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

Government considers making income up to Rs 5 lakh tax free under new regime

The central government is examining the possibility of increasing the tax-free slab to Rs 5 lakh in the two-year-old alternative personal income tax regime to make it more attractive. Taxpayers currently don’t pay income tax if their taxable income is Rs 2.5 lakh or less. Very few taxpayers have opted for the alternative tax regime. For many, the tax outgo in the older personal income-tax regime is lower if they make use of deductions such as under Section 80C and Section 80D.

Why it’s important: Increasing the threshold to Rs 5 lakh will reduce the tax outgo, leaving more money with taxpayers to invest. If the tax outgo in the new and old regimes is similar, most would opt for the new one because it will reduce the compliance burden.

Budget may smoothen tax snags at International Financial Services Centre

The federal budget may tackle some hurdles at the International Financial Services Centre in GIFT City, which is treated as a quasi-foreign territory seen through the prism of the Foreign Exchange Management Act but a domestic area under tax laws and other regulations. Open-ended category 3 AIFs face such a conundrum. The Reserve Bank allowed domestic investment in a GIFT City fund using the liberalized remittance scheme. But administrators of category 3 AIFs receiving such LRS money may face a tough time dealing with taxmen.

Why it’s important: The tax inconsistency when a fund set up to invest and trade in listed stocks receives money from local investors needs to be dealt with.

India Inc sees record M&A activity in 2022 worth around $171 billion

The Indian corporate sector reported its highest ever mergers and acquisitions in 2022 calendar year at $171 billion as against deals worth $145 billion announced in 2021. The $ 57.8billion merger of HDFC Bank and HDFC led the league table. The acquisitions by the Adani group dominated the headlines, with the conglomerate making its foray into the cement sector by buying Swiss firm Holcim’s stake in Ambuja Cements for $6.5 billion.

Why it’s important: The outlook for M&As in 2023 will build on this, driven by moderating valuations and expectations, a marginally tighter financing environment, and changing geopolitical priorities leading to control transactions compared with minority transactions.

Abu Dhabi in advanced discussions to invest $350-400 million in Lenskart

Abu Dhabi Investment Authority is in advanced discussions with Lenskart and its existing stakeholders for an investment of $350-400 million, the largest fundraise by the eyewear retailer. Some of Lenskart’s investors are looking for a partial exit. The investment will mostly be through a secondary sale of shares with a small primary round consisting of growth equity at a valuation of $4. 5 billion.

Why it’s important: The potential valuation of Lenskart would be more than double the market capitalization of Warby Parker, an online retailer that listed on NYSE in September 2021.

Apple is likely to increase iPhone production in India by three times

Apple Inc is likely to triple its production of iPhones assembled in India over the next two years. Apple has instructed its local suppliers — Foxconn, Pegatron and Wistron — to increase manufacturing capacities. They’re adding assembly lines and manpower. The Cupertino-based firm is in the process of increasing production capacities for the immediate term as well as establishing long-term plans in India, government officials said.

Why it’s important: The threefold increase would represent a significant expansion of Apple’s manufacturing capabilities in India and would lessen its dependence on factories in China, a policy the US firm has been pursuing since the covid pandemic broke out.

States competing for infrastructure investments provide relief to lenders

A few large capex private projects and competition between states to secure them are benefiting lenders, who can now be more confident that firms will be able to complete the projects on time. States are offering subsidies, favorable land deals and other incentives to encourage investments and job creation, bankers said. Infrastructure projects have often been delayed due to challenges with land acquisition and other issues.

Why it’s important: The competition between states is benefiting banks financing the infra projects because it offers them assurance that they will not be stalled unless there are major policy changes.

Crypto and taxation on G20 agenda as finance trace starts Tuesday

A globally coordinated approach to unbacked crypto assets, advancing the international taxation agenda and reorienting international financial institutions will be the key agenda items for the G20 Finance Track meetings starting Tuesday, the finance ministry has said. The first G20 Finance and Central Bank Deputies meeting, jointly hosted by the finance ministry and the Reserve Bank, is scheduled to be held during December 13-15 in Bengaluru.

Why it’s important: India has been consistently saying a global framework is necessary to regulate cryptocurrencies. The G20 platform is an excellent forum to start working on a framework.

State Bank to start foreign rupee trade with smaller nations

The State Bank India will begin overseas trade in rupee with smaller countries like Mauritius and Sri Lanka. Two special vostro rupee accounts have been opened with SBI to facilitate overseas trade in rupee. SBI Mauritius and People’s Bank of Sri Lanka had opened the vostro accounts. As far as rupee trade with smaller nations is concerned, the Reserve Bank has allowed opening of six special vostro accounts with three Indian lenders — SBI, Bank of Ceylon and Indian Bank.

Why it’s important: The decision to start rupee trade with smaller countries steers clear of any transactions with Russia that carries the risk of sanctions by Western nations. The overseas trade in rupees has been a non-starter till now.

Pharma regulators and companies step up action against fake drugs

Pharma companies and state drug regulators are intensifying action against spurious and substandard drugs in India. In 2019-20, of the 81,329 tested drug samples, 2,497 were found to be of non-standard quality (NSQ), and 199 were declared spurious, government data show. In 2020-21, the NSQ count rose to 2,652 in the 84,874 tested samples and 263 were spurious. Between 2019 and 2021, 384 were arrested in relation to counterfeit or NSQ drugs.

Why it’s important: The rise in the detection of spurious and substandard medicines warrant increased vigilance not just in the domestic market but also in foreign shipments.

Budget may pare custom levies to align with free trade pacts

India plans to cut some of its import duties in the budget for 2023-24. Since these cuts will be on basic customs duty, they will have a minuscule impact on collections under the integrated goods and services tax. The cuts will also not impact the viability of the production-linked incentives that encourage domestic manufacturing in about 13 sectors, including electronics, automotive and textiles.

Why it’s important: The customs cuts will help India better navigate the raft of free trade agreements it is negotiating with several countries.