Growth may not be in 6.75-7.5% range: Economic Survey

Read in English - Economic Survey says growth may not be in 6.75-7.5% range

• GDP Growth during 2015-16 was 7.9%. GDP Growth during 2016-17 was 7.1% ... against anticipated 8.5% due to demonetization. 
• GDP Growth during 2017-18 is projected to be 7.7%, but the Economic Survey has a pessimistic view on growth forecast with downward risk to the earlier estimated growth range of 6.75-7.5% GDP growth for 2017-18. Growth is expected to undershoot the earlier range.
• CPI inflation to be below 4% by March this fiscal, which only indicates anemic condition of economy.
• The challenges included are appreciation of the rupee, farm loan waivers, rising stress on balance sheets in power as well as telecom and transition issues arising from implementing the Goods and Services Tax (GST).
• Fiscal slippages due to series of deflationary impulses that are weighing on an economy yet to gather its full momentum.
• Farm loan waivers by states would touch Rs. 2.7 lakh crore and could cut economy demand by up to 0.7% of GDP.
• Fiscal deficit will be 3.2% of GDP in 2017-18 as compared to 3.5% last fiscal.
• Since February 2017, the rupee has appreciated by about 1.5%.
• The bank NPA's rose from 9.2% in Sep 2016 to 9.5% in Mar 2017.
• Reliance Jio’s entry with free voice and data has led to a brutal price war in the telecom industry, hurting revenue and profitability of incumbents amid ballooning debt, increasing the sector’s share of non-performing assets, which is a cause for worry, the Economic Survey said. Ironically, Reliance Jio was funded by same banks to the tune of Rs.1.80 lakh crores which has exposure in telecom sector to the tune of Rs. 5 lakh crores and their diminished EBITDA has lost its ability to service massive debt. 
• A positive unintended consequence of demonetization is that about 5.4 lakh new tax payers* have joined the tax net post note ban, which probably could have been achieved even without note ban.
  *mostly between Rs.2.50 & Rs.3.00 lakhs taxable income with aggregate tax payment less than Rs.100 crores.

Read - Economic Survey is a wake-up call for Centre

Even as the unintended consequences of  arrogant, audacious & attrocious demonetization of Modi are surfacing at regular intervals and estimated to normalize in about two years time, the hurriedly implemented mangled GST, with in six months of note ban, has created avoidable numerous troubles to trading, manufacturing and informal sectors disturbing supply chain of commodities is unpardonable another adventure by Modi for political and personal glorification gains rather than in public and national interest. Almost all segments of economy are suffering and the most prominent being loss of millions of jobs and distressed agriculture. For increasing speed of travel, if your car driver presses brakes instead of accelerator, again and again, what will you do? Simply change the driver. Right. Driver Modi must be replaced, if our nation needs to progress.

