is also likely to be on the agenda.

The Council, headed by finance minister Arun Jaitey is the highest decision making body of the new indirect tax system that came into effect from July 1, 2017.

It is also expected to take up the issue of transferring ownership of the IT backbone GST Network in a government owned company, a proposal that was approved by the Cabinet in September, sources said.

In addition, there could be discussions on reducing cess on plug-in hybrid cars, which currently falls in the 28 percent tax slab. However, the overall tax incidence for the green vehicle is 43 percent right now.

Also read: Exclusive | Centre may soon cut tax on hybrid cars to 35 percent

It is learnt that the road ministry has proposed bringing down the tax liability to 35 percent.

Rate cuts have always been a contentious issue as the Centre and states have to come to a consensus. In that light, the meeting assumes all the more significance, coming as it does after the recent elections in five states that saw the Congress wresting power in all the three Bharatiya Janata Party (BJP)-ruled states.

Days ahead of the meeting, Prime Minister Narendra Modi said the government wants to ensure that ‘99 percent things’ attract GST at 18 percent or lower rate.

“Today, the GST system has been established to a large extent and we are working towards a position where 99 per cent things will attract the sub-18 percent GST slab,” Modi said, while also hinting that the highest  tax slab will be restricted to luxury and sin goods.

Also read: Working to bring 99% things in sub-18% GST slab: PM Narendra Modi

A range of goods from air conditioners to dishwashers, from television sets to digital cameras could become cheaper,  if the Council expected to slashes rates to 18 percent on all products in the 28 percent slab, except demerit goods, cement and automobiles.

This could effectively set 18 percent as the highest GST tax slab, except only two broad categories of goods and services.

Over 1,200 goods and services fall into four broad tax slabs- 5, 12, 18 and 28 percent. Currently, there are close to 40 goods and services in the 28 percent slab, which comprises demerit and luxury goods, among other items.

The move comes barely four months ahead of the crucial Lok Sabha elections in April-May, 2019. The cut in rates, however, could affect GST revenues, given that the collections are still short of the budgeted target.

The last major round of rate cut happened in July when the Council decided to cut tax on 80 items. The government, then, had to forego revenue worth of Rs 10,000 crore-Rs 11,000 crore annually.

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Gujarat has emerged as the best performer in developing startup ecosystem for budding entrepreneurs, according to the ranking of states done by the department of industrial policy and promotion (DIPP).

Other top performers that followed the western state were Karantaka, Kerala, Odisha and Rajasthan.

"This exercise will help all the states to improve the ecosystem for promoting startups," DIPP Secretary Ramesh Abhishek said Thursday.

The rankings are based on the initiatives taken to develop startup ecosystem for promoting budding entrepreneurs.

A total of 27 states and three union territories participated in the exercise.

The ranking framework covers seven areas of intervention and 38 action points, including policy support, incubation centres, seed funding, angel and venture funding and easier regulations.

The government launched Startup India Action Plan in January to promote budding entrepreneurs in the country. The plan aims to give incentives such as tax holiday and inspector raj-free regime and capital gains tax exemption.

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The Reserve Bank of India (RBI) on December 18 said it would inject Rs 50,000 crore into the system in January 2019 through a purchase of government securities.

To discuss the same, CNBC-TV18 spoke to MS Gopikrishnan, head macro trading, SA and financial markets at Standard Chartered Bank and Ananth Narayan, professor of SPJIMR.

“I think the size seems to be on the larger side. Markets were anticipating OMOs till March but the number was much smaller. I would probably put something like Rs 20,000 crore per month from January to March. Against that, we are seeing roughly Rs 50,000 crore per month which seems to be on the higher side. Markets will be surprised on the positive side and I think that will definitely have an impact on the yields in the morning. Just not immediately, in the run up to March, we will probably looking at yields falling further. Oil falling by 7-8 percent is definitely going to add to the positive sentiments to bond markets,” said Gopikrishnan on December 19.

Talking about how the OMO could provide liquidity support to the bond markets, Narayan said, “Overall for this financial year, assuming that they continue with Rs 50,000 crore from January to March, RBI would have effectively purchased Rs 3.36 lakh crore of government securities, which is a staggering 80 percent of the net issuance budgeted for this year by the central government. That is a huge amount of monetisation. It is a huge amount of liquidity support. Clearly, bond markets will celebrate Christmas and Diwali all put together for now. That trend will continue. It does raise larger questions about the medium-term but who bothers about the medium-term, we will worry about it later on."

“Normally when you have fiscal slippages and you have monetary easing to support that kind of fiscal slippages, you would be concerned about inflation, you would be concerned about financial stability but clearly with consumer price index (CPI) prints surprising on the downside, 2.3 percent is a really low number and with oil prices coming off, those fears are relegated for the time being. The nature of our fiscal is not looking good. While we celebrate and while we feel happy about what is going on right now, farm loan waivers as it is even before these farm loan waivers started, we were having sharp reduction in tax collections, we were looking at a one percent slippage before accounting jugglery comes into play and plus now we have a competitive populism being the order of the day. It doesn’t augur well for the quality of the fiscal deficit,”

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The average ticket size of life insurance policies has jumped 2.45 times in almost 10 years. According to data from Kotak Institutional Equities, the average premium collected from a retail customer for a regular payment product was Rs 9,942 in FY09 which grew to Rs 22,549 in FY18. For the eight months of FY19, the average premium rose to Rs 24,395.

