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

Finance Ministry reimposes austerity steps; no cap on health

The finance ministry reimposed expenditure curbs on ministries and government departments for the July-September quarter, reports Business Standard.

Why it is important: There will be no spending restrictions on the ministries of health, rural development, agriculture, MSME and railways as part of a two-pronged strategy.
It is in keeping in view the evolving situation arising out of Covid-19 and anticipated cash position of the government.
Spending curbs were imposed last April following a nationwide lockdown.
These were relaxed later and then removed in December.

Puts curbs on ministries/depts such as civil aviation, home, labour, consumer affairs and telecom.

‘Devas will pursue its rights in courts around the world’

Matthew D Mcgill, partner at Gibson, Dunn & Crutcher, and lead counsel for a number of Devas’ shareholders, explains what necessitated this latest move in the US courts, in an interview with Business Standard.

Why it is important: Devas Multimedia is out to enforce a $1.2-billion international arbitration award arising from a failed contract with Antrix Corporation, the commercial arm of ISRO, by approaching US courts this week to lay claim on Air India’s assets abroad.

What he says: On the urgency for moving courts in the US, he said it is a common practice after winning such a decisive arbitration award to act on enforcing a decision, which was binding on the Indian government.
The only urgency is coming from the Indian government, which has taken outrageous actions to evade payment of the award, and expropriate Devas.

Devas will continue to pursue its rights and enforcement actions against India in courts around the world.

Monsoon delays further in North India

With north-western part of the country reeling under heat wave conditions due to break in Monsoon, the India Meteorological Department said further advance of southwest Monsoon into remaining parts of Rajasthan, Delhi, Haryana and Punjab is not likely till July 7, The Times of India reports.

Why it is important: The timely monsoon is important for the agricultural sector and for the revival of the rural economy.
Monsoon enters into the break phase with little rain over the country.
No signs of revival till July 7.
Heavy rains could trigger floods over NE and states like Bihar later.

The heat wave conditions are predicted in several parts.

Jalan-Kalrock must put Rs 600 crore in first year for Jet Airways reboot

For Jet Airways to take to the skies again, London-based Kalrock Capital and UAE businessman Murari Lal Jalan will need to infuse Rs 350 crore within 180 days, The Times of India reports.

Why it is significant: It is followed by another Rs 250 crore in the next six months — a total Rs 600 crore in the first year.
Settlement of claims from this amount made on Jet 1.0 will be limited to Rs 475 crore.
While Jet’s financial creditors had raised total claims of Rs 7,808 crore, the consortium has proposed to pay Rs 385 crore to them — 95 percent less.
It raises hope for the airline to fly again.

It does not have much good news for Jet 1.0 employees as of now.

Benchmark bond yields could rise 25 percentage point in 6 months

India's benchmark bond yields could rise about a quarter percentage point in the next six months, The Economic Times reports.

Why it is so: Inflation stoked by high transport-fuel prices and a global commodities super-cycle likely to offset central bank efforts to hold down rates.

ET poll showed the likelihood of yields on the benchmark paper climbing to 6.25 percent by December.

Some participants expect the gauge to touch even 6.50 percent as North Block might need to expand its balance sheet further to salvage an economy dented by the second viral wave.

Rural, small town sales buoy consumer majors

Several top consumer goods makers said rural and small-town sales made a recovery in June, The Economic Times reports.

Why it is important: Rural and small-town markets are particularly important for the FMCG industry, since they contribute 55-60 percent to sales.

Earlier it was thought that these markets would take longer to pick up after the second wave that led to infection rates spiking in these areas too.

Buoyant rural sales, along with the gradual opening up of markets and pent-up demand in cities, has helped several top companies clock 5-15 percent year-on-year growth in revenue in June.

V-shaped recovery: Rural markets will make a V-shaped recovery with the vaccination drive picking up pace, the government announcing stimulus measures and with a normal monsoon.

Hinterland remittances turn the corner

Remittances from urban to rural pockets revived in June after a 40 percent decline in April, reports The Economic Times.

Why it is important: It points to an economy emerging from lockdown-induced hibernation.
The remittance flows are a good proxy of the state of the migrant economy.
India processes roughlyRs 12,000 crore toRs 14,000 crore in monthly remittances internally.

Remittance players said that with migrant labour returning to urban pockets of Maharashtra, the NCR, Gujarat and Karnataka, business is returning to normal.

Vaccination is key: If India is able to vaccinate a bulk of the population in the coming months, it will see a rise of 10-20 percent in this business.

Tata Motors turns the corner, partner not a priority now

The turnaround in the fortunes at Tata Motors has eased the pressure of hunting for a partner, reports The Economic Times.

Why it is important: It aims to chart a new plan on its own.
It has put the hunt for a new partner low in its priority.

The sustained volume momentum and structured cost-cutting exercise has put the car division in a self-sustaining mode.

GEAR initiative: The backbone to the cost-saving exercise was the GEAR initiative – i.e. Generate, Evaluate, Approve and Realise.

Govt charts course for usage of new-age fuel

India is considering a proposal to make it mandatory for fertilizer plants and oil refineries to use green hydrogen, says a Mint report.

Why it is important: It is part of plans to cut the nation’s dependence on fossil fuels.
Fertilizer plants and oil refineries may have to use green hydrogen to meet 0.15 percent of their total hydrogen requirements, starting 2023-24, and ramping it up to a tenth of their total requirements within six years.
Indian companies, including Reliance Industries Ltd, have been gearing up to leverage opportunities presented by the transition to cleaner energy.

India wants to run the world’s largest clean energy programme.

Reserve Bank tightens leash on cooperative lenders’ operations

The RBI has significantly tightened the screws on cooperative banks, the Mint report says.

Why it is important: It wants to enforce powers granted by legislative changes last year to clean up a system bogged down by corruption.
Lax corporate governance standards have been at the centre of India’s cooperative banks, with political influence and interference rampant, like in the PMC Bank.

RBI is now enforcing a series of guidelines on the appointment of managing directors and chief risk officers while imposing fines for shortcomings and mandating stricter reporting norms.

Loan stress looms but lenders have more capital now

India’s banks should brace for another wave of stress, says a Mint report.

Why it is important: As bad loans may touch 9.8 percent of the loan book by the end of the fiscal year from 7.5 percent in FY21.
The second wave of the pandemic is expected to have had an adverse impact on the income prospects of both corporate and individual borrowers.

Banks face the risk of incipient challenges to asset quality materializing.

The positives: However, unlike in the past, lenders won’t find themselves lacking in capital to weather this stress.

The upside for banks is that large borrowers may not be the main source of stress, although their share may remain high.

IPOs raiseRs 27,417 crore in 2021, highest in 10 years

Indian companies raisedRs 27,417 crore through IPOs this year, the highest in at least a decade compared to six months of previous years, Mint reports.

Why it is important: It is driven by abundance of liquidity and investor euphoria.
But the funds were not used for growth capital for companies.

Private equity and venture capital funds took advantage of buoyant stock markets to exit their investments.

Liquor discounts this festive season as new policy lifts price controls

Liquor shops in the Capital will soon be able to offer discounts, Hindustan Times reports.

Why it is important: A new excise policy that removes price controls in the retail alcohol trade kicks in.
It enables offers of the kind that are usually seen around Diwali on vehicles, electronics, and gift items.It will boost the government revenue, crack down on the liquor mafia, improve user experience and the liquor industry.