Central government to continue with capex push in 2022-23
The government will not cut capital expenditure in the current fiscal year, finance secretary TV Somanathan said. The government has budgeted Rs 7.5 trillion capital expenditure in 2022-23 compared with a revised Rs 6.03 trillion capex in the year ended March.
Why it’s important: The statement comes in the backdrop when some experts have suggested fiscal policy should aid monetary policy in managing soaring inflation. The government says capex is necessary for long-term growth and short-term developments should not distract from that goal.
ONGC considers raising stakes in Russian oil fields amid war in Ukraine
ONGC is weighing the options of placing more bids for the stakes of Western companies in multiple Russian oil and gas fields, even as its first bid for Shell’s 50 percent stake in Salym fields in Siberia has not been accepted. The company is looking at an option to bid for Shell’s 27.5 percent interest in the Sakhalin-II oil and gas project and ExxonMobil’s 30 percent stake in the Sakhalin-I project.
Why it’s important: The reasoning is that the war in eastern Europe will not last forever and nor will the sanctions. This could an opportunity to secure energy supplies on the cheap, but there are risks involved.
Economists suggest welfare scheme for urban jobless, universal basic income
The Economic Advisory Council to the Prime Minister has suggested that the government should introduce a demand-based guaranteed employment scheme for the urban unemployed on the lines of the rural jobs guarantee program. It also suggested a universal basic income and allocating higher funds to the social sector to reduce inequality.
Why it’s important: While wages have been growing, the expansion has been patchy. Raising minimum earnings through an urban jobs guarantee and introducing universal basic income could reduce the income gap and bring in a more equal distribution of earnings in the labor market.
Ruchi Soya buys Patanjali Ayurved's food biz for Rs 6.9 billion
Ruchi Soya will acquire the food business of Patanjali Ayurved for around Rs 6.9 billion, which is expected to fast-track Ruchi Soya’s shift to the fast-moving consumer goods category. The name of Ruchi Soya Industries will be changed to Patanjali Foods after regulatory approvals.
Why it’s important: It will be a debt-free transfer and Ruchi Soya will fund the purchase through internal accruals. The strategic initiative for acquisition of food business will strengthen Ruchi Soya’s food product portfolio with an array of brands.
JSW group signs exclusive deal to buy green energy producer Mytrah
The JSW Group has entered into an exclusive agreement to buy green energy producer Mytrah Energy India in a deal worth about $2 billion in enterprise value. Mytrah has an operational portfolio of 2.3 GW, which includes 1.7GW of wind and around 535MW of solar power. It also has 700MW of projects under development.
Why it’s important: JSW and other investors are scouting for green energy assets as India transitions to clean energy to mitigate the effects of climate change. India has set an ambitious target to achieve a renewable energy capacity of 500GW by 2030, three times the current installed capacity of 156.6GW.
Corporate top brass to see highest pay raises in five years
Salaries of Indian CEOs and other top management are set to rise the fastest in five years amid a shortage of people at the top. India Inc’s CXO pay is expected to increase by 8.9 percent in 2022 from 7.9 percent in the previous year, according to human-resource consulting firm Aon India’s 2022 Executive Rewards Survey, which analyzed 475 companies across 20 industries.
Why it’s important: There is a talent shortage at CXO levels, and companies have realised they must pay more to get high-quality talent. The pay hikes come after two years of stagnant or subdued hikes because of pandemic-related disruptions.
Reserve Bank committee divided on pace of interest rate hikes
One of the members of the Reserve Bank of India’s monetary policy committee suggested an immediate repo rate hike of more than 100 basis points, while others favored less aggressive rate action in the future, minutes of the rate-setting panel’s last meeting showed. One basis point is a hundredth of a percentage point.
Why it’s important: It is almost certain that the central bank will raise the benchmark interest rate again in June after an off-cycle rate hike of 40 basis points in May. Experts expect a total of at least 100 basis point hike in the current financial year.
Promoter incomes in India see huge jump on dividends and buybacks
India’s top promoters and business families saw a massive rise in income from equity dividends and share buybacks in 2021-22 in line with a sharp jump in corporate earnings. Their income from dividends and share buybacks rose a whopping 50.6 percent year-on-year to around Rs 370 billion compared with a 12.6 percent increase in 2020-21. In comparison, India’s per capita income is estimated to grow by 16.7 percent in 2021-22 after contracting by 4 percent in the preceding financial year.
Why it’s important: The incomes of the super wealthy have risen dramatically during the pandemic. The rise has widened the income gap between an average Indian household and the country’s top promoters and business families.
Rent in shopping malls rises on higher store demand and rising sales
Top malls in India are demanding rents that are 10-15 percent higher than pre-Covid levels as shoppers return and retailers get back to growth mode, reversing the discounts many landlords offered struggling retailers to help them survive the pandemic.
Why it’s important: Well-located malls could have one of their best years as pent-up demand helps revive business. Retail businesses have reported a 23 percent jump in April sales from pre-pandemic levels, indicating a strong uptick in consumer demand.
Ratings firms seek clarity from regulator on new RBI directive
Credit rating agencies have sought the intervention of their regulator in the wake of new directions from the Reserve Bank and the contradictions that have surfaced in the views of the two financial market watchdogs. The central bank has said ratings given on loans to a company cannot be notched up based on diluted and non-prudent support structures such as letter of comfort, letter of support or undertaking, and other covers like pledge of shares.
Why it’s important: Such ratings support from parent firms or promoters enables companies to reduce the cost of borrowings because higher the rating, lower the interest on debt. Regulatory conflicts need to be ironed out.