A round-up of the biggest articles from newspapers
Reserve Bank to continue to support growth, ensure liquidity
The Reserve Bank of India (RBI) will continue to support growth and ensure that the system has adequate liquidity to assist productive sectors, while maintaining stability of the rupee’s exchange rate, Governor Shaktikanta Das said. India is well placed to be able to cushion the economic shock due to the war in Ukraine, Das said.
Why it’s important: The governor said the primary mandate of the central bank is to maintain price stability. Although retail inflation has been more than 6 percent in the past two months, above the RBI’s tolerance band, it has held back increasing benchmark interest rates to assist economic recovery.
Government may launch the public offer of LIC in 2-3 weeks
The central government could launch of the initial public offering of Life Insurance Corporation of India in 2-3 weeks as the market situation may have improved slightly since there was a minimal effect of the interest rate hike by the US Federal Reserve. It has filed updated draft documents with the market regulator, responding to queries on risk assessment and whether LIC’s valuation at the time of filing the draft red herring prospectus and listing would remain the same.
Why it’s important: India’s largest IPO will be launched only when market volatility subsides, and the government is unlikely to rush into it. It will also consider the geopolitical situation due to the war in east Europe that have made investors jittery.
Business activity touches new high as threat from pandemic reduces
The Nomura India Business Resumption Index rose to a record high of 126.4 in the week ended March 20 from 122.8 in the preceding week. The pickup was broad-based with the domestic reopening after the third pandemic wave helping a fast catch-up in the dominant services sector, Nomura said. The high-frequency indicator was about 26.4 percentage points above its pre-pandemic levels.
Why it’s important: Although it is too early to tell, the impact of Ukraine war on economic growth appears to be limited. The resumption of business activity was also helped by the government, which has shielded consumers from rising crude oil costs and not increased prices of petrol and diesel.
Hindustan Unilever in talks to acquire majority stake in spice maker MDH
Hindustan Unilever is in discussions with Mahashian Di Hatti, popularly known as MDH, to buy a majority stake in the maker of Spices. MDH could be valued between Rs 100 billion and Rs 150 billion since it has a national presence.
Why it’s important: The branded spice market is huge in India and is estimated to double in size to Rs 500 billion by 2025. It is, however, dominated by regional spice makers. That could change if Hindustan Unilever leverages its distribution muscle to promote MDH after the acquisition.
Airfares skyrocket in domestic routes after jet fuel costs scale peak
The price of plane tickets has soared after last week’s record hike in jet fuel prices, making flying costlier for those making last-minute bookings. Average fares on popular routes like Delhi and Mumbai, Hyderabad and Delhi, and Chennai and Delhi have risen by 50-60 percent for reservations made within a fortnight before travel compared to airfares a year ago.
Why it’s important: The price of aviation turbine fuel accounts for some 30-40 percent of the cost of operating an airline firm in India. Last week’s price hike will compromise margins of carriers that have been bleeding in the recent past due to the COVID-19 pandemic. However, sales might not be impacted as there’s a lot of pent-up demand.
Government won’t allow setting off crypto losses to cut tax burden
Tax deduction to account for mining costs of cryptocurrencies and other virtual digital assets will not be allowed, the central government has said in Parliament. Also, investors will not be allowed to offset losses from one crypto transaction against gains from another. Infrastructure costs incurred in the mining of virtual digital assets will not be treated as cost of acquisition as it will be seen as capital expenditure.
Why it’s important: The latest stance of the government is a setback for the crypto assets industry. Industry stakeholders have said that disallowing offset between different cryptocurrencies and mining expenses will discourage investor participation, which is currently high in India.
Piramal files bankruptcy proceedings against Anil Ambani firms over unpaid dues
Piramal Capital and Housing Finance has approached the National Company Law Tribunal (NCLT) and filed bankruptcy proceedings against Anil Ambani-owned Reliance Power and its subsidiary Reliance Natural Resources to recover dues. Reliance Natural Resources had defaulted on a loan of Rs 6.26 billion borrowed from Dewan Housing Finance Corporation (DHFC), which has been taken over and merged with Piramal Capital. Piramal has initiated recovery proceedings against several defaulters of Dewan.
Why it’s important: The recovery of dues could get entangled legally as the two companies owned by Anil Ambani intend to dispute Piramal’s petition on grounds that the dues are not as high as claimed. Financial transactions at the erstwhile DHFL are still being investigated by government agencies.
Indian steel makers to invoke force majeure to renegotiate contracts
Some Indian steel companies are planning to invoke the force majeure clause and renegotiate short- and long-term contracts with customers after a surge in raw material costs, including that of coking coal, a vital ingredient in steel mills. Force majeure refers to an event that cannot be anticipated or controlled, and which makes execution of a contract impossible or impractical.
Why it’s important: The domestic steel industry is undergoing a crisis as raw material costs have soared due to war breaking out in Ukraine and the leftover impact of the coronavirus pandemic. Steelmakers in Europe have recently raised prices sharply and Indian companies may have no choice but to do that same.
Health of small businesses improving on easy liquidity and credit flows
The health of micro, small and medium enterprises (MSMEs) is improving with the easing of liquidity pressures and an increase in the credit flow in the past two months. Nearly 11. 5 million or 65 percent of such businesses have benefitted from the government’s emergency credit line guarantee scheme. Loan disbursals have grown by 50 percent, according to estimates by ratings agencies.
Why it’s important: The disruptions caused by the COVID-19 pandemic was disastrous for many small and medium businesses in India. Although there are some signs of recovery as restrictions have eased, business is not back to pre-Covid levels.
Business of India’s pharma firms in Russia unaffected by Ukraine war
Although many Western pharmaceutical majors have scaled down operations in Russia to comply with sanctions on Moscow, Indian pharma companies are continuing to run their business in that country, which contributes nearly $ 600 million of their annual revenues.
Why it’s important: Indian firms continue to export medicines to Russia since pharma products are exempted from the Western sanctions. Russia has been a hedge against regulatory uncertainties in the US market, which accounts for nearly 40 percent of their overall revenues.