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‘Traditional wholesale lost half its revenue share post DeMo, GST’

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Mumbai, Nov 13 : A report on consumer goods distribution channels has revealed that while modern trade and e-commerce have gained significant revenue share after the “twin shock” to the economy, demonetisation and Goods and Services Tax (GST), traditional wholesale has lost half its revenue share.

“In rural towns or villages, wholesale accounts for 60-70 per cent of sales. However, demonetisation and GST compliance nearly crippled this channel, which is still reeling from it,” said the report by financial services group Centrum .

Post the twin shocks to the economy, Centrum said, the traditional wholesale channel was reeling under pressure as they operated on a purely cash basis.

Wholesale accounts declined from 135,000 before GST to 66,000 now, as per the estimates built on various interactions, Centrum said. This has led to loss of sales of 8-10 per cent and inventory correction in these outlets.

“Thus, companies which were highly reliant on the wholesale channel saw their revenue decline, forcing them to rebuild distribution,” the report said.

The report further stressed that organised wholesale and cash-and-carry are replacing traditional wholesale providing GST compliance and no credit. In the past three years, they have doubled their store count to 100.

Centrum said its top picks in such a scenario are Britannia (has low wholesale dependence and focus on central India belt) and Dabur (uses a cluster-based distribution strategy in rural areas and on focus-on-power brands strategy).

“We feel the most impacted would be Colgate (weak wholesale channel and yet to build full direct distribution).” it said.

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The end of growth?

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The end of growth

Sveriges Riksbank Prize: Better Answers to Our Biggest Problems’, focusing on jobs, immigrants, growth, climate change and trade. Here are exclusive excerpts from the book, published with permission from the publishers, Juggernaut.

Good Economics for Hard Times
By Abhijit V. Banerjee & Esther Duflo
Published by: Juggernaut

Is growth over?

Two economic historians at Chicago’s Northwestern University are at the centre of this discussion.

Robert Gordon takes the view that the era of high growth is unlikely to come back. We have only met Gordon once. He gives the appearance of being quite reserved; his book, however, is anything but. On the other side is Joel Mokyr, whom we know much better, an enormously vivacious man, with twinkling eyes and a kind word for everybody; he writes with infectious energy consistent with his generally positive outlook on the future.

Gordon has gone out on a limb and predicted economic growth will average a meager 0.8 per cent per year over the next twenty-five years. “Everywhere I look,” he said during a debate with Mokyr, “I see things standing still. I see offices running desktop computers and software much as they did ten or fifteen years ago. I see retail stores
where we are checking out with bar code scanners the same way we did before; shelves are still stocked by humans, not by robots; we still have people slicing meat and cheese behind the counter.”

Today’s inventions, in his view, are simply not as radical as electricity and the internal combustion engine were. Gordon’s book is particularly daring. He gleefully takes on the set of future innovations futurologists predict and one by one explains why, in his opinion, none of them would be as transformational as the elevator or air conditioning, and why none would take us back to an era of fast growth.

Robots cannot fold laundry. Three dimensional (3D) printing won’t affect large-scale manufacturing. Artificial intelligence and machine learning are “nothingnew.” They have been around at least since 2004 and have done nothing for growth. And so on.

It is clear of course that nothing Gordon says precludes the possibility that something entirely unexpected, perhaps some hitherto unimagined combination of familiar ingredients, will prove to be ransformative. It is just his hunch that it won’t.

Mokyr, on the other hand, sees a bright future for economic growth, spurred by nations competing to be the leader in science and technology, and the resulting rapid spread of innovation worldwide. He sees the potential for progress in laser technology, medical science, genetic engineering, and 3D printing.

To Gordon’s claim that nothing much changed in fundamental ways in how we produced in the last few decades, he counters: “The tools we have today make anything that we had even in 1950 look like clumsy toys by comparison.”

But mostly, Mokyr thinks that the way the world economy has changed and globalized produces the right environment for innovations to bloom and change the world, in ways we cannot even begin to envision. He predicts one factor that will accelerate growth: we will be able to slow down the aging of the brain. Which of course would give us more time to have better ideas. Mokyr, engaging and creative as ever at seventy-two, is a good example for his thesis.

The fact that two brilliant minds come to such radically different conclusions about growth highlights what a vexing topic it has been. Of all the things economists have tried (and mostly failed) to predict, growth is one area where we have been particularly pathetic. To name just one example, in 1938, just as the US economy was going back into high-growth mode after the Great Depression, Alvin Hansen (who was not a nobody; he was the co-inventor of the ISLM model most students of economics will remember from their first macroeconomics class, and a professor at Harvard) coined the term secular stagnation to describe the state of the economy at the time.

