Union Minister Piyush Goyal addresses a press conference, in New Delhi on July 30, 2024.
| Photo Credit: PTI

Commerce and Industry Minister Piyush Goyal on July 30 said there is no rethinking in the government to support foreign direct investments (FDI) from China as was pitched by the Economic Survey recently.

He said it was a report that always speaks about new ideas and gives out their own thinking.

The Survey, he said, is not at all binding on the government and there is no thinking on supporting Chinese investments in the country.

“There is no rethinking at present to support Chinese investments in the country,” the Minister told reporters in New Delhi.

In 2020, the government made its approval mandatory for FDI from countries that share landed border with India.

Countries which share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.

The Minister was responding on a pitch made by the pre-Budget Economic Survey on July 22 for seeking FDI from China to boost local manufacturing and tap the export market.

As the U.S. and Europe are shifting their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then, export the products to these markets rather than importing from the neighbouring country, the survey has said.

India faces two choices to benefit from the ‘China plus one strategy’ — it can integrate into China’s supply chain or promote FDI from China.

“Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the U.S., similar to how East Asian economies did in the past. Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade. This is because China is India’s top import partner, and the trade deficit with China has been growing,” it has added.

China stands at the 22nd position with only 0.37% share ($2.5 billion) in the total FDI equity inflow reported in India from April 2000 to March 2024.

The ties between the two countries nosedived significantly following the fierce clash in the Galwan Valley in June 2020 that marked the most serious military conflict between the two sides in decades.

The Indian and Chinese militaries have been locked in a stand-off since May 2020, and a full resolution of the border row has not yet been achieved, though the two sides have disengaged from several friction points.

India has been maintaining that its ties with China cannot be normal unless there is peace in the border areas.

Following these tensions, India has banned over 200 Chinese mobile apps like TikTok, WeChat, and Alibaba’s UC browser. The country has also rejected a major investment proposal from electric vehicle maker BYD.

However, earlier this year, the Competition Commission of India (CCI) cleared JSW Group’s proposed acquisition of a 38% stake in MG Motor India Pvt. Ltd.

MG Motor India is a wholly owned subsidiary of Shanghai-headquartered SAIC Motor.

Though India has received minimal FDI from China, the bilateral trade between the two nations has grown multi-fold.

China has emerged as the largest trading partner of India with $118.4 billion two-way commerce in 2023-24, edging past the U.S. India’s exports to China rose 8.7% to $16.67 billion in the last fiscal.

The main sectors that recorded healthy growth in exports to that country include iron ore, cotton yarn/fabrics/made-ups, handloom, spices, fruits and vegetables, plastic and linoleum.

Imports from the neighbouring country increased 3.24% to $101.7 billion. The trade deficit widened to $85 billion in the last fiscal year from $83.2 billion in 2022-23.

According to the commerce ministry data, China was India’s top trading partner from 2013-14 till 2017-18 and in 2020-21. Before China, the UAE was the country’s largest trading partner. The U.S. was the largest partner in 2021-22 and 2022-23.

Union Finance Minister Nirmala Sitharaman.
| Photo Credit: PTI

Finance Minister Nirmala Sitharaman on July 23 proposed to increase the rate of securities transaction tax (STT) on futures and options (F&O) trade to discourage retail investors’ participation in the risky instrument.

“It is proposed to increase the rates of STT on the sale of an option in securities from 0.0625% to 0.1% of the option premium, and on sale of a futures in securities from 0.0125% to 0.02% of the price at which such futures are traded,” she said in the Union Budget speech.

This came after the Economic Survey flagged concerns over rising retail investors’ interest in derivative trading. The survey stated that speculative trade has no place in a developing country.

It also pointed out that the sharp increase in retail investor participation in F&O trading is likely driven by humans’ gambling instincts.

“Derivatives trading holds the potential for outsized gains. Thus, it caters to humans’ gambling instincts and can augment income if profitable. These considerations are likely driving active retail participation in derivatives trading,” according to the Economic Survey 2023-24.

