IMF sharply reduces India 2022-23 growth forecast to 6.8 percent
The International Monetary Fund (IMF) has slashed India’s economic growth estimate for 2022-23 to 6.8 percent from its July projection of 7.4 percent, citing the impact of external headwinds and weaker-than-expected second-quarter growth. Despite the downgrade, India will remain one of the fastest-growing big economies in 2022 and 2023. China’s growth is estimated to slow to 3.2 percent in 2022.
Why it’s important: The IMF’s estimate follows downward revisions by other agencies as well. The World Bank has lowered India’s growth forecast to 6.5 percent for 2022-23, and the RBI and the Asian Development Bank have pared their projections down to 7 percent.
Stock markets tank 1.5 percent on weak global cues, rising US bond yields
Indian equities fell 1.5 percent in a late sell-off on rising bond yields and worsening geopolitical situation, with the Nifty dropping below the crucial psychological mark of 17,000 points. The benchmark Sensex closed at 57,147.32 points, 1.46 percent. The Nifty lost 257.45 points, or 1.49 percent. The two-year US bond yield rose to its highest since August 2007, trading at 4.3 percent.
Why it’s important: The latest fall shows that domestic markets cannot remain immune to global turmoil. Investors are likely to remain on the side-lines rather than putting their money in the stock market at this point of time.
Reserve Bank tightens rules for banks on unhedged forex exposure
The Reserve Bank of India (RBI) has modified guidelines for banks on incremental capital and provisioning requirements in relation to unhedged foreign currency exposures amid the weakness in the Rupee compared with the US Dollar. In cases where lenders face a potential loss to earnings before interest and depreciation of more than 15 percent but up to 30 percent, they will have to increase provisioning by 20 basis points. It rises incrementally to 80 basis points when potential loss is more than 75 percent.
Why it’s important: The rupee has fallen 10 percent against the US Dollar in 2022, leading to greater scrutiny of unhedged exposure through borrowings in foreign currencies. The higher provisioning requirements are a result of that.
Funding winter compels start-ups to tap convertible notes to raise funds
Business-to-business (B2B) e-commerce platform Udaan is close a fresh round of debt financing of $150-200 million via convertible notes. It will mark the second such infusion for the start-up this year at a time when late-stage equity funding is becoming scarce. Data from venture intelligence shows venture funding for start-ups fell to $2.7 billion for the September quarter compared with nearly $12 billion in the same period in 2021. This includes only four $100 million deals compared to 17 in the preceding quarter and 30 in the March quarter.
Why it’s important: As the funding winter sets in, desired valuations not happening for start-ups, which are now resorting to these debt instruments because cautious investors are demanding better unit economics and a clearer path to profitability.
Liquidity slips into deficit on higher credit growth and festival loan demand
A sharp rise in demand for credit, higher consumption during the festive season and dollar sales by the RBI in the forex market have led to liquidity in the banking system tightening sharply. In September, liquidity in the system slipped into deficit for the first time in three years. In October, the system slipped into a liquidity deficit for the first time on October 10 (Monday).
Why it’s important: The deficit liquidity will put pressure on banks to raise more deposits. They could do so by offering higher interest rates since the central bank has raised the benchmark policy rate by 2.9 percent in recent months.
Indian Railways could blacklist Oracle if bribery charges are proven
The Indian Railways (IR) may blacklist Oracle Corp., if an internal inquiry establishes that the database software maker’s Indian arm paid bribes to railway officials in 2019. The inquiry aims to ascertain facts based on which the US Securities and Exchange Commission (SEC) fined Oracle $23 million for violating the foreign corrupt practices act last year. Oracle had allegedly paid bribes to an official of a transportation company, majority owned by the railway ministry.
Why it’s important: Oracle India may face a ban from participating in railway contracts bids and also get blacklisted from participation in other government contracts in India for a specific period.
Bira 91 purchases the Beer Café in an all-stock deal
Beer maker Bira 91 has acquired the Beer Cafe, India’s largest alcoholic beverages chain, in an all-stock deal that will make the pub chain a fully owned subsidiary of Bira 91. Investors in the Beer Cafe, including promoters Rahul and Bineeta Singh, Mayfield, Granite Hill and RB Investments, will get shares of Bira 91. Bira 91 will get a retail presence through the Beer Cafe’s 33 outlets, while the pub chain will get the beer company’s support in innovations and supply chain.
Why it’s important: The buyout is expected to enable Bira 91 to strengthen its presence in the pub scene and build a consumer platform focused on beer.
India’s aviation market is poised to see robust demand growth
India is a key aviation market for the Asia Pacific and is expected to see robust air travel demand, global airlines’ grouping International Air Transport Association (IATA) has said amid the country’s domestic air passenger traffic inching towards pre-Covid levels. On October 9, the daily number of domestic air passengers touched 4 lakh. Prime Minister Narendra Modi has described the trend as a great sign.
Why it’s important: After being hit badly during the pandemic due to restricted mobility, Indian aviation is recovering. Airlines are ramping up staff and expanding routes to cater to the rising demand in travel.
Electric vehicle start-ups complain of not getting promised government subsidies
Start-ups producing electric two-wheelers and three-wheelers have said they are not getting subsidies under the second phase of the Faster Adoption and Manufacturing (FAME II) of Electric Vehicles (EVs) scheme even though some established manufacturers are receiving them. Subsidies of Rs 200-300 crore remain unpaid, alleged executives of smaller start-ups. Automakers like TVS Motor Co, Bajaj Auto, Ola Electric, and Mahindra Electric continue to enjoy benefits, they said.
Why it’s important: The government is yet to form a committee to investigate the matter. It has asked the companies to explain if they are importing products. Action will be taken only after verifying the claims.
Government asks telecom operators, phone makers to hasten early 5G adoption
Top government officials will meet executives from telecom networks and cell phone makers to push for early adoption of 5G in India. A notice from the department of telecommunications said the government is seeking the involvement of telcos and phone makers to release firmware upgrades needed for 5G devices to connect to 5G networks.
Why it’s important: Jio and Airtel, the country’s two largest telecom operators, have already launched 5G services in some cities. Software upgrades for the early adoption of 5G become a priority now as coverage expands across the country.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
