Government to release draft ecommerce policy and rules
The government will soon circulate revised versions of the ecommerce policy and rules to spell out guidelines for all online transactions, covering all digital commerce and service providers, including marketplaces, ride-hailing companies, and ticketing and payment companies. The two drafts will be released at the same time in sync with each other, reducing the scope for misunderstanding.
Why it’s important: The rules are expected to focus more on safeguarding consumers. India’s ecommerce sector is expected to grow to $188 billion by 2025 from $64 billion in 2020. The online retail sector, one of the country's biggest job creators, has faced flak from small traders and offline retailers for alleged predatory pricing, preferential treatment for related parties and flouting of several regulations.
Asset quality may worsen, RBI’s stress test shows
The gross non-performing asset ratio of scheduled commercial banks is likely to increase to 9.5 percent in September 2022 from 6.9 percent in September 2021 in a severe stress scenario, the Reserve Bank of India said. The central bank noted that the banks would, however, have sufficient capital, both at the aggregate and individual levels, even under stress conditions.
Why it’s important: Bank credit growth is showing signs of a gradual recovery, led by the retail segment, although flow of credit to lesser rated corporates remains hesitant. Micro, small and medium enterprises, and the microfinance segments are reflecting signs of stress. However, lenders have enough capital to withstand a severe shock.
IT, pharma departments ask for top-up funds in incentive schemes
Key government departments, such as pharmaceutical, electronics and information technology, and new and renewable energy, have sought approval of additional funds for their production-linked incentive schemes. An empowered group of secretaries is likely to soon consider these demands.
Why it’s important: There has been a better-than-expected response from industry for the schemes, which is a healthy sign. A top-up is expected to give a further leg up to domestic manufacturing and Atmanirvar Bharat.
India may miss divestment target again in 2021-22
The government’s disinvestment target of Rs 1.75 trillion for the year to March 22 is unlikely to be met since there’s still uncertainty over the privatization of Bharat Petroleum.
Why it’s important: There hasn’t been much progress on the sale of Bharat Petroleum, as many bidders have been unable to find partners to form a consortium to finance the deal. This is due in part because there’s considerable global macroeconomic uncertainty over the Covid-19 pandemic and volatility in the energy markets.
Centre may revamp duties to boost local production
India’s national budget for 2022-23 may introduce a raft of changes to customs duties as the government leans on tariff rationalization to promote local manufacturing. The government may reduce duty on basic raw materials, including metals, which have seen prices soar in recent months, while withdrawing concessions for some products, including intermediates used in manufacturing, where domestic capability has improved over the years.
Why it’s important: The budget needs to lower duties across the value chain, from raw materials and intermediates to finished products, experts said, while industry representatives called for customs duty relief for supplies and equipment used in Covid-affected sectors such as hospitality.
RBL Bank under scrutiny because of the handling of Rs 3 billion loan
A Rs 3 billion loan that was written off within seven months of being sanctioned has emerged as the key reason for the banking regulator’s sudden intervention in private lender RBL Bank.
Why it’s important: RBL faces asset quality issues. Bad loans as a percentage of total advances rose to 5.4 percent on 30 September, up from 4.34 percent on 31 March. The banking regulator, however, has assuaged concerns of depositors and shareholders, saying the private lender’s financial health remains stable, and there is no reason for depositors to react to speculative reports.
Chips scarcity to ease by second half of 2022
Consumer electronics makers expect the semiconductor shortage to ease by the second half of 2022, pinning their hopes on plans of global chipmakers to roll out more fabrication units abroad.
Why it’s important: The semiconductor industry has been unable to keep pace as the unexpected surge in demand for personal computing devices for remote work and supply-chain disruptions during the pandemic led to long wait times for companies that make mobile phones, computers, cars, and appliances. The demand remains high.
High inflation is hurting rural demand for FMCG products
Rural demand for fast-moving consumer goods has been weak in the October-December quarter because of high inflation and high base effect in the same period last year when the growth rate was high.
Why it’s important: Rural demand saw a slowdown due to a consumption decline in the quarter ended September with value growth at 9.4 percent, which was led by price increases. In the same period, volumes contracted 2.9 percent due to a lower consumption of items like cooking oil, packaged groceries, hot beverages, and detergents.
Bajaj sets up electric vehicle manufacturing unit
Bajaj Auto has announced an investment of Rs 3 billion as it started work at its new unit at Pune to make electric vehicles. The factory, spread over an area of half a million sq. feet, will employ nearly 800 people and have a production capacity of 500,000 electric vehicles every year.
Why it’s important: India’s firms are rushing to set up factories manufacturing electric vehicles as they anticipate high demand for them in the coming years. The government is also offering several incentives to both suppliers and consumers as the country speeds up its process of energy transition to reduce the emission of greenhouse gases.
Private cryptocurrencies pose immediate risks, prone to frauds
The proliferation of private cryptocurrencies across the globe have sensitized regulators and governments to the associated risks, the Reserve Bank of India said in its Financial Stability Report, adding that they pose immediate risks to customer protection. They are also prone to frauds and to extreme price volatility, given their highly speculative nature, it said.
Why it’s important: The aggregate market capitalization of the top 100 cryptocurrencies has reached $2.8 trillion, the banking regulator has said. In emerging market economies subject to capital controls, free accessibility of crypto assets to residents can undermine their capital regulation framework. India is expected to soon bring in a law to regulate cryptocurrencies.Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.