To protect the interests of the tyre industry in India, India has decided to impose countervailing duties (CVD) on large radial tyres from China. Radian tyres have for long been afflicted by cheaper Chinese tyres and the government obliged the tyre industry by imposing CVD for a period of 5 years. The CVD ranges from 9.55% to 17.57% of the value of the tyres. Earlier, the government had also imposed CVD on cast aluminium alloy wheels where China had heavily resorted to dumping cheap products. It protects domestic tyre companies from the unfair competition from China.
With the recent controversy over the integrity of the LIBOR (London Inter Bank Offer Rate), the RBI has decided to streamline Indian benchmarks. RBI issued detailed norms for the setting up of financial benchmarks administrators (FBA) to create and monitor all major market benchmark for financial instruments. FBAs will have to be a company incorporated in India with a minimum net worth of Rs.1 crore. FBAs will only monitor Indian benchmarks and will not have any jurisprudence over foreign benchmarks. Such FBAs will be required to go through some minimum eligibility criteria.
In a move that was not exactly surprising, the Telecom FDI into India fell by nearly 60% in FY19 over FY18. Telecom FDI (foreign direct investment), which stood at $6.21 billion in FY-18 fell sharply to $2.66 billion in FY-19. However, the telecom minister, R S Prasad, confirmed that this was not in any way connected to the financial stress in the telecom industry. The telecom sector has been weighed down by over $120 billion of debt, which is proving to be a major overhang for the sector. The telecom industry overall has been going through consolidation since Reliance Jio launched its economy plans.
In a softened blow for ecommerce companies and also for franchises like Visa and MasterCard, the RBI has clarified that foreign firms can process data abroad, but storage must be in India only as long as the data pertains to Indian nationals. The RBI has clarified that while foreign data firms can process client data abroad, the Indian customer data should be stored in India only. This storage has been the bone of contention between the government and the ecommerce companies with the US government also lobbying for the US ecommerce companies. It remains to be seen how Amazon and Flipkart react.
Gold and oil continued to be the key commodities to watch out for cues on the equity markets. Indian Gold demand expected to fall to 3 year low with volumes dropping by nearly 10% in 2019 on the back of very high gold prices. Even in the past, the gold demand has seen a sharp fall whenever there has been a spike in the gold price. Normally, people in India make gold allocations for the festive season and then adjust the volumes accordingly, so volumes could be hit. The other key commodity, Brent crude, spurts by 2.21% to $66.49/bbl on falling US stockpiles and a refinery shutdown. The spurt had nothing to do with the Iran conflict. On Wednesday, the price of Brent Crude shot up after the US reported larger than anticipated drawdown on stockpiles as US exports were sharply higher.
Global markets react positively to conciliatory noises coming from Trump. With Trump indicating that a trade deal between the US and China was entirely possible during the G-20 Summit, markets breathed a sigh of relief. The official level talks have already begun and Trump indicated that he may not have to impose higher and broader tariffs on Chinese products. However, the bone of contention in the trade talks could be the issue of security. Both the US and China are unwilling to compromise and come down on the issue of security and that is what the global market are apprehensive about.