Recently, Sebi chief Madhabi Puri Buch also cautioned investors against heavy bets on F&O. Before that, Ms. Sitharaman and Chief Economic Adviser V, Anantha Nageswaran flagged the growing risk of F&O trading for retail investors.

F&O trading continues to grow in popularity, and market experts believe that this is driven by the potential for profit and the rising trading volumes. Experts said investors who lack understanding or risk appetite should avoid derivatives trading.

The segment’s popularity is evident from its massive growth, with the monthly turnover in the F&O segment reaching ₹8,740 lakh crore in March 2024, compared to ₹217 lakh crore in March 2019.

At the same time, the average daily turnover in the equity cash segment was ₹1 lakh crore, while the F&O segment saw an average daily turnover of about ₹330 lakh crore.

Futures and Options trading involves contracts that derive their value from an underlying asset, such as stocks or commodities. Futures contracts obligate the buyer and seller to transact at a predetermined future date and price, while options give the holder the right, but not the obligation, to buy or sell the asset at a set price within a specific period.

These financial instruments are used for hedging risks, speculating on price movements, and arbitraging price differences. However, they come with significant risks, including leverage risk and market volatility, which can lead to substantial losses.

Futures and Options trading is largely being utilised as a speculative tool for quick profits in the stock market. However, the reality is that most retail investors are losing money.

A study by the Securities and Exchange Board of India (Sebi) revealed that 89 per cent of individual traders in the equity F&O segment suffered losses, with average losses of Rs 1.1 lakh in FY22.

Additionally, there was an exponential increase in the F&O segment participation during the pandemic, with the total number of unique individual traders increasing by over 500% from 7.1 lakh in FY19 to 45.24 lakh in FY21, the study noted.

Earlier, Buch stated that the capital markets regulator is “compelled” to warn against speculative bets in the F&O segment because it has become a “macro issue”, affecting the broader economy now.

Household financial savings are going into the speculative bets, belying the expectations of being used for capital formation, and the youth is losing tonnes of money in such trades, she stated.

Last month, the Sebi board approved stricter norms for the entry of individual stocks in the derivatives segment. The proposal is aimed at weeding out stocks with consistently low turnover from the F&O segment of the bourses.

New Delhi:

Minister of State for Finance Pankaj Chaudhary said that the first Union Budget of the third Modi government will be based on his mantra of “Sabka Saath Sabka Vikas.” Finance Minister Nirmala Sitharaman will present the full budget for 2024-25 on Tuesday.

“This budget is based on PM Modi’s mantra of Sabka Saath Sabka Vikas,” MoS Chaudhary said.

Chaudhary was among the first members of FM Nirmala Sitharaman’s team to reach the North Block offices of the Finance Ministry ahead of the budget presentation. Vivek Joshi, Secretary of the Department of Financial Services, and Chief Economic Advisor V. Anantha Nageswaran have also reached the ministry ahead of FM Sitharaman.

Minister Sitharaman is set to present the Union Budget 2024 in Parliament today, marking her seventh consecutive budget and eclipsing the late Moraji Desai’s record of six consecutive budgets, which is likely to focus on changes in the income tax structure and improving the ease of doing business in India. Sitharaman tabled the Economic Survey 2023-24 along with the statistical appendix on Monday.

Sitharaman will lay on the table a statement (in English and Hindi) of the estimated receipts and expenditures of the government for the year 2024-25 in the Rajya Sabha.

She will table the budget one hour after the conclusion of the presentation of the Union Budget 2024-25 in the Lok Sabha.

The Finance Minister also laid on the table, under subsection (1) of Section 3 of the Fiscal Responsibility and Budget Management Act, 2003, a copy each (in English and Hindi) of the following papers: medium-term fiscal policy strategy statement and macro-economic framework statement. The Finance Minister will further lay on the table statements (in English and Hindi) of the estimated receipts and expenditures (2024-25) of the Union Territory of Jammu and Kashmir (with the legislature).

