More interest rates hikes with fiscal measures: RBI governor
The Reserve Bank of India will continue to raise interest rates in coordinated moves with the central government’s fiscal measures to tame inflation, Reserve Bank of India governor Shaktikanta Das. Expectation of a rate hike is a no-brainer, Das said in an interview. It will also not allow a runaway depreciation of the rupee.
Why it’s important: Retail inflation has been persistently high for the past few months, which has prompted the central bank to already raise the benchmark interest rate by 0.4 percent. More hikes are in the offing that will raise borrowing costs.
India joins Indo-Pacific economic bloc aimed at countering China
India has formally joined the Indo-Pacific Economic Framework, along with 12 other countries in the region led by the United States, to strengthen economic cooperation as a geostrategic counter to China’s growing clout in the region.
Why it’s important: The framework does not yet call for launching negotiations for a trade pact but promises to begin collective discussions towards future negotiations. There could be opportunities for Indian businesses in the future.
States seek legal opinion on court ruling ahead of GST council meeting
Some states are taking a legal view on the state GST rate and the compensation rules ahead of the Goods and Services Tax (GST) Council meeting likely to be held in mid-June. Several states are likely to pitch for GST compensation beyond the June 30 deadline.
Why it’s important: Since the meeting will take place after the recent Supreme Court verdict that the decision of the Council is not binding on the central and state governments, some states dissenting on various issues may want to be louder at the meeting.
Government may announce further duty cuts to cool rising prices
The government is considering some more short and medium-term measures to dampen inflation further after cutting excise duty last week to bring down prices of auto fuels. The measures under consideration include a reduction in customs duty for essential items such as edible oil and other imported raw materials for industries. A cut in the agriculture infrastructure development cess is also possible.
Why it’s important: The central government is finally taking measures to bring down soaring retail inflation. The duty cuts will, however, impact revenue collections and could widen the fiscal deficit.
FMCG firms see demand revival, higher profitability in second half of 2022-23
Consumer product companies expect a recovery in demand and profitability during the second half of the financial year due to a predicted good monsoon, higher farm prices, fading inflationary pressures in the coming months, and the low base effect, even as they face slowing demand in the current quarter.
Why it’s important: FMCG companies in India are hoping for a faster recovery of demand in rural areas. Most of these firms had blamed slowdown in the rural market in the March for dragging down overall growth.
Tata Sons likely to earn record Rs 278 billion from listed firms
Tata Sons, India's biggest promoter in the private sector, is expected to earn a record Rs 277.97 billion through equity dividend and proceeds through share buyback from its listed group companies for the 2021-22 financial year. This will be a rise of 17.6 percent from Rs 236.63 billion earned in 2020-21.
Why it’s important: The record earnings by the Tata conglomerate, led by cash cow TCS, is an indicator that corporate earnings in India, particularly for the large business groups, have continued to rise despite the disruptions caused by the Covid pandemic.
Government measures to tame inflation may have limited market impact
Tax tweaks over the weekend to arrest soaring inflation may soften prices in the short term, although their overall impact maybe limited. The government cut excise on auto fuels, imposed export duty on iron ore and other steel intermediates, and reduced duty on inputs for steel and petrochemicals.
Why it’s important: The measures do not bode well for companies in these sectors, with metals and oil and gas indices on the BSE falling the most, while the auto index gained the most. The impact on markets is expected to be muted.
Rate revision in goods and services tax may get delayed
The plan to rationalize goods and services tax rates to boost revenue collection for central and state governments may get delayed because of the sudden deterioration in macroeconomic conditions, including slowing economic growth and surging inflation.
Why it’s important: Since retail inflation has been persistently high, raising consumption taxes could be a challenging task for the authorities. They may focus on high-end consumption items, where policymakers think that there is room for an increase.
Government may hire private sector executive to lead ONGC
The central government is keen on seeking a private sector executive to head state-run ONGC amid global energy inflation that lends urgency to the push for higher oil and gas production to reduce India’s import dependence. The search and selection committee panel set up in February to choose a chairman-cum-managing director is planning to seek out private sector executives as well.
Why it’s important: ONGC is one of the best run public sector firms in India. It has been led by PSU executives till now, and it is not clear why the government would prefer somebody from the private sector. Lower compensation could be a key hurdle in this regard.
Telecom operators may raise tariffs by 12 percent by Diwali
India’s top three telecom service providers are likely to increase tariffs by another 10-12 percent by Diwali to boost their average revenue per user. Despite the price increase, the three carriers are likely to add up to 40 million customers in 2022-23, primarily in the underpenetrated rural markets.
Why it’s important: The telecom sector did not lose any active users in the March quarter even after 20-25 percent tariff hikes in November and December last year. This could mean the market is ready to take another hike as telecom tariffs in India remain among the lowest globally.