The Trump speech was largely disappointing as it did not contain any specific references to his grand plan to cut personal and corporate taxes or to his plans of investing $ 1 trillion into US infrastructure. A large part of his speech was devoted to his alleged relations with Russia and the future of US-Russia relationships. Trump has promised a less suspicious relationship with Russia and at the same also reiterated his controversial plan to build a wall along the Mexican border.

Indian pharma and IT companies have some serious worrying to do as an outcome of the Trump speech. On the subject of outsourcing, Trump has spoken of a Border Tax on US companies that outsource jobs and operations to other countries. While his direct reference was to Latin America, Indian IT industry depends on US outsourcing for more than 70% of its business and could be hit any such move. Trump has talked at length about the overpricing of pharmaceutical products by pharma companies and the predatory pricing policies followed. While the reference is to large US formulations manufacturers, Indian generic drug companies are also likely to be hit by price investigations.

The RBI may have come up with a plan to reduce the cost of overseas borrowings for Indian companies by imposing a uniform withholding tax irrespective of type and currency of denomination. The rate of withholding tax ranges from 5% to 20% depending on the nature of the borrowing and the Tax Treaty with the respective nation. There has also been a demand to exempt Masala Bonds from withholding tax as these are rupee denominated. Masala bonds are rupee-denominated issued by Indian companies to foreign investors and do not carry any currency risk for the issuer. The RBI may make these Masala bonds exempt from withholding tax and standardize the withholding tax for other bonds.

The total currency is circulation in Indian currently is just about 50% of the pre-demonetization levels. That the economy is still running smoothly at half the currency levels shows that the fears over demonetization were largely misplaced. One of the ideas behind demonetization was that people are encouraged to shift their money transactions to the digital platform and reduce their dealing in cash. Early tax estimates show that the demonetization has definitely led to higher levels of tax compliance and a wider tax net. Based on the current experience, the government may decide to reduce its eventual target of note printing to keep inflation in check.

The race seems to be hotting up for the top job at the National Stock Exchange. Some of the eminent contenders for the job include Ashish Chauhan of BSE, former BSE CEO Madhu Kannan and Vimal Bhandari of Indo Star Capital. Global head hunting firm, Egon Zehnder has been hired by NSE to finalize on the CEO for NSE. The selection panel includes Anand Mahindra, Usha Thorat, Mohandas Pai and Dinesh Kanabar. The hunt for a new CEO began after former CEO, Chitra Ramakrishnan, submitted her resignation from the position last month.

SEBI and the IT department are closely investigating nearly 32,000 entities across India for stock price manipulation and tax evasion. They appear to have used the long term capital gains (LTCG) umbrella to evade taxes in a big way. This tax evasion has happened through small companies and penny stocks. Typically a stake in such companies is sold through a placement, then the price is manipulated and at the end of one year the stock is sold off at a huge profit. Since the profit is a LTCG, it becomes exempt from capital gains tax. This provides an avenue for the manipulators to flush their black money into the normal channels.

MOU to the extent of nearly Rs.50,000 crore were signed during the second day of the Vibrant Gujarat Summit at Gandhinagar in Gujarat. Most of the MOUs pertained to banks signing off funding arrangements. SBI was the biggest signatory accounting for Rs.30,000 crore of the funds committed on Day 2 of the Vibrant Gujarat Summit. Both the NSE and BSE will be investing in the GIFT City while MCX plans a business continuity centre in Gujarat. More than 110 countries have participated in the summit.

Dr. Urjit Patel has cautioned the government over its rising debt burden. Speaking at the Vibrant Gujarat Summit, Patel highlighted the need to be careful about off-balance sheet items like government guarantees and interest subvention schemes, which can combine to put pressure on India’s overall external rating. The RBI governor also focused on the need for better transmission of policy rate cuts. In the past, only 50% of the rate cuts were actually passed on to the end customers by the banks. However, post the demonetization the banks have been flush with deposits and are fairly desperate to expand their asset books. SBI took the lead by cutting MCLR by 90 bps and other banks have followed suit.