With this upcoming budget presentation, Finance Minister Nirmala Sitharaman will surpass the record set by former Prime Minister Morarji Desai, who presented five annual budgets and one interim budget between 1959 and 1964 as finance minister. The budget session of Parliament began on July 22 and, according to schedule, will end on August 12.

On Monday, the Economic Survey tabled in Parliament conservatively projected India’s real GDP growth of 6.5-7 per cent, cognizant of the fact that market expectations are on the higher side. Real GDP growth is the reported economic growth minus inflation.

India’s real GDP grew by 8.2 per cent in 2023-24, exceeding the 8 per cent mark in three out of four quarters. According to official data from the Indian government, the country’s GDP grew by an impressive 8.2 per cent during the financial year 2023-24. India’s economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22, respectively.

Union Finance Minister Nirmala Sitharaman
| Photo Credit: PTI

Union Budget 2024-25: Nirmala Sitharaman to present Budget for a record seventh time in a row

Union Finance Minister Nirmala Sitharaman will be presenting the Union Budget 2024-25 on July 23, 2024. It will be a record seventh consecutive Budget presentation for Ms. Sitharaman. The monsoon session of parliament started on July 22 with the tabling of Economic Survey 2023-24. A total of 20 hours has been allocated for the debate on the budget.

Major fire onboard INS Brahmaputra: one sailor missing, ship resting on its side

A sailor is missing after a major fire broke out onboard an Indian Naval Ship Brahmaputra at the Naval Dockyard, Mumbai on July 21 evening leading to the ship listing on one of its sides. “The fire was detected by the ship’s duty staff while carrying out routine maintenance work onboard the ship. The ship’s fire fighting team immediately commenced fire fighting action and was augmented by the fire brigade from Naval Dockyard, Mumbai and other units in the vicinity. No casualties have been reported in the incident,” Indian Navy spokesperson briefed on July 22.

Opposition questions Lok Sabha discussion on Olympics preparations four days before event, brings up treatment of women wrestlers

A discussion on India’s preparedness for the Paris Olympics held in the Lok Sabha on July 22 set off questions from the Opposition not just on the timing of the debate (the event is to begin this Friday) but also on the controversies such as harassment allegations levelled by women wrestlers against former BJP MP Brij Bhushan Sharan Singh. During the discussion, Congress member Deepender Hooda brought up the wrestlers’s case. Though he did not name Mr. Singh, Mr. Hooda said a situation should not arise where players have to fight their own government and the system.

India has moved from women’s development to women-led development: Economic Survey

Observing that India is transitioning from women’s development to women-led development, the Chief Economic Advisor on July 22 said there has been a 218.8% increase in budgetary allocation for schemes for the welfare and empowerment of women even as it acknowledged that women in India face the “’motherhood penalty” with a drop in female labour force participation rate around childbearing years.

Supreme Court asks IIT-Delhi to solve ‘ambiguous’ question from NEET-UG Physics paper

The Supreme Court on July 22 asked the Indian Institute of Technology-Delhi Director to assign three of its finest professors to solve a tricky and “ambiguous” question in the NEET-UG 2024 exam’s Physics paper within 24 hours and report back. Their answer would impact the total marks of over four lakh candidates, including 44 students who scored perfect scores in the exam.

Nancy Pelosi endorses Kamala Harris as Democratic Party’s presidential candidate

Top Democratic leader and former U.S. House Speaker Nancy Pelosi on Monday endorsed U.S. Vice President Kamala Harris as the party’s presidential nominee after President Joe Biden stepped aside amid concerns from within their party that he would be unable to defeat Republican Donald Trump.

U.P. government still not relocated family of Hathras gang-rape victim, Allahabad HC told

The Allahabad High Court has been recently informed that the family members of the 19-year-old Dalit woman, who was gang-raped and murdered in 2020, face difficulty in their daily movement due to security concerns which prevail as the Uttar Pradesh government has not complied with the court order for their relocation. 

