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


#1. Bankers expect a smaller rate hike of 35 basis points or less this week

There is likely to be a smaller interest rate increase by the Reserve Bank of India this week, bankers said. Nine out of 10 banks polled by Economic Times expect the central bank to hike rates by 0.35 of a percentage point or less at the December 5-7 meeting of the monetary policy committee. Five of nine bankers predicted a rate increase of 35 basis points, while two expected it will be in a range of 25-35 basis points. One basis point is a hundredth of a percentage point. Only one banker expected half a percentage point increase.

Why it’s important: The persistently high inflation in home and abroad seem to be cooling. Combined with the indications of a slower rate hike by the US Federal Reserve and concerns over a global economic slowdown may lead to the Reserve Bank slowing the pace of interest rate hikes.

#2. Finance ministry nixes tax benefits to SEZs under proposed DESH Bill

The finance ministry has turned down the commerce ministry’s proposal to provide tax incentives to units set up in special economic zones as part of the Development of Enterprises and Services Hub (DESH) Bill, 2022, saying that it will create havoc for factories outside such zones. The commerce department should do whatever it takes to make the scheme beneficial to encourage these units, but tax incentives should be kept out of the scheme, a finance ministry official said.

Why it’s important: Tax incentives under the DESH scheme should be examined carefully because the objective is to make these unit more competitive in the overseas markets and not within India.

#3. Government plans world’s biggest grain storage program to ensure price stability

India is working to develop the world’s largest grain storage program by merging various schemes of the ministries of agriculture, consumer affairs, food and public distribution, and food processing. The proposal, which has been circulated among the Union ministries and departments for discussions, comes amid rising global food prices in the wake of disruptions caused by the war in Europe and the covid pandemic.

Why it’s important: Although India was less impacted by the disruption in cereal supplies, prices of edible oil and other food items shot up sharply. Maintaining higher inventory will help cushion abrupt price rises.

#4. Local toys sector to get Rs 3,500 crore in production-linked incentives

The central government is planning a Rs 35,000 crore production-linked incentive scheme for toys that comply with Bureau of Indian Standards norms. The development comes after a government survey in 2019 found that only a third of the toys imported from China were safe. Following this, several steps were taken, including issuing a quality control order and imposing higher customs duty on toys to prevent unsafe toys from entering the country.

Why it’s important: The production-linked incentives could help in reducing the import of unsafe toys from China and also build a robust domestic manufacturing ecosystem.

#5. India must review rules for domestic financial sector, says Uday Kotak

Rules governing the Indian financial sector need to be rewritten to realize the domestic economy’s growth potential, Kotak Mahindra Bank’s managing director Uday Kotak said in an interview. Domestic banks are losing out to global rivals without the leeway to build scale and the inability to underwrite riskier credit due to poor recoveries from bankrupt companies, he said.

Why it’s important: While a case might be made to ease lending rules for domestic banks, the government and the Reserve Bank will tread cautiously given the high burden of bad debts among Indian lenders.

#6. CBI court bats for extension of deadline to file charges in bank fraud case

A special CBI court has called for legislation to extend the deadline for filing of charge sheets in serious cases while dealing with a bail application in India’s biggest bank fraud case. While granting bail to Dewan Housing Finance promoters Dheeraj and Kapil Wadhawan in the case of allegedly cheating a bank collective of Rs 34,614 crore, judge Ashwani Kumar Sarpal cited an incomplete charge sheet filed against the Wadhawan brothers for his decision.

Why it’s important: Investigating agencies often face difficulties in completing complicated case probes, particularly financial crimes. The deadline to file formal charges within 60 days could be too constricting.

#7. Ola Electric chief says two-wheeler market will become entirely electric in three years

Bhavish Aggarwal, founder and CEO of Ola Electric, has said that internal combustion engine products will fall off a cliff as far as two-wheelers are concerned. “We see the whole or near 100 per cent of the two-wheeler market shifting from ICE in three years,” Aggarwal said. ICE players who think it will take a long time for the conversion of two-wheelers into electric mode are doing so at their own peril, he said.

Why it’s important: Although the electric two-wheeler market in India might have crossed the crucial inflection point that leads to rapid growth, the projection could be overly optimistic given concerns about fire safety and higher costs.

#8. India starts discussion with lithium-rick nations to ensure growth of battery industry

To ramp up domestic battery manufacturing capacity and reduce dependence on imports, the federal government has started talks with a few lithium-rich countries to supply the mineral to Indian companies, industry sources said. The foreign ministry held a meeting with the ambassadors of countries, including Argentina, Chile, and Bolivia, among others, to put forth its request.

Why it’s important: India has to ensure sufficient supplies of lithium and other rare earth minerals required by the battery industry to ensure that its transition to electric mobility and greener energy is not hamstrung in any way.

#9. Start-up funding rise in November to $ 1.27 billion amid caution among investors

Domestic start-ups have raised $ 1.27 billion in funding in November, the highest in a month since June, when a funding slowdown became noticeable. The increase in funding last month was mostly led by early and growth-stage rounds that crossed $ 1 billion in proceeds after more than five months, according to data from Venture Intelligence.

Why it’s important: Despite the increase in deal activity, tech investors feel it does not point to a sustained recovery. The funding winter shows no signs of easing and late-stage funding will continue to struggle.

#10. Digital rupee transactions remain anonymous form wallet to wallet

All wallet-to-wallet transactions of the central bank digital currency in the retail segment have remained anonymous as those transactions were not reflected in the core banking system of banks. Around 2,000 transactions took place in the three days since the pilot began. The Reserve Bank has created Rs 1.71 crore worth of digital rupee for the pilot. The target is to involve 50,000 customers in the next few days.

Why it’s important: The anonymity of transactions in the retail segment is expected to boost customer confidence to use the digital rupee in India widely.