A rise in the ticket size means customers are willing to pay a higher premium for products. There is a huge gap that exists between the insurance required and the one taken by the policyholders.

Under-insurance is a reality

India is the second-most underinsured country in the world with an insurance gap of $27 billion (approximately Rs 1.98 lakh crore). A survey by specialist insurance and reinsurance market Lloyd’s said while India’s overall level of insurance penetration (total insurance premiums as a percentage of the gross domestic product) has increased 0.2 percent since 2012, it continues to have one of the highest underinsurance levels globally.

Insurance gap refers to the gap between the actual sum assured required versus that taken. For example, if the insurance needed is Rs 100 and an individual has taken Rs 40, the insurance gap is Rs 60.

Banks vs non-bank insurers

The data showed that insurance companies with banks as a large partner have a much higher ticket size. For instance, ICICI Prudential Life Insurance had an average ticket size of Rs 80,365 for the April to November 2018 period.

Canara HSBC OBC Life Insurance came second with an average ticket size of Rs 70,135. However, this was a drop from Rs 82,365 in FY09.

LIC versus the rest

Unlike private sector companies which sell a large proportion of unit-linked insurance plans (Ulips), Life Insurance Corporation of India (LIC) predominantly sells traditional products. The average ticket size for LIC was Rs 13,943 for the April to November 2018 period compared to Rs 5,885 for FY09.

For private insurers, the average for the eight months of FY19 was Rs 52,939 that rose from Rs 18,686 in FY09. The premium collected per policyholder (retail) stood at Rs 52,943 on an average.

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Manas Chakravarty

At last, we know why the central government was so keen on trying to get the Reserve Bank of India (RBI) to part with its reserves or to speed up bank lending. It was a bit of a mystery why the government of the fastest-growing large economy on the planet was so concerned about growth. The results of the state elections tell us that huge sections of the population were being left out of that growth and the ruling party knew that and was terribly worried about it.

The signs of disenchantment have been visible for quite some time. As we pointed out a few days ago, the Reserve Bank of India’s consumer confidence survey showed widespread pessimism about the economy, which has now been translated into votes against the government.

Is there reason for concern? These were state elections, where local issues dominate and things may well be different in the national elections. More fundamentally, as some economic commentators point out, do governments really make all that difference? After all, the UPA-1 coalition government had the support of the communists and what could be more like the kiss of death for markets than communist support. And yet we had a booming economy and soaring markets from 2004-08.

But consider the euphoria in the markets five years ago at the prospect of a Modi government. That optimism was based on the hope that this would be a very different government, especially from the one that preceded it. While no Indian government can afford to alienate international investors and therefore has a restricted menu of choices, it’s also true there’s considerable policy leeway, as evident from the policies, or lack of them, of UPA-II.

True, the high hopes from the Modi government have been dashed. But consider what this government has achieved. Its reforms include: an expansion of market share for the formal economy through the introduction of the Goods & Services Tax, allowing contract labour in all industries enabling businesses to hire and fire, increasing the tax to GDP ratio mainly through an increase in indirect taxes, rolling back subsidies, bringing in an inflation-targeting regime at the central bank, keeping the fiscal deficit under control, enacting a bankruptcy law to end the promoter raj, initiating a clean-up of the real estate sector through RERA, ensuring private sector participation in social programmes such as the affordable housing programme and the health insurance scheme and lastly, ensuring that subsidies are well-targeted through the direct transfer of benefits to bank accounts.

Many of these reforms are an attempt to change the structure of the economy. They are all measures that strengthen the foundations of capitalism in the country. To be sure, the government hasn’t satisfied the votaries of privatisation, demonetisation was a disaster and it has also tried to bend institutions to its will, but then it would be silly to think that this government is a liberal one. Rather, its model is the East Asian one of state-directed capitalism rather than a free market one.

Some complain the government has also had to offer sops to the masses, such as farm loan waivers and the promise of higher minimum support prices. But in a poverty-stricken democracy sops for the electorate are inevitable. What is far more important is that it has attempted to transform India into a hard state, emulating the East Asian regimes which saw rapid growth. The prime minister’s admiration for the Chinese model is well-known.

An added advantage of the ruling party is that it has a second string to its electoral strategy — its Hindutva ideology. This ideology is an attempt to use nationalism, tradition and religion to paper over the gross inequalities and myriad fissures of Indian society, so that the all-important work of capital accumulation necessary for development continues unhindered. In a democracy, there are always pressures to redistribute the surplus, thus leaving less capital for growth. The ruling party’s ideology acts as a counter to this tendency, using religion and chauvinism as weapons for mass mobilization, keeping the masses distracted from economic issues.

But development is also a very disruptive process, destroying livelihoods and uprooting communities. The reforms are at a substantial cost and the benefits often come with long lags. New winners are created, but there are also many losers. The state elections have shown that those who have been left behind are striking back.

The capitalism — with Hindutva — characteristics model of the last four years has attempted to take the country down a road very different from the one it had been on since Independence.  Some believe it is the path to prosperity, others that it will lead to disaster. This model has been badly mauled in the state elections. The national elections next year will be its acid test.