My Article on Crypto Currencies in Money control

Cryptocurrency a boon to digital transactions & financial inclusion

R. Kannan Cryptocurrency and its rapid valuation strides have made headlines globally. Forcing governments and regulators to take note of digital currency as an emerging asset class luring the average investor. Cryptocurrency is a digital asset created to be used as a medium of exchange -- like cash. Bitcoin, the most popular cryptocurrency has send ripples across global markets as it crossed the landmark $ 10,000 threshold. While most governments and regulators have cautioned investors against investing in Bitcoin and other cryptocurrencies, they continue to evaluate introducing their own digital currency. A group of experts at the Reserve Bank of India are examining the possibility of a fiat cryptocurrency which could be used as a digital currency. According to a few media reports the RBI’s digital currency is rumored to be called Lakshmi. Regulators across the globe including United States, Singapore, Japan and China are looking at regulatory measures to rein in the growth in cryptocurrency or digital currency.  In China cryptocurrency exchanges are shifting and improvising their business for domestic cryptocurrency traders. China allows private individuals to hold and trade bitcoin, but prohibits participation by banks and other financial institutions. Some countries explicitly permit the use of bitcoin which includes Canada and Australia. The US has adopted a positive stance in regards to Bitcoin. Meanwhile, it also has ordered several government bodies to assure that transactions in Bitcoin are carried out only in legal terms. In April, markets cheered Japan for recognizing bitcoins as legal tender and license 11 exchanges. India is on the brink of a digital revolution after the revolutionary reform –Demonitisation. Digital transactions in the country has seen an 80% jump during 2017-18, with the total amount expected to touch Rs 1,800 crore. The value of digital transactions till October this year stood at Rs 1,000 crore, which was nearly equal to that for the whole of 2016-17, according to the ministry of information technology. If the numbers are anything to go by there could be merit for the Indian government to weigh the pros and cons of floating its own digital currency to further boost digital transactions. Cryptocurrency or digital currency can revolutionize digital payments in India. Transactions through digital currency are cost effective, fast and transparent. Since, the transactions is traceable due to a public ledger it ensures transparency. Blockchain technology ensures the transactions are secure and hence the chances of frauds are minimal. Hassel free instant settlement of transactions in the age of smart phone penetration and internet connectivity has led to the increased acceptability and popularity of digital currency. Digital currency with the right regulatory environment could also help promote financial inclusion. It’s easier for individuals to open an e-wallet account than a traditional bank account given the increased mobile and data penetration. The usage of Aadhar in the country has made it easy for individuals to execute digital transactions and open e- accounts instantly. With the operationalization of payment and small banks the introduction of digital currency could change the way India banks or avails off and conducts financial services.  Regulators and governments globally are concerned that in the present form the digital currency is being used for money laundering and tax evasion. The concerns are valid considering this technology is new and its acceptance is increasing among the average investors. Considering the many advantages of this technology, Governments can no longer ignore its existence and there’s a need to frame a regulatory mechanism to monitor its usage. It’s not just individuals; corporates have also started using this technology for intra company transactions to reduce the cost of operations. Regulators and government in India need to collaborate and evaluate if this emerging asset class can be regulated by the current regulations of Know Your Customer, money laundering, foreign exchange and GST norms. Author is Head Corporate Performance Monitoring & Research, Hinduja Group Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

15^th December 2017

India Government Finances Apr17 - Nov17

Central Govt. Finances: Apr.-Nov. 2017-18

Highlights:

Total receipts during April- October 2017-18 were at Rs.1292648 cr, (LY: Rs. 1150843 cr), 12.3% rise over the same period last year. It was 60.2% of BE 2017-18. Out of which revenue receipts were at Rs.728768 cr (LY: Rs.697988 cr), 4.4% rise YoY and Capital receipts were at Rs.563880 cr (LY: Rs.452855 cr), 24.5% higher than the last year.

