Why Indian Companies Are Paying Higher Taxes To The Govt
On today's episode, financial journalist Govindraj Ethiraj talks to Sujan Hajra, Executive Director and Chief Economist...29 July 2023 5:30 PM IST
- <00:50> Falling Material Costs Are Helping Companies Pay Higher Taxes To Govt with Sujan Hajra
- <07:25> Dark Advertising, How We Are Getting Conned Online with Manisha Kapoor
- <09:19> Less planes, fewer airlines and yet India scores record passenger traffic
- <17:35> How One Car Maker Is Making No Secret Of It's EV Hesitation
TRANSCRIPT
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
Good morning, it's Monday, the 19th of June and I'm Govindraj Ethiraj, coming to you from Mumbai, India's financial capital and the most rocking city in the world, well almost.
Our top reports for the day
1. Falling Material Costs Are Helping Companies Pay Higher Taxes To Govt
2. Dark Advertising, How We Are Getting Conned Online
3. Less planes, fewer airlines and yet India scores record passenger traffic
4. How One Car Maker Is Making No Secret Of It's EV Hesitation
Tax Collections
India's tax collections, including advance taxes continue to rise as companies benefit from lower material costs in manufacturing and stronger credit growth has helped banks and finance companies.
Put differently, as companies report better margins and more profits, the first call on these very profits is obviously the tax man.
Investment banks like Morgan Stanley have already said they expect better margins to power the stock market in the next year or two for many companies.
The Government's advance direct tax collections for the June quarter from companies, LLPs and individuals was up 15% year on year to Rs 116,000 crore as of last week.
While it looks like it's all soaring skywards, at some point the party will slow down. Goods & Service Tax collections growth for India's states could moderate to 12 to 14% in 2023-34, versus 20% in ther previous or last year, rating agency Crisil has predicted.
So how could we sum up the strength in tax collections and what is driving it and for how long ? I reached out to Sujan Hazra, Executive Director and Chief Economist at stockbroking firm Anand Rathi to ask him
Meanwhile, the bullish report of this week prize, or technically last, goes to HSBC.
Titled, India, Investment Destination of the Decade and Beyond and penned by it's global private banking and wealth team, it touches upon the usual points of demographics to digital public infrastructure and high tech exports to strong balance sheets to make a case for the India investment story.
The part i found interesting was the reference to India's old economy sectors, namely the unorganised, low and medium tech manufacturing and agriculture which make up 85% of India's GDP.
HSBC argues that the new india which is the digital part, can lift up the old India and could lead to greater formalisation of informal sectors and digitisation of manufacturing.
Agriculture is already seeing tech innovations via drones, AI and computing in general, more startups are emerging and if all the ducks fall in line, then India's potentia growth rate could rise to 7.5% per year over the next decade, solving 2/3rds of India's employment problem, HSBC says.
All of what HSBC is saying may of course happen in any case but a friendly reference to the informal sector is always welcome. At least someone in this space is thinking about them.
May Is A Rocking Month For Indian Aviation
Airbus could announce a record 500-aircraft agreement with India's Indigo, Bloomberg News is reporting. This order would double the airline's existing backlog and is for A320s.
The 500-number seems high and compares with Air India's own agreement with Airbus and Boeing to buy 470 aircraft, a deal which saw various heads of state sign off and announce.
On the subject of traffic and the month of May now.
May seemed to be a landmark month for Indian aviation for many reasons.
India's domestic traffic hit 13.2 million passengers, crossing the previous record of 13.02 million, the Mint newspaper reported.
Meanwhile, despite lower number of airlines and aircraft, the Mumbai International Airport hit a record of 4.34 million passengers flowing through it's gates in May or last month, up 23% from May 2022.
The previous record was, of course, before Covid, at 4.32 million passengers in May 2018.
From Mumbai, Delhi was the top domestic destination, followed by Bangalore and Chenai and Dubai, not surprisingly, is the top in the international category. Dubai was followed by Abu Dhabi and Singapore.
Speaking of lower number airlines, the absence of GoAir helped, Indigo take a 61.4% market share in the same month, that is May, according to data from the Directorate General of Civil Aviation.
This is the highest market share in Indigo's 16 year history.
