Morning Scan: All the big stories to get you started for the day

A round-up of top newspaper stories.

1. Indian equities snap nine-day winning streak as investors dump IT stocks

India’s stock markets fell after a selloff in IT shares led by Infosys, breaking their nine-day winning run. The Sensex lost 0.86 percent and the Nifty declined 0.68 percent. Both indices had fallen as much as 1.4 percent earlier in the day. The BSE IT index plunged as much as 4.7 percent. Infosys shares tanked 9.4 percent, hitting the lower circuit. The negative sentiment rubbed off on other Indian tech stocks and the Nifty IT index fell to its lowest in nearly two years.

Why it’s important: Disappointing fourth-quarter results by leading IT firms have spooked investors. There might be more pain ahead for software stocks as top firms have reported deteriorating demand in key western markets and pressure on margins, souring their business outlook for 2023-24.

2. India suffers setback as WTO rules against tariffs on ICT products including cellphones

The dispute settlement panel of the World Trade Organization has ruled that India’s tariffs on mobile phones and electronic components violate its commitment under the IT guidelines of the multilateral trade body. “We recommend India bring such measures into conformity with its obligations under the General Agreement on Tariffs and Trade 1994,” the panel ruled. The rulings were on three separate, but similar disputes raised by the European Union, Taiwan, and Japan.

Why it’s important: The WTO ruling will put pressure on India to withdraw the tariffs at a time it is aiming to be a leader in global electronics manufacturing through a production-linked incentive scheme.

3. Higher collections of tax deducted at source show success of the compliance strategy

The income tax department is increasingly garnering a higher share of tax revenue from taxes deducted at source, suggesting that holding one party in a transaction accountable for tax collection and its deposit to the exchequer has ensured compliance. The share of TDS in gross direct tax receipts has increased from 32 percent in 2014-15 to nearly 39 percent in 2021-22, official data showed. The government’s latest steps in widening the reach of the TDS system include eliminating exemptions on interest payments for listed debentures and imposing a levy on online game winnings.

Why it’s important: Automatic tax deductions have significantly improved compliance. It has also proven invaluable for the tax authority in increasing oversight of economic transactions.

4. Adani Group paid back $3 billion in March quarter to lower pledges and settle bonds

The Adani Group paid back at least $3 billion in the March quarter, lowering promoter group pledges, and settling bonds with three domestic mutual funds. The embattled conglomerate spent at least $2.54 billion to cut promoters’ pledges in four of the nine listed Adani group companies, which include flagship Adani Enterprises, Adani Ports, Adani Transmission, and Adani Green Energy, regulatory filings showed.

Why it’s important: The March quarter was extremely bruising for Adani because the group saw a massive $145 billion erosion in market value after a report that alleged accounting fraud and stock manipulation. Adani denied wrongdoing and scrambled to soothe investor concerns and regain business credibility.

5. India to receive a big boost from coal-fired electricity as new plants come on steam

India is expecting a massive 14.56GW of new coal-fueled power coming on stream in 2023-24 in a reminder that the world’s fastest-growing major economy needs diverse sources to satiate its rising hunger for energy. This is part of a plan to add around 27GW of coal-fired capacity at the cost of about Rs 1.89 lakh crore to be executed by power generation companies run by the central and state governments.

Why it’s important: The additional power capacity by burning coal, one of the most damaging fossil fuels, comes even as India has declared ambitious green energy transition goals. India’s electricity demand is growing at an average of 10 percent every year and cannot be met by renewable sources alone.

6. Apple chief visits India to discuss wider domestic engagement with government

Apple chief executive officer Tim Cook, who arrived in Mumbai on Monday ahead of the inauguration of the company’s first-owned stores, is likely to discuss plans to broaden the range of products it makes in India during meetings with the government. The first stores will be opened in Mumbai and Delhi. The tech giant, which currently makes iPhones in the country through its contract manufacturers, may bring up starting the production of headphones, iPads, and watches, besides boosting the component ecosystem.

Why it’s important: Apple has already significantly increased local production of iPhones in recent times, boosting India’s exports of mobile phones. Apple is seeking to diversify supply chains to reduce its dependence on China, and India provides a ready alternative.

7. Wireless operators ask the government to sharply slash levies to make 5G viable

India’s top telecom firms Reliance Jio, Bharti Airtel and Vodafone Idea have called on the government to sharply reduce levies, saying that they are making huge investments for the fastest 5G rollout seen anywhere in the world but have no clear visibility in terms of additional revenue. The top telcos, through the Cellular Operators Association of India, want the license fee to be brought down to 1 percent from 3 percent, and the universal service obligation levy of 5 percent to be deferred till the Rs 64,774 crore lying in the fund gets exhausted.

Why it’s important: Mobile data rates in India is among the lowest in the world. Although the operators are rapidly deploying 5G services across the country, they are yet to have any visibility on revenues that would put additional pressure on their razor-thin margins.

8. Fuel and electronics exports from India rise as emphasis shifts from labor-intensive sectors

The share of oil and electronic goods exports in the post-pandemic world has increased at the cost of outbound shipments of labor-intensive sectors such as gems and jewelry, engineering goods, and readymade garments. The share of petroleum exports in India’s total shipments went up from 13.2 percent in 2019-20 to 21.1 percent in 2022-23. The share of electronics goods exports, meanwhile, rose from 3.7 percent to 5.3 percent during the same period. The share of gems and jewelry exports fell from 11.5 percent in to 8.5 percent and the share of engineering goods exports declined from 25.1 percent to 23.9 percent.

Why it’s important: The changing dynamics of outbound shipments of goods would necessitate a change in India’s trade policy stance.

9. GMR to leverage a partnership with ADP to attract global brands to Indian airports

The GMR Group is working on upgrading the retail experience at its airports worldwide by leveraging the expertise of its French partner Groupe ADP. The retail strategy is expected to help GMR improve non-aeronautical revenues at airports such as Delhi, where 30 percent of non-aeronautical revenue is used to cross-subsidize airport charges.

Why it’s important: The group’s broader strategy is in line with that of other airport operators such as Adani Group and the Airport Authority of India. Adani has stated its intention to develop real estate and aero cities around its airports. AAI is readying to sell master concessions at its airports to increase non-aeronautical revenue.

10. Large donations to charities by 8,000 taxpayers for evasion under scrutiny

The income-tax department has sent notices to about 8,000 taxpayers who have made large donations to charitable trusts, suspecting them to be attempts at tax evasion. These taxpayers were making donations disproportionate to their income and expenditure, data analytics have suggested. Those served notices include salaried and self-employed individuals, apart from companies. Taxmen are also looking into independent tax professionals who facilitated these transactions. The department is also tracking charitable trusts that are offering fake bills to taxpayers.

Why it’s important: The donations are said to be exactly the amount required to lower the income-tax slab or get a full exemption and were paid by cash. The concerned charities stand to lose their exemption status if any wrongdoing is found.