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

A round-up of the biggest articles from newspapers

July 07, 2022 / 07:35 AM IST

Reserve Bank eases forex rules to stop rupee’s slide

The Reserve Bank has announced steps to encourage forex inflows and arrest the rupee’s decline against the dollar. The measures include doubling the annual overseas borrowing limits for companies to $1.5 billion and temporarily abolishing caps on interest rates for banks to attract deposits from NRIs. The central bank also eased rules for foreign investors to invest in government and corporate debt in India.

Why it’s important: The rupee has been under tremendous pressure in recent months, as foreign investors pulled out investments and India’s trade deficit has widened to a record. India’s current account deficit is estimated to have doubled in a year.

India may be better placed as recession looms over the West

India is probably better placed than many other economies to navigate a recession in the US and Europe as it would cool high crude oil and commodity prices and help avoid further interest rate hikes. Recession fears have hammered equities and have begun eroding prices of commodities as well.

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Why it’s important: Although a recession in the West is bad news for all economies, the cooling of oil and commodity prices will help India to address concerns over the widening current account deficit and high import bills.

Banks may be asked to charge royalty on brand name, pay GST on that

The tax department has told the banks, including State Bank of India, ICICI Bank, HSBC, and Axis Bank, among others, if a mutual fund unit uses any brand components, it should pay royalty or similar fees to the parent and 18 percent GST has to be paid on that amount. Most banks do not charge royalty or get paid a fixed amount, which is set to be challenged by tax authorities.

Why it’s important: If the tax department pursues this approach of charging royalty within bank arms, the GST cost could run into thousands of crores for large banks. The move is likely to be contested hotly.

Mittal family deal with Singtel delayed over valuation concerns

A difference over valuations is holding back the $1.5-2 billion buyout of Bharti Airtel shares by Sunil Mittal’s family from Singapore Telecommunications. Singtel and the Mittal family are shareholders in Bharti Telecom, a promoter company of Airtel. Singtel had begun talks with Bharti Airtel chairman Mittal to sell a small part of its holding in the Indian telco to the Mittal family as part of its portfolio management strategy.

Why it’s important: Singtel was keen to book some profits and redeploy some of the capital in new investment opportunities. The valuation mismatch could be due to the recent volatility in the share value.

Aviation regulator demands SpiceJet explanation over recent snags

The Directorate General of Civil Aviation has issued a show-cause notice to SpiceJet for its failure to establish safe, efficient, and reliable services. The regulator has given SpiceJet three weeks to explain why action should not be taken against the airline. SpiceJet has denied any violations and said it is committed to safe operations.

Why it’s important: There has been several recent safety related incidents at not just SpiceJet, but IndiGo and Vistara as well. Airline firms cannot be lax on safety issues and not face regulatory action.

Government to conditionally release Rs 1 lakh crore capex fund to states

The central government will release Rs 1 lakh crore interest-free capex loans to the states under seven heads with conditions such as facilitating Gati Shakti, funding the PM Gram Sadak Yojana, incentivizing digitization, laying the optical fiber cable network, urban reforms, disinvestment, and monetization. While Rs 80,000 crore will be allocated to the states, the remaining will be for specific purposes.

Why it’s important: A primary condition is that the states must follow the original branding of the projects, and not appropriate credit for the centrally sponsored schemes, as has been done in a few cases earlier.

Regulator allows good drivers to pay lower premium for motor insurance

To boost tech-enabled insurance covers, the Insurance Regulatory and Development Authority of India has permitted general insurance companies to introduce concepts like pay as you drive, pay how you drive, and floater policies for vehicles belonging to the same individual owner of two-wheelers and private cars as add-ons in motor own damage policies.

Why it’s important: The move will allow motor own damage policies to be tailored on customer driving patterns, vehicle usage, and other parameters to offer the best features. It would provide insurers with better rating parameters, helping them differentiate good drivers from bad ones, impacting premiums.

Revenue of Byju’s doubles to nearly Rs 10,000 crore due to acquisitions

Byju’s, India’s most valuable startup, has become bigger as the online education platform has doubled its revenue to nearly Rs 10,000 crore in 2021-22 financial year. Based on the latest revenue figures, Byju’s is valuing itself at $22.6 billion, almost $6 billion more than its October valuation. The higher revenue and valuation are due to a string of acquisitions that helped the company nearly double its revenues in a year.

Why it’s important: Byju’s is yet to announce its financial results for 20121-22, pending an audit. It would be interesting to see how the scorching pace of expansion through acquisition plays out for the edtech firm.

India aims to export $350 billion worth of services in 2022-23

India’s service exporters are looking at an export target of $350 billion in the current financial year, a rise of a sharp 37 percent from last fiscal year, despite headwinds and recession fears in the global market. The companies are pinning their hopes on the post-pandemic recovery made by some key sectors, including travel, hospitality, and entertainment.

Why it’s important: The steep rise in seevices exports could help India narrow the widening trade and current account deficits, which is, however, conditional to a cooling of crude oil and commodity prices.

Order books of goods exporters start to shrink on inventory pileup

Order books of Indian exporters have begun shrinking as inventories pile up in key export destinations due to lower demand. Order books have shrunk 15-20 percent for leather and footwear, while in yarn, volumes have seen a sharp 70 percent fall. High inflation in the US and the European Union slowed takeoff for cotton yarn, readymade garments, leather goods and handicrafts, slowing the pace of exports in June.

Why it’s important: The good news of higher services exports is offset by the lower expectations of merchandise exports. This would be reversed only when inflation cools in the West and demand pick up.
Moneycontrol News
first published: Jul 7, 2022 07:34 am
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