Israeli parliament approves bill to label U.N. relief agency UNRWA as a terror organisation

The Israeli parliament gave preliminary approval on Monday to a bill that declares the main United Nations relief organisation for Palestinians a terrorist organisation and proposes to sever relations with the body. The vote against the United Nations Relief and Works Agency for Palestinian Refugees (UNRWA) is the latest step in a Israeli push against the agency, which Israeli leaders have accused of collaborating with the Islamist movement Hamas in Gaza.

Government allowing ties of officials with RSS follows court cases in Himachal, M.P.

A compendium of instructions, part of a set of Rules, which governs the conduct of civil servants across the country is yet to reflect the changes brought in by a July 9 office memorandum that banned government officials from associating with the Rashtriya Swayamsevak Sangh (RSS) and its activities.

India now among top 25 arms exporter nations: Economic Survey

India has transitioned from being an arms importer and found a place in the list of top 25 arms exporter nations, the Economic Survey revealed on Monday. Between 2015 and 2019, India held the distinction of being the world’s second-largest arms importer, but the narrative has changed now. Defence production has grown substantially in the country, from ₹74,054 crore in the financial year 2016-17 to ₹108,684 crore in 2022-23, boosting defence exports.

Only 4.4% of India’s young workforce is formally skilled, said the Economic Survey 2023-24. File
| Photo Credit: M. Moorthy

With only 4.4% of India’s young workforce formally skilled, linking skill development with production Linked Incentive (PLI) and employment-linked incentive schemes in high-growth potential sectors like toy, apparel, tourism, logistics and textiles would aid upgrading of skills as production moves up the value chain, the Economic Survey said on July 22.

The Survey for 2023-24 tabled in the Parliament stated, “in order to reap the demographic advantage, it is necessary to equip the workforce with employable skills and knowledge that meet the requirements of the globalised labour market”.

Currently, the PLI scheme is available for 14 sectors. Industry bodies have been demanding introduction of an employment-linked incentive scheme to promote job creation in the economy, in the face of a growing young population amidst concerns about jobless growth.

Also Read:Economic Survey 2023-24 LIVE updates

According to the Survey, to maximise the outcomes from skilling initiatives, convergence, and utilisation of synergies with other employment-centric programmes would mutually benefit the two verticals.

“Measures are being taken by government to translate India’s demographic dividend into a productivity dividend by enabling job and entrepreneurial opportunities that are in sync with the aspirations and abilities of India’s youth. It is partnering with the industry to enhance skilling with employability,” said the Survey.

Click here to download Economic Survey 2023-24

It further stated that “linking skill development with PLI scheme and employment-linked incentive schemes in high-growth potential sectors like toy, apparel, tourism, logistics, textiles, leather sector etc. would aid upgrading of skills as production moves up the value chain”.

Image for representational purposes only.
| Photo Credit: PTI

Equity benchmark indices Sensex and Nifty ended lower on July 22, dragged down by heavy selling pressure in Reliance Industries and Kotak Mahindra Bank ahead of the Budget.

Besides, a weak trend in global equity markets also hit investors sentiment, traders said.

Falling for the second day in a row, the 30-share BSE Sensex fell 102.57 points or 0.13% to settle at 80,502.08. During the session, it tanked 504 points or 0.62% to 80,100.65.

The NSE Nifty dipped 21.65 points or 0.09% to 24,509.25. During the day, it dropped 168.6 points or 0.68% to 24,362.30.

Reliance Industries declined over 3% among the Sensex pack after the company reported a 5% drop in its June quarter net profit.

Kotak Mahindra Bank also fell more than 3% after its June quarter earnings failed to cheer investors.

ITC, State Bank of India, HCL Technologies and IndusInd Bank were the other big laggards.

NTPC, UltraTech Cement, HDFC Bank and Mahindra & Mahindra were among the gainers.

