Midnight News Update –Sep 20, 2017
A day ahead of its all-important meeting to vote on the conversion of Tata Sons into a private limited company, the Tata Group set about consolidating its hold on the Tata group companies. Both Tata Chemicals and Tata Global Beverages sold their cross holdings in each other to Tata Sons helping them consolidate their position further. Earlier this year, Tata sons had also bought out Tata Motors’ stake in Tata Steel. Ever since the Mistry episode, the board of Tata Sons has been going about consolidating its hold over the group. The vote on 21stSeptember will be very crucial for the Tatas and Mistry family.
The Indian industry has warned Mr. Hasmukh Adhia that if the GST rules were not tweaked quickly, the export sector may immensely suffer. Indian exports are already seeing a shrinking export market due to a strong rupee which has been held high by strong capital inflows. Exporters have to pay the GST on imports but they can claim credit during exports. Due to glitches in the software, the exporters are facing practical problems in claiming this credit. The industry has warned that nearly $10 billion worth of exports may get stuck due to the problem that they are facing with respect to deferment.
It was another significant victory for Reliance Jio as TRAI cut the interconnect charges sharply, despite protests from Bharti Airtel. Interconnection usage charges (IUC) for mobile-to-mobile calls have been reduced from 14 paisa to just 6 paisa. From January 01, 2020, the IUC will stand totally abolished. Rajan Matthews of the COAI has promised to take this issue to the court of law to legally prevent TRAI acting against the interests of the larger section of the industry. Bharti is likely to be worst affected as it gets most of traffic through incoming calls due to its vast rural network.
Total food grain output during the current year is likely to be at the same level as last year at around 276 million tonnes. This is commendable since rainfall was deficient in some sectors and there were floods in other sectors. During the monsoon, states like Gujarat, Assam, Bihar and Rajasthan faced excess rainfall while states like Karnataka, Chhattisgarh and Tamil Nadu faced a dry spell. The food grain production is a key input for food inflation which goes into determining the level of CPI inflation. That eventually becomes the driving force when the RBI has to take a view on interest rates in the economy.
The September quarter may end up being a bad quarter for advance tax collections with the NPA-laden PSU banks being the worst hit. The mop-up in the quarter depicted a mere 10.4% growth in advance tax collections and was principally tepid in sectors like steel and banking. The biggest market of Mumbai which contributes nearly 1/3rd of the direct tax collections in India was one of the key reasons for this tepid performance on the advance tax front. The big contributors were the downstream oil marketing companies like HPCL and BPCL which are likely to see a sharp increase in advance tax collections. The government has already asked the CBDT to tighten the screws and start scrutiny of returns on a random basis to identify cases of companies that have seen a sharp fall in advance tax outgo.
The world markets are watching the Fed policy announcement on 20th September with bated breath. On the one hand, there will be greater clarity on rate hikes and there may be another attempt for rate hike in December as inflation has jumped back to 1.9%. But the bigger question will be on how the Fed will handle the tapering of its $4.5 trillion bond portfolio. Whilethe entire tapering may take years to complete, the starting of the process itself may create liquidity issues for global markets. Janet Yellen wants a shift to taper as a monetary tool, although her successor may not agree with the same.
