The inter-connect usage charges (IUC), which were to be scrapped effective December 31 this year, has been extended by one more year. IUC is imposed by the operator in whose network the call lands. The legacy networks like Bharti and Vodafone were the big beneficiaries of this IUC which is charged at 6 paisa per minute. IUC benefits operators that have more incoming calls landing on their network as compared to outgoing calls. There had been a long standing demand by the new players like Jio to scrap IUC. With the AGR troubles in telecom, the TRAI has put off the scrapping of IUC by one year.
Nifty and Sensex rallied sharply on Tuesday on the back of multiple favorable cues. The trade deal has been affirmed by the US Trade Representative and that was a major boost to the markets. Metal stocks were obviously the big gainers on Tuesday. The second trigger was the push on the BREXIT front with Boris Johnson being voted back by a thumping majority. But the biggest boost to markets came from the MSCI revamp, which is likely to increase India’s weight in the MSCI EM index by nearly 100 bps. This is expected to lead to global flows into India to the tune of $2.5 billion to bridge the gap.
Gita Gopinath of the IMF has warned that the IMF could significantly downgrade the Indian GDP growth estimates as weak consumption and tepid private investments are expected to keep the GDP growth under pressure. As of now the IMF estimates stand at 6.1% for 2019 and 7% for 2020. That does look a little steep considering that the GDP grew at just about 4.5% in the third quarter and the high frequency indicators are hinting at a tepid December quarter too. Moody’s has already downgraded India’s GDP growth to 4.9% for fiscal 2019-20 and IMF may also peg its GDP estimates closer to that.
Brent Crude prices scaled above the $66/bbl mark on Tuesday and the gains in the last one week have been fairly sharp. The rally in oil has had a number of triggers. For example, the likely trade deal between the US and China is keeping oil prices buoyant. Secondly, the OPEC meet in Vienna had enhanced the supply cuts from 1.2 million bpd to 1.7 million bpd giving an impetus to prices. Lastly, the better than expected macro data in China output and consumption has also raised hopes that the Chinese central bank will sustain the financial impetus to keep growth on track.
The Finance Ministry has set a monthly target of GST collections to the tune of Rs.110,000 crore in the next four months of this fiscal with one month collections touching a high of Rs.125,000 crore. In the last few months, the GST revenues have been struggling to even cross the Rs.100,000 crore mark. Last year, GST collections fell short by nearly Rs.120,000 crore. This target assumes importance ahead of the all important GST Council Meet on 18th December. One of the big fears that businesses do have is that the finance minister may increase the GST rates. However, considering that inflation is already at 5.54%, any GST hike will only add to inflation. However, it is very likely that non-merit goods like cigarettes, tobacco products and other items of luxury consumption could see an additional levy or cess.
After several days of strength, the UK Pound weakened on Tuesday after Boris Johnson was seen playing hardball on BREXIT. As against the January 31 deadline offered by the EU, Johnson has sought a deadline of December to pull out of the EU. That hardly leaves enough time considering that the Christmas holidays will also be commencing shortly. The Tories now want to push the EU to a corner by threatening to walk out of EU if there was no deal by end of December. Obviously, the emphatic victory of the Conservatives appears to have emboldened Johnson in his relations with the EU.
