Bad monsoons may result in poor sugar output in the state of Maharashtra but it may be good for the price. In fact, the State Government expects Maharashtra sugar output to fall 39.2% in the current season to 6.5 million tonnes due to delayed rainfall. The state of Maharashtra is the second largest sugar producing state in India after Uttar Pradesh. This is likely to give some support to sugar prices which had fallen by nearly 20% due to a glut of supply in the previous cycle. Drought has reduced area under cultivation by 28%, with the drought conditions being especially severe in the state.
Fears of a repeat of February 2016 are back to haunt the world oil markets. Russian oil minister hints at oil touching $30/bbl in the absence of an oil deal. Alexander Novak, the oil minister of Russia, has warned that in the absence of a full-fledged supply deal between the OPEC and Russia, Brent Crude could touch a low of $30/bbl soon. Currently, the glut of US shale and fears of a global slowdown are pulling down oil prices. It is just Iran sanctions and the OPEC supply cut that is holding. Meanwhile, the Saudi Oil Minister, Falih, has put the ball in Russia’s court.
In a rather unique move, the government has decided to take on the audit bull by the horns. The MCA has moved the NCLT to bar IL&FS auditors Deloitte and BSR for a period of 5 years by making a fresh application with the NCLT. Deloitte and BSR are the auditors for IFIN, the subsidiary of IL&FS that is at the eye of the storm. According to the MCA, the auditors had not exercised the requisite due diligence that was expected of them as the accounting watchdog. There has been an ongoing dispute about the jurisdiction of regulating auditors but now the MCA is taking matters into its hand.
As the trade war deepens, China is no longer content with relying on dollars for its forex reserves. China is increasingly hedging its dollar bets through gold. Over the last few months, China has been adding nearly 16 tonnes of gold every month to the reserves with the PBOC. China has total forex reserves of $3.5 trillion with nearly a third in dollar assets. With Trump threatening to escalate punitive tariffs on goods worth $300 billion, China is looking to reduce its dependence on dollars and also to diversify its reserve bets. This also frees up more options for China when it comes to dealing with tariffs.
When Boris Johnston hinted that UK may not pay the EU dues of Euro 39 billion till a satisfactory deal is signed, it had opened a Pandora’s Box of sovereign default. However, S&P and Fitch have confirmed that Britain delaying EU payments will not amount to sovereign default. S&P and Fitch have confirmed that UK delaying their €39 billion payment to the EU, pending better BREXIT terms, will not amount to sovereign default since as per their definitions, sovereign ratings only refer to risks faced by private investors and this does not fall under that definition. Also, this is more in the nature of a membership fee and not debt issued in the international markets. The EU is not taking it lying down and has warned UK of a possible clash in the International Court of Justice in Hague if the dues were not cleared.
Corporate tax cuts are not expected to happen in the current Union Budget, which will be presented by Nirmala Sitharaman on July 05th. With the Finance Minister already stretched for resources, NDTV reports that corporates may have to forget about any corporate tax cuts this time around. Jaitley had originally promised to cut corporate taxes from 30% to 25% over four years but later backtracked and only made the cut applicable to companies with turnover less than Rs.250 crore. We will have to wait till July 05th for the final decision although this decision is almost a foregone conclusion.