HDFC Bank climbed over 2% after the company’s consolidated net profit grew 33.17% to ₹16,474.85 crore in the June 2024 quarter.

In Asian markets, Seoul, Tokyo and Shanghai settled lower, while Hong Kong ended in the positive territory.

European markets were trading higher in the mid-session deals. U.S. markets ended lower in overnight trade on July 19

According to the Economic Survey, 2023-24 tabled in Parliament on July 22, capital markets are becoming more prominent in India’s growth story, with an expanding share in capital formation and investment landscape on the back of technology, innovation and digitisation.

Further, Indian markets are resilient to global geo-political and economic shocks, it added.

“Despite heightened geo-political risks, rising interest rates and volatile commodity prices, Indian capital markets have been one of the best performing among emerging markets in FY24,” the Economic Survey said.

Meanwhile, global oil benchmark Brent crude dipped 0.08 per cent to $82.53 a barrel.

Foreign Institutional Investors (FIIs) bought equities worth ₹1,506.12 crore on July 19, according to exchange data.

The BSE benchmark hit its new all-time high of 81,587.76 in the initial trade on July 19 but failed to carry forward the winning momentum and tanked 738.81 points or 0.9% to settle below the 81,000 mark at 80,604.65.

Nifty tumbled 269.95 points or 1.09% and ended at 24,530.90 after hitting its fresh record peak of 24,854.80 during the opening bell on July 19.

The Economic Survey 2023-24 on July 22 cautioned against significant increase in retail participation in the stock market, saying expectation of higher returns without real market conditions is a matter of concern.

At the same time, it also mentioned that enhanced participation of retail investors lends stability to the capital market and noted the increasing interest of these investors in the derivative trading.

Economic Survey 2023-24 LIVE updates:

Over the last few years, the Indian capital markets have seen a surge in retail activity through direct trading in markets through their accounts and indirect trading through mutual fund channels.

According to Economic Survey 2023-24, retail investors’ share in the equity cash segment turnover was at 35.9% in 2023-24 (FY24). The number of demat accounts with both the depositories rose to 1,514 lakh in FY24 from 1,145 lakh in FY23.

The impact of this influx of the investors in the market is also reflected in new investor registrations with the exchanges, their share in total traded value, net investments, and ownership in the listed companies.

For instance, the registered investor base at NSE has nearly tripled from March 2020 to 9.2 crore as of March 31, 2024, potentially translating into 20% of the Indian households now channelling their household savings into financial markets.

“The significant increase in retail investors in the stock market calls for careful consideration. This is crucial because the possibility of overconfidence leading to speculation and the expectation of even greater returns, which might not align with the real market conditions, is a serious concern,” said the document tabled by Finance Minister Nirmala Sitharaman in Parliament.

The survey noted that a rise in retail participation was more substantial and steadier through the indirect channel — mutual funds. The FY24 has been a spectacular year for mutual funds as their Assets Under Management (AUM) increased by ₹14 lakh crore or 35% year-over-year to ₹53.4 lakh crore at the end of FY24, boosted by mark-to-market (MTM) gains and expansion of the industry.

The total number of folios increased to 17.8 crore at the end of FY24 from 14.6 crore at FY23-end.

Some of the factors that facilitated the entry of investors included seamless technological integration, government measures towards financial inclusion, growth of digital infrastructure, rapid smartphone penetration, a rise of low-cost brokerages, the pursuit of generating income from alternative sources and lower returns generated by traditional asset classes such as real estate and gold.

However, retail investors have cashed in their gains in financial markets and been investing in real assets.

The survey said that the enhanced participation of retail investors in the Indian capital market is hugely welcome and lends stability to the capital market. Also, it has enabled retail investors to earn higher returns on their savings.

Noting the interest of retail investors in the derivative market, the survey said,” the derivatives are hedging instruments, they are mostly used as speculative instruments by investors worldwide. India is likely no exception”.