Reliance Communications is sinking

• Reliance Communications, 7th largest telecom service provider posted its yearly loss of Rs.1,283 crores.
• Its debt stood at Rs.45,733 crores, as on March 2017, prompted banks raise red flag.
• Rating agencies downgraded RCom over debt concerns.
• In seven days, RCom stock tanked 33%.
• The lenders has granted seven month standstill on the debt.
• By Dec 2017, it will have to conclude merger deals with Aircel and sale of 52% Reliance Infratel's equity to Brookfield infrastructure for Rs.25,000 crores to pare down its debt to Rs.20,000 crores.
• Debt pile up was due to its decision to switch from CDMA to GSM and purchase of 3G spectrum at Rs.8,585 crores.
• And then company landed in debt trap i.e. borrowing money to repay debt.
• Reliance Jio's aggressive marketing has impacted smaller companies like RCom losing its subscribers. While Airtel experienced severe contraction of profits all others viz. RCom, Idea, Vodafone etc slipped into losses.
• They expect reduction in market share resulting in pressure on margins.
• In last quarter RCom lost 29.5 million customers, whereas Airtel and Idea gained 22.41 and 14.4 million customers.
• The current issue is partly due to delay in shifting from CDMA to GSM that resulted in its low value subscriber base. Initial attempts to upgrade to GSM has not yielded any good results.
• Today it has 62,000 cell sites compared to Idea-Vodafone's 273,000 and Airtel's 185,000. 
• As investments slowed so are subscriber additions, as people chose operators with superior networks.
• RCom plans to sell of its Dhirubai Ambani Knowledge City's 135 acres in Navi Mumbai and 4 Acres property near Connaught place New Delhi to retire its remaining debt.
• RCom proposed to surrender part of spectrum to escape payment liabilities to DoT. 
• Merged entity AirCom of RCom-Aircel-MTS with its 10% market share, sub optimal quality subscribers, less spectrum and debt burden will find it hard to service with its prevailing EBITDA. 
• It is even more tricky to incur capex for modernisation given its financial health and inability to raise bank loans.
• Anil Ambani's elder brother, Mukesh Ambani, might not allow RCom to die because of its name "Relaince" attached to it.

My View:

While AirTel, Idea and Vodafone continuously invested in capex, spectrum and marketing to increase its presence and value, RCom did nothing of that sort and landed in trouble. Also banks are to be blamed which funded Reliance Jio to the tune of Rs.180,000 crores only to trouble the saturated telecom sector pulling down almost all telco's with combined exposure by banks to the extent of Rs.400,000 crores. SBI Chairman expressed concerns about telco's combined EBITDA dropping to levels where debt servicing becomes hard and their loans might get turned into NPA's. Needless to say like in any other case, here too promoter owners will walk off with riches, banks will get charge of worthless assets and will have to take huge haircut. And then PSU Banks will look at centre to recapitalize them. Same old story repeating.

Telcos in India deep trouble

• Until a year ago, all Telcos in India were fairly well off making impressive profits with stock prices attracting investors.
• With Reliance Jio launching its operations, a year ago, with its inaugural FREE offers compelled the existing Telcos to spend massive amounts in advertising and customer retention activities that resulted in erosion of their handsome profits and landing them with huge losses.
• The data with us suggests that the total EBITDA (earnings before interest, taxes, depreciation and amortization) of the sector on an annualized basis is Rs 65,000 crore, which is clearly unsustainable for debt of more than Rs 4 lakh crore," the SBI chairperson said.
• Now Indian banking sector already reeling under insurmountable NPAs of over Rs.7 lakh crores stands exposed to another huge risk of over Rs.4 lakh crores.
• While Mukesh Ambani's borrowings from Banks is over Rs.1,80,000 crores and his investment in Reliance Jio is estimated at Rs.1,50,000 crores against its original estimate of Rs.85,000 crores. His strategy was to destroy competitors and monopolize Telco business with its advanced VOLTE technology is dealing deadly blow to existing Telcos namely Airtel, Vodafone, Idea, Reliance Communications, BSNL etc.
• The ongoing consolidation in Telco sector in India will result in job losses to the extent of 40,000 this year.
• Mukesh Ambani used Bank's money to push Banks to the brink of collapse. It is a matter of time Telcos loans of Rs. 4 lakh crores will become NPAs. How Reliance Jio will pay back its Rs.1.5 laks crores is  a million dollar question.
• The loans to Mukesh Ambani were granted by Banks during Modi's tenure i.e. during past three years as quid pro quo for funding his 2014 election campaign expenditure.
• Whether Mukesh Ambani will be able to make profits for Reliance Jio amidst chaos in Telco sector and repay banks is another million dollar question. How many more years he will hang on, we will have to wait and see.
• In all Indian Banks stands exposed to monumental risk of Rs. 5.50 lakh crores in Telco segment, in addition to existing NPAs of over Rs.7 lakh crores.
• Since three years Banks were unable to invest in infrastructure segment and other high value projects due to paucity of funds. This has resulted in GDP growth looking southward in addition to the deadly blow dealt by mindless demonetization 2016.
• Meager budget support for inducing additional capital, public sector banks are simply biting time and recent ordinance with code for NPAs recovery being worthless and with discouraging global parameters, Indian economy today is spiraling down at breakneck speed with all economic indices looking southward there is no magic wand to halt this except looking towards sky for 'ache din'. But 'ache din' will come only when decisions are sound and implementation is faultless but not for rhetoric and high decibel shouting.