The revenue receipts are not growing as expected and the collections from GST was much below the expectations. To make up the shortfall in revenue receipts, the government has to opt for increasing the capital receipts which had shown a good growth over the previous year.

Gross tax receipt was atRs.973412 cr (LY: Rs.818884 cr), 18.9% growth YoY. Net tax revenue retained by the Central Government was at Rs. 633617 cr, 19.5% higher than the last year and it was 51.6% of the budget estimate for whole year.

Recovery of loans were at Rs.8394 cr, 5.7% higher than the last year.

Total Government expenditure from Consolidated Fund of India was at Rs. 1292648 cr (LY: Rs.1150843 cr), out of which, revenue expenditure was at Rs.1129853 crore (61.5% of BE) and capital expenditure was at Rs. 162795 cr (52.5% of BE).

Revenue Expenditure increased from the previous financial year by 10.1% and Capital Expenditure increased by 30.3%.

Revenue deficit was at Rs. 401085 cr (LY: Rs.327896), 22.3% higher than the last year and it was 125% of total budget estimate. This is an area of concern.

Fiscal deficit was at Rs.525321 cr(LY: Rs.423507 cr), 24% higher than the same period last year and it was at 96.12% of BE. Considering that another , four months to go , this will far exceed the budget.

Primary deficit was at Rs.267412 cr, 35.9% rise YoY. It was 1140% of BE.

Eight core infrastructure industries grew by 4.7 per cent in October 2017, as compared to 7.1 per cent in October 2016. The growth of these industries during April-October 2017 was 3.5 per cent, as compared to 5.6 per cent during the corresponding period of previous year. In Dec, there was traction and the expectations are that , the growth rate will rise. The forecast by various international and domestic agencies indicate that the growth going for ward will pick up.

Foreign exchange reserves stood at US$ 400.7 billion as at end of 24^thNovember 2017 as compared to US$ 370.0 billion at end March 2017.

The growth rate of IIP in Oct. 2017 was at (+) 2.2 percent. During Apr- Oct.17 the overall IIP contracted by 2.5percent compared to growth of 5.5 per cent during same period last year.

Foreign trade: Merchandise exports and imports increased by 30.5 per cent and 19.6 per cent respectively in US$ terms in Nov. 2017 over Nov. 2016. During Nov. 2017, oil imports increased by 39.1 per cent and non-oil imports increased by 14.6 per cent respectively over Nov. 2016.

Balance of Payments: India’s current account deficit (CAD) at US$ 22.2 billion (1.8 per cent of GDP) in H1 of 2017-18 increased from US$ 3.9 billion (0.4 per cent of GDP) in H1 of 2016 -17. During the H1 of 2017-18, the net invisibles balance (invisible receipts minus invisible payments) was US$ 52.5 billion as compared to US$ 45.7 billion in the corresponding quarter of 2016-17. Net FDI inflows during H1 of 2017-18 moderated to US$ 19.6 billion compared to US$ 20.8 billion in H1 of 2016-17. Portfolio investment recorded a net inflow of US$ 14.5 billion during H1 of 2017-18 as compared with US$ 8.2 billion in H1 of 2016-17. Net capital flows remaining higher than the CAD, there was net accretion to India’s foreign exchange reserves (on BoP Basis) to the tune of US$ 20.9 billion in H1 of 2017-18 as compared with US$ 15.5 billion in H1 of 2016-17

External Debt: India’s external debt stood at US$ 495.7 billion at end-September 2017, recording an increase of 5.1 per cent over the level at end-March 2017. Long-term debt was US$403.0 billion at end-September 2017 as compared to US$ 383.9 billion at end-March 2017.

Short-term external debt was US$ 92.7 billion at end-September 2017, as compared to US$ 88.0billion at end-March 2017.

As per the estimates of Gross Domestic Product (GDP) for the second quarter (July-September) 2017-18, released by the Central Statistics Office (CSO), the growth rate of GDP in Q2 wasat 6.3 per cent as compared to the growth of 7.5 per cent in Q2 of 2016-17.