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Auto slowdown: Suzuki sceptical about growth in India after slump in quarterly profits

Suzuki Motor Corp said it was no longer gung-ho about India's auto market, the world's fourth-largest, where it has seen relentless growth in the past seven years. And the parent of the country's biggest car maker is not alone.

The Japanese automaker issued the warning after it reported a slump in quarterly profit this week on tumbling sales at its Indian unit, Maruti Suzuki, which accounts for half the number of cars sold in India.

"We no longer think that growth in India will be an uninterrupted move upwards," Suzuki President Toshihiro Suzuki cautioned. Maruti's sales, which were growing till January, has slipped every month over February-September 2019.

India's auto sector has gone into a tailspin this year as tight liquidity at shadow banks, high taxes and a weak rural economy have sapped consumers' buying power. Global players like Ford, Volkswagen and Fiat are already re-evaluating their strategy as they struggle to make inroads in a market dominated by small cars.

"Car makers are getting very cautious regarding their future investments in India. Most of them are either deferring or just scrapping their India new model plans," said Puneet Gupta, an autos sector expert at IHS Markit.

Auto executives and analysts point out that some car makers are focussing on their strengths in terms of products instead of chasing volumes with small cars. Some others are taking drastic steps to reduce their exposure.

Ford has agreed to sell a majority stake in its India arm to Mahindra & Mahindra, ending its independent operations in the country after two decades and highlighting the challenges automakers face in growing profitably in Asia's third-largest economy.

 

DIALLING BACK

A cocktail of higher taxes under a new goods and services tax regime, flip-flop over electric-vehicle policy, and a boom of ride-sharing firms such as Uber and Ola have all plagued global automakers in India. Not having the right cars and smaller sales network have also hurt, some executives say. "When you have policy instability it becomes very hard to convince headquarters to invest more in the country," an executive at a western automaker said.

India is largely a small-car market and that is not a strength for most global automakers, who sell more SUVs and luxury cars elsewhere such as in China and the United States - the world's top two car markets, the executive added.

Western automakers had to design products specifically for India which is an expensive exercise, said V.G. Ramakrishnan, managing partner at consultancy Avanteum Advisors. "Many chose a mass-market strategy instead of a niche one," and are dialling back to focus on specific segments, he said.

Volkswagen has put its sister company Skoda in charge of India strategy and will focus on SUVs. Fiat too has put SUV-maker Jeep in charge of driving sales in the country.

Demand for SUVs in India is growing faster than some small car segments, prompting even the likes of Maruti that dominates the small-car space to look at launching SUVs and crossovers.

Honda is re-evaluating its India plans and may convert one of its two plants into a research centre, local media reported. Toyota and Suzuki have formed an alliance to share supply chain costs and develop new vehicle technologies together. "Automakers want to exploit their existing resources, minimize their costs and maximize their returns," Gupta said.

Indirect tax authorities to use new system for search, summons, other communication

The Central Board of Indirect Taxes and Customs (CBIC) has said its unique DIN system would come into force in the indirect tax administration from November 8. "The DIN would be used for search authorisation, summons, arrest memo, inspection notices and letters issued in the course of any enquiry. From now onwards, any communication from GST or Custom or Central Excise Department without a computer-generated DIN would be treated as invalid," said Revenue Secretary Ajay Bhushan Pandey.

The move will help bring transparency and accountability through use of information technology, a government statement said.  "No communication would be issued without DIN except, only if it is in the specified exceptional circumstances," Pandey added. CBIC had implemented the DIN (Documentation Identification Number) system in direct tax administration in August.

CBIC Chairman Pranab K Das said the DIN system would create a digital directory for maintaining a proper audit trail of such communications. "Now all such specified communications with DIN would be verifiable on the online portal cbicddm.gov.in and any communication which is not in conformity with the prescribed guidelines as per the DIN related Circulars dated 05.11.2019 shall be treated as invalid," he said.

The CBDT in August had made DIN mandatory for all communications made by the Tax Department to assessees. As per DIN rules for the direct tax administrations, no communication can be issued by any income-tax authority to the assessee unless the DIN is "duly quoted" in the body of such communication.

J&K Bank continues to register growth despite recent events: Financial Commissioner

Jammu and Kashmir Bank is firmly moving on a path towards growth despite some of the recent events, Financial Commissioner, Finance, Arun Kumar Mehta said Tuesday.

The bank has shown profitability for the 8th straight quarter and posted a net profit of Rs 465.00 crore in the last fiscal, bank officials said.

The operational performance of the bank with regard to all the banking parameters has been satisfactory with the figures of advances and deposits during the five months of the current fiscal showing an increase of Rs 900.00 crore and Rs 2,030 crore, respectively from those over the corresponding period during the last fiscal, Mehta said.