His view was that the American economy would never grow again because all the ingredients of growth had already played out. Technological progress and population growth in particular were over, he thought.

Most of us today who grew up in the West grew up with fast growth or with parents used to fast growth. Robert Gordon reminds us of our longer history. It is the 150 years between 1820 and 1970 that wereexceptional, not the period of lower growth that followed. Sustained growth was virtually unknown until the 1820s in the West.

Over the period 1500 to 1820, annual GDP per capita in the West went from $780 to $1,240 (in constant dollars), a paltry annual growth rate of 0.14 percent. Between 1820 and 1900, growth was 1.24 percent, nine times more than in the previous three hundred years, but still much less than the 2 percent it would hit after 1900. If Gordon is right and we end up with a 0.8 percent growth rate, we would simply be returning to the average growth rate over the very long run (1700-2012). This is not the new normal; it is just normal.

Of course, the fact that sustained growth over a long time, the kind we saw over most of the twentieth century, was unprecedented, does not mean it could not happen again. The world is richer and better educated than ever before, the incentives for innovation are at an all-time high, and the list of countries that could lead a new innovation boom is expanding.

It could well be the case, as some technology enthusiasts believe, that growth explodes again in the next few years, fueled by a fourth industrial revolution, perhaps powered by intelligent machines capable of teaching themselves to write better legal briefs and make better jokes than humans. But it could also be, as Gordon believes, that electricity and the combustion engine brought about a onetime shift in how much we can produce and consume.

It took us some time to reach this new plateau and there was fast growth along the way, but we have no particular reason to expect this episode will repeat itself. Nor, we might add, do we have definitive proof it won’t. Mostly, what is clear is that we don’t know and have no way to find out other than by waiting.

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Sensex up 129 pts, Yes Bank tanks 7%

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Sensex equity Nifty

Mumbai, Dec 11 Sensex advanced 129 points during the early trade on Wednesday while the Nifty traded slightly below the 11,900 mark.

Yes Bank fell over 7 per cent after it postponed the decision to approve or decline the binding offer of $1.2 Billion — 60 per cent of the total capital the bank aims to raise — submitted by mysterious investor Erwin Singh Braich on Tuesday.

Yes Bank, however, said it is willing to “favourably consider the offer of $500 Million of CitaxHoldings and Citax Investment Group and the final decision regarding allotment to follow in the next board meeting..”

At 9.59 a.m., the Sensex was up 129.98 points or +0.32 per cent at 40,369.86. The Nifty jumped 35.05 points at 11,891.85.

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DoT cracks whip, tells telcos to pay pending AGR dues fast

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New Delhi, Dec 10 : The Department of Telecom (DoT) has asked telecom licencees to speed up the process of self-assessment of adjusted gross revenue (AGR) based dues and the payment of over Rs 1.47 lakh crore and submit comprehensive representation on previous issued demands latest by December 13, 2019.

The letter issued by the DoT has been viewed by IANS. The deadline for payment of AGR dues is January 23, 2020.

Three telcos — Airtel, Vodafone Idea and Tata Tele — have filed review petition of the Supreme Court order in October, which paved the way for the DoT to seek AGR dues, penalty and interest from the telcos.

“The comprehensive representation shall be submitted within a week latest by December 13, 2019,” DoT said in the letter to the telecom licensees, adding that majority of the licence fee assessments have been settled after the SC judgement and for any remaining issues, a comprehensive representation needs to be submitted to the department.

In light of the Supreme Court order on AGR computation, all the annual assessment for licence fees and spectrum usage charges for relevant years are being re-examined.

“And now since all the earlier demands are being re-examined with respect to the SC judgement, you are requested to kindly submit a comprehensive year-wise, circle-wise representation except for issues which have been decided by the SC,” the letter said.

“In this regard, it is pointed out that over a course of time, multiple representations related to LF (licence fee) assessments were received from various licencees for consideration by the department,” the DoT letter added.

Further, self-assessment of dues and payments along with the submission of relevant documents as per a licence finance wing letter of November 13 needs to be expedited, the letter said.

Any issues should be pointed out in the comprehensive representation to be submitted but in no case the self assessment of the dues and payments along with the submission of relevant documents are to be delayed, it pointed out.

The Supreme Court decided in favour of the government’s contention that all revenues, including that from non-core sources, would be counted in calculating AGR. Licence holders have to pay about 8 per cent of AGR to the DoT as fees. Telcos also pay about 3-4 per cent of AGR as spectrum usage charges.

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