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

A round-up of the biggest articles from newspapers

A round-up of the biggest articles from newspapers

1. Reserve Bank keeps buying US bonds for fourth consecutive month

The Reserve Bank of India (RBI) has continued buying US bond for the fourth straight month amid surging treasury yields. India’s investment in US treasury securities jumped by $ 9. 2 billion in August to $ 221.2 billion, the highest in nearly two years, according to latest data compiled by ETIG. A small part may also be coming from corporates. India now ranks 12th in terms of US treasury holdings, after Brazil but ahead of Canada.

Why it’s important: Investing in US treasury is advantageous right now because the US Federal Reserve (Fed) is increasing rates and the dollar is getting stronger. This will help getting higher returns in the long term.

2. Market participants look to put rocky year behinds as Samvat 2078 ends

The Indian stock market outperformed global peers in Samvat 2078, which comes to an end amid wild swings. With the Indian economy better placed than many others, company earnings growth is expected to remain strong, analysts said. A pickup in the rural economy, hit by food inflation and erratic rainfall, would bode well for the economy and earnings. The new Samvat year, a calendar followed in some parts of India, is likely to remain a market for stock pickers.

Why it’s important: Although investors are hoping for calmer conditions and steadier gains in the new year, market volatility is unlikely to go away as there’s still geopolitical instability, rising interest rates, strengthening dollar and high crude oil prices.

3. Economic survey may project India’s GDP growth at 6-7 percent in 2023-24

The Economic Survey 2022-23, to be presented a day before the Union Budget next year, is likely to peg India’s real gross domestic product growth between 6 and 7 percent for 2023-24. The survey will be the first one by chief economic advisor V Anantha Nageswaran and his team in the finance ministry’s economic division. The broader theme of the survey could be on how India dealt with two years of the pandemic and geopolitical disturbance, the emerging strengths and weaknesses, and the lessons to be learnt.

Why it’s important: The economic survey is the government’s report card but may also suggest solutions to deal with future shocks, and how India can position itself in the emerging world order.

4. High-value purchases rise during festive season after two years of muted growth

Urban consumers continued high-value purchases in the festive season, helping mobile phone and consumer electronic brands clock over 15 percent sales growth. Apparel and fashion companies, fine dining and quick-service restaurants had a good season after two years of pandemic lull. Sales of FMCG in categories like packaged food and personal care products got a festive boost with sales growing by 8-11 percent.

Why it’s important: Consumer companies were expecting higher sales as the pandemic receded. But the real test of sustained sales growth will come after the Diwali season ends.

5. Prominent charitable institutions in India to face increased tax scrutiny

More than 24 prominent charitable institutions in the country, from private trusts, educational societies, statutory authorities, and cricket associations, may soon face tax scrutiny after a Supreme Court ruling set the limits to which tax exemption can be claimed. Most of these are profitable but get tax exemption due to their status as a charitable organization. The revenue department is preparing a standard operating procedure to scrutinize their books and evaluate if they can continue to claim tax exemption.

Why it’s important: Estimates show that there are some 50 institutions that carry out commercial activities and use the general public utility clause to gain tax exemption despite being highly profitable. The government may even modify rules to plug the loopholes.

6. India’s green GDP growth starts outpacing traditional GDP expansion

India’s green gross domestic product has turned a corner in the 21st century by growing faster than traditional GDP, a recent RBI paper said. While traditional GDP accelerated at an annual average pace of 6.27 percent and 6.61 percent in the 2000s and 2010s, the green GDP rose 6.34 percent and 6.71 percent, respectively. The trend had been the reverse in the past three decades of the 20th century. Green GDP adjusts the conventionally calculated GDP for the environmental costs of economic growth.

Why it’s important: India in recent decades taken measures to cut carbon emissions, improve resource use efficiency and boost clean energy capacity. The results have started showing.

7. No recession in India, authorities doing good job, says Hindustan Unilever chief

India is unlikely to face a recession and the country remains a bright spot, Hindustan Unilever’s managing director Sanjiv Mehta said, sounding optimistic amid a grim global economic situation. “I don’t see a recession in India. At this stage, I am optimistic that our economy could grow in the region of 6-7 percent, which under the circumstances would be a great achievement. The RBI and the government have been doing a good job despite the challenging context,” Mehta said in an interview.

Why it’s important: Despite the positive outlook, the government faces the twin challenges of keeping inflation in check and keeping up the economic growth momentum, he said.

8. More IT firms might follow soft stance of Infosys on moonlighting

After Infosys, more Indian IT companies may allow employees to take up additional work outside the company with prior approval, as these firms look to stop attrition. Others are of the view that authorizing employees to work for non-competing establishments may do little to enthuse workers and may instead lead to managerial disruption. It may not deliver huge benefits to attrition-ridden firms as only a small percentage of the workforce is likely to opt for such a scheme.

Why it’s important: Taking up an additional job in addition to primary employment to supplement incomes has emerged as a contentious issue in the IT industry. It is stoking polarizing opinions on the efficacy of companies authorizing gig work.

9. Government to sell stake in some listed state-owned railway companies

The central government is looking to sell some of its shares in listed railway companies to raise money. The railway ministry has asked public sector companies under its ambit to consider whether they can sell new shares to raise capital, with the government selling some of its shares. The move comes after the cabinet recently granted greater freedom to the boards of central public sector undertakings to pursue stake sales.

Why it’s important: The government’s disinvestment target for the current financial year looks increasingly out of reach. It remains to be seen whether this development makes any progress amid market volatility.

10. Loan growth of banks outpaces deposits by a huge margin

Credit growth of Indian banks touched a decadal high of 18 percent in the 14 days ended October 7, but deposits grew at a much slower pace of 9.6 percent, according to RBI data. A majority of the banks that announced their quarterly earnings this month have reported high loan growth, but their deposit growth was seen trailing loan growth by a large margin.

Why it’s important: The widening gap between credit and deposits has raised concerns that the slower pace of liabilities expansion may emerge as the biggest constraint for loan growth in the financial system. Banks have to do more to attract deposits.