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

Morning Scan

1. India may introduce a simpler regime to improve ease of doing business for overseas investors 

India could take steps to create a simpler regime for overseas investment by diluting the rigid distinction between foreign portfolio investment and foreign direct investment, economic affairs secretary Ajay Seth told the Economic times. Rules could also be revisited to help Indian industrialists whose overseas investments are greater than those in the country to invest locally more easily.

Why it’s important: Current regulations do not make for smooth sailing for these categories of investors, which the government wants to address. Finance minister Nirmala Sitharaman in her budget speech said FDI and overseas investment rules will indeed be simplified.

2. Corporate India ready for capex spree to expand capacities once demand shows uptick 

CEOs across business sectors are ready to expand capacities, expecting the government’s target to invest a record Rs 11.11 lakh crore on infra development will act as a catalyst for a jump in consumer demand, the Business Standard reported. For the past few years, the investment scene in India has been dominated by government capital expenditures and private investments in manufacturing sector have remained muted.

Why it’s important: Capex will rise only when domestic consumption becomes stronger and external demand rises. A flood of cheap Chinese imports has also made local firms wary of expanding capacities.

3. Over 70 percent of intraday traders incurred losses in 2022-23, regulator’s study finds 

Over 70 percent of intraday traders in the equity cash segment incurred losses in 2022-23, the Hindu Businessline reported, citing a study by the Securities and Exchange Board of India. The number of individuals participating in such trades rose by 300 percent in the four financial years ending March 2023.

Why it’s important: The share of young intraday traders under 30 years of age has grown to 48 percent in 2022-23, up from 18 percent in 2018-19. The losses indicate overconfidence in a trader’s ability to generate regular income by predicting daily price movements. More awareness is needed in this matter.

3. Global capacity centers may expand footprint on stable taxation and litigation regime

Finance minister Nirmala Sitharaman’s proposal to provide certainty in international taxation and reduce litigation for global IT firms operating in India can further spur the massive expansion of global capability centers, the Economic Times reported. The Centre aims to expand the scope of safe harbor rules and streamline transfer pricing assessment procedure, which could see a near threefold expansion of captive units to a $120 billion sector by 2030.

Why it’s important: The GCCs are India-registered entities providing services to global parents and thus attract strict transfer pricing provisions under tax laws. Any easing will lead to lead to better predictability and acceptance. It would an industry boosting measure.

5. Tax deducted at source for income from government bonds may deter retail investors 

Just when retail investors are warming up to investing in central and state government securities via online platforms such as RBI Retail Direct, a budget proposal on deduction of tax at source on income from these instruments could prove to be a dampener, the Hindu Businessline reported. From October 1, investors may have to factor in a 10 percent TDS outgo when investing in G-Secs and State Development Loans.

Why it’s important: Participation of retail investors in the G-Sec market has been rising in the past few years through online portals. Although the TDS proposal would improve tax compliance, practical implications need careful management to avoid discouraging investment in these financial instruments.

6. Piramal’s financing arm eyes overseas bond markets to diversify fundraising 

Piramal Capital & Housing Finance, currently reliant on bank funding, plans to continue accessing the overseas bond market to diversify its borrowing sources, the Business Standard reported. The diversified NBFC aims to increase its borrowing from global sources to 10 to 12 percent over the next 2-3 years, up from the current 4 percent. It issued its maiden dollar-denominated bond this week, raising $300 million.

Why it’s important: The macroeconomic environment in the country is prompting many bigwigs of India Inc to tap the overseas bond market for funding. Piramal is the latest to join that bandwagon.

7. Changes in capital gains tax will benefit most people, says top tax bureaucrat 

The changes in the capital gains tax announced in the budget for 2024-25 are rational decisions that will benefit people in most scenarios, and it is for the government to decide on the suggestions that come up, Central Board of Direct Taxes chairperson Ravi Agarwal told the Mint in an interview.

Why it’s important: There has been all-round consternation on the raised rates and changed time periods in calculating capital gains tax. Whether it does benefit most taxpayers remains to be seen.

8. Government mulling industry call to lift restrictions of Chinese foreign direct investment 

The central government is holding discussions on industry’s calls for easing restrictions imposed on Chinese investment into the country as also granting visas to experts for setting up plants, but is yet to take a final decision, the Economic Times reported, citing top government officials. The Economic Survey tabled in Parliament has also batted for easing Chinese investments into the country.

Why it’s important: Industry lobby groups want an easier visa regime for expats, including those from China, at a par with the one proposed for firms in the sectors under the government’s production-linked incentive schemes. The finance minister, too, has hinted at a revamp of foreign direct investment regime.

9. Lower customs duty for gold and jewelry could see consumer rush ahead of wedding season 

The budget proposal to pare customs duty has sparked a gold rush at jewelry stores as consumers hurry to stock up on the yellow metal ahead of a busy wedding season, the Economic Times reported. Customers have begun flocking to jewelry stores to benefit from the reduced rates of gold, mostly buying heavy stuff that had eluded them for the last six months as gold prices scaled a record Rs 74,000 per 10 gm.

Why it’s important: There are worries, which could be unfounded, that the extraordinary surge in demand could prompt a rollback of the lower customs charges. The fears could be overblown.

10. Higher user fees at 16 major airports in India adds to rising airfare burden for fliers 

Since the beginning of the current financial year, 16 airports have raised user development fees, the Mint reported. Airports at Bengaluru, Hyderabad, Mangaluru, Thiruvananthapuram, Ahmedabad, Jaipur, Lucknow, Kannur, Kochi, Chennai, Kozhikode, Kolkata, Goa, Bhubaneswar, Patna, and Srinagar have raised these fees in a range of 2 to 200 percent, the civil aviation ministry said.

Why it’s important: The widespread increase in airport charges is an additional burden to fliers facing higher airfares this year and comes on the back of airline firms struggling to find enough aircraft to serve soaring demand.