In the same month, Indian airlines clocked over 90% capacity utilization, or passenger load factor.
Most airlines did passenger load factors above 90% in May with Spicejet at almost 95%.
These are obviously drool worthy numbers for the airlines…till they last.
Are you Getting Conned Online ?
Has it happened to you that things you have not bought have got added to your shopping cart or some small but mysterious amounts get added to your final online bill whether buying goods or an air ticket ?
Well, it turns out this is a much bigger problem than many of us may have thought and there is a name for it. It is called 'dark patterns' and covers a suprisingly large breadth of funny behaviours, for lack of a stronger word.
The Government's Department of Consumer Affairs (DoCA) and the Advertising Standards Council of India (ASCI) are working on self-regulatory frameworks to check these "dark patterns" in Indian advertising, where companies use unethical practices to fool customers. Guidelines on this are expected in two months
There is much more to this and I caught up with ASCI CEO and secretary general Manisha Kapoor to understand dark patterns and also asked her whose neck was really on the chopping line and how ?
Toyota Gets Attacked By Climate Friendlies
It's tough to take a contrarian position on fossil fuels, particularly in the automotive industry. It's worse if you say it aloud. Pretty much everyone, including shareholders could jump on you as car giant Toyota found out recently.
Before i come to Toyota, R C Bhargava, Maruti Suzuki's India chairman and industry veteran has been saying for two years and more that going all out on electric does not make sense, at least for this company Maruti, adding, "it does not make sense in the national context either."
His larger point is that India generates almost 75% of it's electricity from dirty coal. Overall, he feels hybrid technology, natural gas or compressed natural gas or CNG and biofuels are a better way towards cleaner figure at this point than electric cars. This is already visible in the company's product portfolio, which also now reflects Suzuki's global partnership with Toyota. You can see the same car, almost, with different badges on Indian roads. Classic example being Maruti's Grand Vitara, a sister model to Toyota's Urban Cruiser Hyryder, both hybrids and built at Toyota's Karnataka plant.
Back to parent Toyota, it's now chairman and earlier CEO till April Akio Toyoda won re-election with the support of 85% of shareholders last week, a number high enough but lower than expected after investors like California Public Employees Retirement System (Calplers) and New York City's public worker pension funds backed by proxy advisory firm campaigned to remove him.
The 66-year-old car racer had said last year a silent majority in the auto industry had questioned whether electric vehicles should be the only consumer option.
The ostensible reason for the shareholder move was that Toyota's board was insufficiently independent. The Wall Street Journal has argued that the proxy campaign was about punishing Mr Toyoda for candidly explaining the challenges to full electrification and promoting hybrid alternatives to battery powered vehicles.
Toyota's other alleged offense, says the WSJ, was lobbying governments to make electric-vehicle mandates less aggressive and punitive.
Apparently, climate-related shareholder resolutions during this proxy season have drawn significantly less support than in recent years.
The WSJ finally argues that technological innovation rather than government mandates is what will ultimately drive consumers to buy electric vehicles.
Toyota unveiled new batteries last week that it says it plans to introduce in new vehicles in 2026 that would extend the vehicle range to 620 miles..I mentioned it too last week as the car that would go from Mumbai to Bangalore on a single charge if there were no jams on Khandala ghats.
Meantime, consumers deserve a choice of cars to buy.
And finally, before I go..I shared an extract with a conversation I had with India Semiconductor Mission advisor Ajai Chowdhury, also HCL co-founder on the business case to manufacture semiconductor chips in India.
He felt India needed a strong semiconductor industry of its own because, among other things, the next wars will be fought over it. We have two likely projects, one from Vedanta-Foxconn and the second from Micron which is looking at a $1 billion chip packaging plant which according to reports, will be an outsourced semiconductor assembly testing and packaging unit.
Meanwhile, chip giant Intel has said it will spend $25 billion on a new plant in Israel, officials said Sunday. The "agreement in principle" would see the semiconductor firm build the facility in southern city Kiryat Gat that would open by 2027 and operate at least until 2035, AFP said, quoting Israel's finance ministry.
Intel in return would receive a grant of 12.8 percent of its outlay, the ministry said, in line with Israel's capital investment encouragement law.
