India eyes bigger infrastructure investment

The new Indian government hopes that foreign direct investment will help to improve infrastructure and lift a sluggish economy. (AP)
Updated 07 July 2019

India eyes bigger infrastructure investment

  • Finance minister promises money for aviation, media and insurance

NEW DELHI: Indian Prime Minister Narendra Modi’s government proposed heavy investments in infrastructure, the digital economy and job creation to lift a sluggish economy burdened with a 45-year-high unemployment rate of 6.1 percent. Unveiling a draft budget after a major victory in national elections, Finance Minister Nirmala Sitharaman proposed a bigger role for foreign direct investment in aviation, media and insurance.
The government set a target for the economy to grow to $5 trillion by 2025 from the present $2.7 trillion. Sitharaman said it would reach $3 trillion by March next year.
She told Parliament that India’s economy is now the sixth largest in the world. In terms of purchasing power parity, it is the third largest after the US and China, she said.
She also announced cash handouts for small farmers, a pension scheme for informal workers and a doubling of tax relief for the lower middle class.
Small farmers would be paid 6,000 rupees ($85) annually, benefiting as many as 120 million households. About 30 million retail traders and small shopkeepers with annual incomes of less than 15 million rupees would get pension benefits, she said.
The budget doubled income tax exemptions for those earning up to 500,000 rupees a year from the existing 250,000 rupees. The decision would benefit 30 million lower-earning taxpayers. Raising taxes on the rich people, Sitharaman announced a 3 percent increase for those with an income between $292,000 — $730,000 a year and a 7 percent increase for those with an income above $730,000.
Currently, India imposes a 10 percent surcharge where total income is between 5 million and 10 million rupees and 15 percent on income above 10 million rupees.
At the same time, she reduced corporate tax to 25 percent from 30 percent for companies that have an annual turnover of up to $58 million. This would include 99.3 percent of companies in India and boost profits for a large number of them and stimulate investments, she said. 

FASTFACT

$5T - The Indian government has set a target for the economy to grow to $5 trillion by 2025 from the present $2.7 trillion.

Sitharaman said foreign direct investment in aviation, media and insurance could be opened further after multi-stakeholder examination. Also, insurance intermediaries could receive 100% foreign direct investment. India at present allows 49 percent foreign ownership in the insurance sector. She also said that local sourcing norms of 30 percent would be eased for foreign direct investment in the single-brand retail sector, a demand put forward by several multinational companies. India currently requires investors to source locally 30 percent of the value of goods purchased.
“These companies will certainly have to relook at their strategy
to tap the large Indian consumption potential. It would now be a race for all these retail companies to evaluate the conditions and take a quick decision to invest into
India,” said Anil Talreja, an industrialist. The finance minister said foreign direct investment in India has remained robust despite global headwinds. India’s FDI inflows in 2018-19 were around $64.375 billion, a 6 percent increase over the previous year.
Modi said the budget would accelerate the pace of development, rationalize the tax structure and modernize the country’s infrastructure.
The government will invest 1 trillion rupees ($15 billion) in infrastructure over the next five years, Sitharaman said.
She also said the government will raise 1.05 trillion rupees through disinvestment in government-owned companies in 2019-2020.
The government also earmarked 100 billion rupees for creating the infrastructure to promote electric cars in the country.


American Airlines threatens to cancel some Boeing 737 MAX orders

Updated 11 July 2020

American Airlines threatens to cancel some Boeing 737 MAX orders

  • American’s stand comes as airlines are finding financing increasingly difficult and expensive
  • Airlines have canceled orders for more than 400 MAX planes so far this year

DALLAS: American Airlines is warning Boeing that it could cancel some overdue orders for the grounded 737 MAX unless the plane maker helps line up new financing for the jets, according to people familiar with the discussions.
American’s stand comes as airlines are finding financing increasingly difficult and expensive as the coronavirus pandemic has crippled their operations.
American had 24 MAX jets before they were grounded in March 2019. It has orders for 76 more but wants Boeing to help arrange financing for 17 planes for which previous financing has or will soon expire, according to three people who spoke Friday on condition of anonymity to discuss private talks between the companies.
If the companies can’t reach an agreement, American could use MAX financing that is about to expire to pay for jets from Boeing’s archrival Airbus, one of the people said.
Chicago-based Boeing said in a statement that it is working with customers during “an unprecedented time for our industry as airlines confront a steep drop in traffic,” but did not comment on the talks with American. The Fort Worth, Texas-based airline declined to comment.
News of American’s threat to cancel some orders was first reported by The Wall Street Journal.
The situation underscores the strain facing airlines during the coronavirus pandemic. It has grown more difficult and expensive for them to finance planes. American’s negotiating stance doesn’t reflect a loss of confidence in the plane’s safety, the sources said.
The MAX was Boeing’s best-selling plane before crashes in Indonesia and Ethiopia killed 346 people and led regulators around the world to ground all MAX jets.
The coronavirus pandemic has compounded Boeing’s problems by causing a sharp drop in air travel and a loss of interest in new planes. Nearly 40 percent of the world’s passenger jets are idled, according to aviation data supplier Cirium, as most airlines have more planes than they need until travel recovers.
That has made it more difficult to finance planes. United Airlines and Southwest Airlines found foreign lenders who agreed in April and May to buy MAX jets and lease them to the airlines, but those carriers are in stronger financial situations than American.
The 17 planes in dispute were supposed to have been delivered to American at least a year ago. That has given the airline the option of canceling the order without penalty and recovering its down payments now, according to one of the people familiar with the matter. The deliveries have been delayed while Boeing works to fix a flight-control system suspected of playing a role in the crashes.
Airlines have canceled orders for more than 400 MAX planes so far this year, and 320 are no longer certain enough to count in Boeing’s backlog. Some were dropped because the airline buyer ran into financial problems, while others were swapped for different Boeing planes. The company had taken 4,619 orders through May.
Air travel in the US fell about 95 percent from the beginning of March until mid-April. Traffic has recovered slightly since then, but remains down more than 70 percent from a year ago. With little revenue coming in, airlines are slashing spending and preparing to furlough thousands of workers this fall.
American has accepted $5.8 billion in federal aid to pay workers through Sept. 30, reached tentative agreement on a $4.75 billion federal loan, and lined up billions more in available cash from private lenders to survive the travel downturn.