This was revealed in a meeting held on Wednesday by the Financial Commissioner, Finance with the J&K bank officials.

While informing that the aggregate credit and deposits have grown substantially year on year (YoY) basis, CMD J&K Bank, RK Chibber, indicated that the bank has shown YoY credit growth of 16 per cent, which is indicative of a robust growth momentum.

Sharing the details of the risk management framework and NPA provisioning put in place by the bank, Chibber stated that the bank's internal controls and processes have been aligned with the industry's best practices and RBI's directives and that there is adequate provisioning for NPAs.

While informing that the bank is operating with a better than industry average net interest margin of 3.84 per cent, Chibber revealed that the bank has shown profitability for the 8th straight quarter and posted a net profit of Rs 465.00 crore in the last fiscal.

Assuring the CMD of the bank of the government's full support for its growth initiatives, he advised that the bank should improve the bank-customer interface to make dealing with the bank healthy experience for its vast customer base.

Chibber further stressed upon the CMD Bank to evolve a communication strategy across multiple media and marketing platforms to dispel the misinformation about the bank.

Financial Commissioner, Finance assured that the Government of J&K, holding a majority stake of 59 per cent in the bank, and J&K Bank will continue to work together to fulfil the aspirations of 12 million account holders of the bank who have reposed their trust in the bank.

CBI raids 169 locations over bank fraud cases worth Rs 7,000 crore

The Central Bureau of Investigation (CBI) carried out searches at 169 locations across the country on Tuesday in connection with various bank fraud cases. The raids were carried out in connection with 35 bank fraud cases amounting to Rs 7,000 crore.

The locations raided were across Andhra Pradesh, Chandigarh, Delhi, Gujarat, Haryana, Karnataka, Kerala, MP, Maharashtra, Punjab, Tamil Nadu, Telengana, UP, Uttarakhand, and Dadra & Nager Haveli.

A CBI official stated that the raids were carried out simultaneously on Tuesday morning. The name of the banks that were targeted in the nationwide raids have not been revealed by the agency. Similar searches in bank fraud cases were carried out in the last few months. 

In the recent PMC Bank case, the lender had created more than 21,000 fictitious accounts to cover up Rs 4,300 crore of loans to the almost-bankrupt HDIL. HDIL promoters, Rakesh and Sarang Wadhawan, PMC Bank Managing Director Joy Thomas, Chairman Waryam Singh and Director SS Arora were arrested by the Economic Offences Wing of the Mumbai Police.

Govt's tax collection in H1 2019-20 only 37% of Budget; lowest in 5 years

Reflecting an overall decline in economic activity, data from Controller General of Accounts says the net tax collection as of September 30 is lowest in the past five years. The government collected Rs 6.07 lakh crore tax till September, far below its Budget target of Rs 16.49 lakh crore, as per the Controller General of Accounts (CGA) data.

The Centre had collected 39.4 per cent (Rs 5.8 lakh crore) of the total target of Rs 14.8 lakh crore in 2018-19; 44.2 per cent (Rs 5.4 lakh crore) of total target of Rs 12.2 lakh crore in 2017-2018; 42.5 per cent (Rs 4.4 lakh crore) of total target of Rs 10.5 lakh crore in 2016-2017; and 40.2 per cent (Rs 3.2 lakh crore) of total target of Rs 8.7 lakh crore.

The net collection of both direct and indirect taxes have seen a significant decline. The government has collected total corporate tax of Rs 2.49 lakh crore this year so far, which is less than one-third of its full-year target of Rs 7.66 lakh crore. Finance Minister Nirmala Sitharaman's announcement of over 7 per cent reduction in corporate tax to 25 per cent would lead to further fall in tax revenue collection.

Personal tax collection till September 30 is over one third (Rs 2.13 lakh crore) of the total target of Rs 5.69 lakh crore for the fiscal year. The CGST (central goods and services tax) so far seems to be in sync -- at Rs 2.47 lakh crore -- with the government's full-year estimate of Rs 5.26 lakh crore.

The lower tax collection means the government may fail to meet its fiscal deficit target of 3.3 per cent of the GDP.  India's deficit for the April-September quarter stood at 95.3 per cent of the 2018-19 budget estimate (BE) in the same period last year. In absolute terms, the fiscal deficit, which is the gap between expenditure and revenue, stood at Rs 6,51,554 crore as on September 30, 2019. The government had kept the fiscal deficit target for the current financial year at Rs 7.03 lakh crore, which is equivalent to 3.3 per cent of the gross domestic product (GDP).

All these numbers indicate a persistent slowdown in the economy. In the first quarter of FY20, GDP growth slumped to a six-year low of 5 per cent. Private consumption decelerated to an 18-quarter low of 3.1 per cent in the June quarter.

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