My View:

A decade ago while launching Reliance Infocom services Mukesh Ambani's statement is paraphrased as "I wouldn't be interested in a bigger piece of smaller pie but would rather aim at smaller piece of larger pie". But today he stands exposed to bulldozing competitors with his money power and establish monopoly in Telco market and eventually loot the consumers. All this facilitated by none other than Modi. While bank NPAs are result of reckless activities by UPA regime, destruction of Telco sector and monopolizing by Reliance Jio and further burdening of Banks and job losses is the creation by Modi himself.

Modi's face saving after thoughts

Reliance's Jio full page advertisement with Modi's photograph was in SEPT 2016, by PAYTM is in NOV 10, 2016 and KVIC's diary & calender ejecting Gandhi's charkha with Modi's picture is more than a month old. 

Recollect Vajpayee ordering reinstalling Nehru's removed wall photo in Ministry of External Affairs in 1977 was at first sight indicates his attitude and respect for Nehru.

Modi  expressing his discomfort with Reliance Jio, PayTM and KVIC after several months of happening through government channels indicates this is an 'after thought' only to save himself from backlash rather than his respect for Gandhi or laws of the land.

Reliance Jio 4G Plans - A probable fraud

Reliance is company with profit as its stated prime objective and not a charity institution.

Consider the following points:

• They had invested over Rs. 100,000 crores during the past few years and has to make profits, not running social service nor a charity.
• Voice calls are not separately billed but consumes your data quota.
• Much publicized Rs.50/GB is applicable for high end customers paying Rs.2,500 or more monthly charges. At low end it as much expensive as others or even more.
• The hyped 4G GSM hand set at Rs.2,999 probably comes with lots of limitations and may turn out to be a paper weight especially for power users.
• Notwithstanding its real intentions, Reliance Jio unleashing price war will definitely bring down mobile tariffs and consumer stands benefited.
• In order to safeguard their customer base existing players will surely reduce tariffs and Reliance goal to rope in 10 crore customers might not happen so easily unless they address all customer issues in time. 
• For majority rural & poor voice only users Reliance Jio means nothing. BSNL prepaid still is the best.
• Existing players have invested several lakhs of crores won't close their shop and handover their customers to Reliance Jio so easily. They will invoke all legal and commercial fight with this predator.
• Finally, the Regulator i.e. TRAI is duty bound to ensure level playing and protect from illegal activities of Reliance Jio and ensure existing players survive.
• TRAI should examine pricing structure of Reliace Jio and if found its tariffs are with deliberate loss making and are aimed at pushing competitors into red and dissolution, severe penalties must be imposed on Reliance Jio.
• Finally no one should be allowed to go into the level where competition gets destroyed and industry monopolized to protect consumers, in long run. That is the spirit of democracy. Competition is essential for competitive pricing, customer service, innovation and quality assurance.

While BSNL's CMD has stated that they have no choice except to match Jio's tariff by tariff to stay put in business and retain customers. Other TELCO's are yet to announce their plans to retain their customers. If they match Jio's tariff's they lose revenue and if they don't they lose customers and in both cases their bottom line would take severe beating. To stay in business they have to follow BSNL's strategy. No other way.

I would suggest to wait for Reliance Jio operations stabilize and once customer benefits are visible and quantifiable then only migrate considering all aspects. Never trust blindly, even if their past track record is good.