“Derivatives trading holds the potential for outsized gains. Thus, it caters to humans’ gambling instincts and can augment income if profitable. These considerations are likely driving active retail participation in derivatives trading,” the Survey said.

The survey calls for raising investor awareness and continuous financial education to warn them of the low or negative expected returns from derivatives trading.

It, further, said that a significant stock correction could see losses that are more considerable for retail investors participating in capital markets through derivatives.

“Investors’ behavioural response would be to feel ‘cheated’ by unseen more considerable forces. They may not return to capital markets for a long time. That is a loss to them and the economy,” it added.

National Education Policy expected to yield foundational literacy and numeracy for every child passing the third standard in the near future. File (representational image)
| Photo Credit: The Hindu

Convergence of efforts across the Centre, States, and local bodies is needed to improve the quality of education, especially primary education, the Economic Survey has suggested.

The National Education Policy (NEP) 2020 is expected to yield foundational literacy and numeracy for every child passing the third standard in the near future, said the Survey for 2023-24 tabled in Parliament on July 22.

Also Read:Economic Survey 2023-24 LIVE updates

The Survey noted education is one of the most critical areas for India’s development, and mission-mode and cost-effective implementation of well-designed and well-intentioned programmes is essential to improve the quality of education, especially primary education, without which further years of education add little value.

“To realise the same, unity of purpose and convergence of efforts across the Centre, State, and local governments is called for, as ‘public education’ is a concurrent list subject,” the Survey document said.

Click here to download Economic Survey 2023-24

According to the Survey, the government’s spending on social services including education rose by 9.36% to ₹23.50 lakh crore in FY24 from ₹21.49 lakh crore in FY23. Of the total, ₹8.28 lakh crore was spent on education alone during FY24, around 8% higher from ₹7.68 lakh crore in FY23.

Finance Minister Nirmala Sitharaman tables the Financial Survey 2023-24. File
| Photo Credit: PTI

“A higher level of private sector financing and resource mobilisation from new sources will be crucial for India to build quality infrastructure,” according to the Economic Survey 2023-24.

The Economic Survey 2023-24 was tabled in the Parliament by Finance Minister Nirmala Sitharaman on July 22. According to the survey, facilitating this would not only require policy and institutional support from the Central Government, but State and local governments would have to play an equally important role.

Also Read:Economic Survey 2023-24 LIVE updates

The survey noted that there is a need to improve data capture and reporting mechanisms for investments in infrastructure across instruments and sectors as well as its composition across various projects at a granular level.

The Economic Survey is an annual document presented by the government ahead of the Union Budget to review the state of the economy. The document also provides an overview of the short-to-medium-term prospects of the economy.

Click here to download Economic Survey 2023-24

The Economic Survey is prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance under the supervision of the Chief Economic Advisor.

India faces two choices to benefit from ‘China plus one’ strategy and that is either to integrate into China’s supply chain or promote FDI from China. File.
| Photo Credit: AP

Increased foreign direct investment inflows from China can help increase India’s global supply chain participation and push exports, says the Economic Survey.

The Survey said as India looks to deepen its involvement in global value chains (GVCs), it needs to look at the successes and strategies of East Asian economies.

 Economic Survey 2023-24 updates

These economies have typically pursued two main strategies – reducing trade costs and facilitating foreign investment.

It added that India faces two choices to benefit from ‘China plus one’ strategy and that is either to integrate into China’s supply chain or promote FDI from China.

“Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies did in the past,” the Survey, tabled in Parliament by Nirmala Sitharaman on Monday, said.

Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade.

“This is because China is India’s top import partner, and the trade deficit with China has been growing. As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them,” it added.

The survey explained how increased FDI inflows from China can help in increasing India’s global supply chain participation along with a push to exports.

At present, FDI from China in any sector needs government approval.

China stands at 22nd position with only 0.37% share ($2.5 billion) in total FDI equity inflow reported in India during April 2000 to March 2024.