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

India’s banks and asset reconstruction companies are locked in a tussle for the last two months because large banks want that the ARCs that acquire loans to give an undertaking that they have no links whatsoever with the promoters of defaulting borrower companies, a declaration that could become significant if any such company faces bankruptcy and is auctioned to a new owner. Some of the big lenders are also refusing to sign the standard indemnity they give on sale of sticky loans to ARCs. Many fear this could become a deal breaker in the stressed loan market.

Why it’s important: Banks do not want an asset reconstruction company to hold loans and act as a front to help a promoter make a backdoor entry into the company. Some banks are unwilling to provide guarantees to the stick loans they sell.

#3. Go First blames engine makers and aircraft lessors for huge losses

The Indian aviation sector has suffered huge losses due to faulty engines supplied by Pratt & Whitney, with nearly 75 aircraft currently grounded, top executives of Go First Airlines have said, which has led to a spike in fares. Asking Aviation Working Group, an association of aircraft lessors, engine makers, and plane makers to pressure P&W to meet its obligation to supply engines, they claimed its members were trying to influence the National Company Law Appellate Tribunal.

Why it’s important: Go First in an unusual move voluntarily filed for insolvency, which was opposed by lessors as it would freeze asset recovery. A bankruptcy court has admitted the proposal that could lead to further litigation.

#4. India’s exports to the West rise in 2022-23 at the expense of Africa and Asia

India’s goods shipments to some Asian and African regions contracted in 2022-23, weighing on overall growth in exports. There was expansion in exports to the European Union and the US despite the economic downturn and heightened geopolitical risks. India’s merchandise exports had risen 6.7 percent to $450.4 billion in the year ended march.

Why it’s important: The decline in outbound shipments to Asia and Africa has been largely due to external factors over with Indian exporters had little control. The situation might not improve in the near future.

#5. Promised freebies in run up to 2024 elections may hurt long-term growth, experts say

The freebies promised by the Congress that swept the Karnataka assembly polls could spur competitive populism in the build-up to the 2024 general elections, experts said, warning that reckless giveaways would hurt long-term growth and development prospects. They acknowledged a certain amount of populism is inevitable as well as desirable in a democracy for redistribution, but that should not undermine fiscal prudence and compromise efficiency in government spending.

Why it’s important: Although there’s no gainsaying on fiscal prudence, the apprehensions could be overblown as welfare spending in India, particularly by the central government, has shown a distinct declining trend in the past decade.

#6. Godrej promoters to establish family office to invest in new age businesses

The promoters of Godrej Industries are setting up a family office to invest in new-age businesses, pursue riskier bets in unrelated segments and incubate new ideas. The family office would start with a few hundred crores and raise funds when opportunities arise, according to Nadir Godrej, the younger brother of group chairman Adi Godrej, whose son Pirojsha will manage the family office.

Why it’s important: The Godrej family has until now invested in new, riskier enterprises through their diversified businesses. The family office could in time consolidate these and fresh investments under a single umbrella.

#7. Electronics and IT ministry may lead government fact-checking team

The central government is likely to opt for a fact-checking team led by the electronics and information technology ministry to verify any information pertaining to the government published on social media and internet intermediaries. The three-member body will consist of two officials from the IT ministry and a third independent member with expertise in law, social media, or public policy. The team will coordinate with other departments of the government on the fact-check, a top official said.

Why it’s important: The development marks a departure from the government’s earlier stance where the Press Information Bureau was identified as the agency to carry out fact-checks. The move has faced serious criticism from free speech activists and media associations.

#8. Axis Trustees, creditor to Future Retail, approaches tribunal for dismissed claims

Axis Trustee Services, one of the creditors to Future Retail, has approached the National Company Law Tribunal after the resolution professional rejected its claims worth Rs 470 crore out of total claims of Rs 1,266 crore. The bankruptcy tribunal is expected to take up the matter by Wednesday. If the trustee’s remaining claims are admitted, it will become the fifth largest creditor in Future Retail’s insolvency resolution. Resolution professional Vijay Kumar Iyer has agreed to file a response.

Why it’s important: Despite the niggles over credit claims, experts say the prospects for resolution under insolvency are positive since there has been an increase in the number of final bidders.

#9. India lags in race to export electronics to the United States

Unlike competing countries like Vietnam, Malaysia and Mexico, India has failed to push electronics exports to the US by exploiting the latter’s imposition of a punitive 25 percent duty on key Chinese imports. As China saw its electronics exports fall by $29 billion in the past four years, the duty created an opportunity for other countries to replace China in the US. Yet, according to a note presented to the government by the Indian Cellular Electronic Association, India’s electronics exports to the US in absolute terms went up by a mere $3.2 billion between 2018, when they stood at $1.3 billion, to $4.5 billion in 2022.

Why it’s important: This was a missed opportunity that local electronics exporters could still correct. The Indian government has been pushing hard to make the country a hub of electronics manufacturing.

#10. Mark Mobius remains bullish on India but won’t invest in Adani

India remains one of the two largest markets in the investment portfolio of Mark Mobius. The founder of Mobius Capital Partners and a seasoned emerging markets investor has expressed strong optimism on India’s potential and said he plans to ramp up his exposure to the country. However, he has steered clear of investing in shares of Adani Group companies due to their elevated debt levels.

Why it’s important: The veteran investor has always been upbeat on India’s economic prospects, not without ample reason. His aversion to overleveraged businesses shows a cautious streak.