Equities rallied and gold prices fell after Trump stated that China and the US could be very close to a massive trade deal. This statement assumes significance in the light of the fact that the deadline for the next round of tariff hikes falls on December 15th. The trade talks had been stuck because China was demanding total winding down of all tariff hikes since March 2018. The US wanted to sign a trade deal by assuring China that there would be no further tariffs; but China is obviously not buying that story. Trump would be keen for a deal in January to coincide with his re-election bid in the US.
Indian economy had a double disappointment on the macro front on Thursday. The CPI inflation came in 92 bps higher rate of 5.54% for the month of November. The big driver of higher inflation was food inflation at 8.66% helped by 36% inflation on vegetables. On the other hand, the IIP for October came in at (-3.8%), the third successive month of negative growth signifying an official manufacturing slowdown. A total of 18 out of the 23 industry groups saw negative growth in IIP with electronics and automobiles the worst hit. The higher inflation is likely to force RBI to maintain status quo on rates in February too.
In a significant application of the anti-profiteering law in India, the GST Council has imposed a penalty of Rs.90 crore on Nestle for not passing on GST rate cuts to the end customer. One of the underlying premises of GST is the anti-profiteering law which stipulates that companies must pass on any GST cuts seamlessly to the end customer. The estimated profit made by Nestle by not passing on this benefit is estimated at Rs.90 crore and Nestle has been instructed to deposit the amount within 3 months. Nestle is entitled to seek the help of the appellate tribunal (GSTAT) or legal recourse as the case may be.
Japanese investment house, Nomura, has pegged India’s third quarter GDP growth at 4.3% and fourth quarter at 4.7%. Considering that Indian economy grew at 4.75% in the first quarter, this would imply a full year growth target of just about 4.6%. That is nearly 40 bps lower than the recent growth estimates put out by the RBI in its last monetary policy. Nomura has pointed out that domestic credit conditions remain tight post the NBFC crisis and the cyclical growth constraints also stay. Nomura also pointed that monetary policy may now play a limited role and fiscal policy could take centre stage in India.
The Cabinet has cleared key changes to the Insolvency and Bankruptcy Code to make it more potent. For example, successful bidders will be ring-fenced from criminal acts of the previous promoters. Also, the bill proposes a threshold for financial creditors to prevent frivolous litigation. Importantly, the IBC will now also permit the NCLT Company to continue as a going concern, which means its licenses and permits will not be cancelled. The Insolvency and Bankruptcy Code also replaces other acts like the SICA and SARFAESI Act, thus shifting the control of the recovery process from the borrower to the creditor. The intent of these amendments is to encourage more buyers to bid for the assets via the immunity clause. This will also speed up the entire process and ensure quick turnaround for financial creditors.
Share transfers could turn out to be more expensive from January 09th. According to a circular passed by the Finance Ministry, there will be some key changes made to the Stamp Duties. Firstly, stamp duties on equity and F&O will be paid to the exchange and not to the respective states. Such rates will be uniform for each product across India. For delivery transactions, the stamp duty will be levied only on the buy side of the trade. Above all, off market transactions will now attract stamp duty. This will also apply when shares are gifted to relatives as well as other third party transfers done off market.
