The likely trade war between the US and the EU brings back memories of the previous trade wars in the 1930s which actually worsened the Great Depression of the 1930s. The story began with the US plan to impose 25% import duties on steel and 10% on aluminium. This is likely to hit countries like Canada, South Korea, EU and China. In the Indian context, the impact may not be too big due to its limited exposure to the US but if China embarks on devaluing the Yuan then the INR is unlikely to be spared as saw in 2015. These tariffs are under Section 232, where Trump has vast discretionary powers.
The latest results of the US FDA inspection at Sun Pharma’s Halol plant are more procedural than structural and to that extent Sun Pharma may be lucky this time around. After completion of the inspection, the US FDA raised 3 observations but all of them pertained to procedural issues rather than data integrity issues. To sum it up, the observations centred on poor upkeep of equipment, wrong incubation temperature and procedural lapses like inadequate training of staff. Sun Pharma has already corrected 20% in the last 1 year and this should surely come as a respite for the stock.
Even as Sun managed to escape stringent observations from the FDA, the Hyderabad based Aurobindo Pharma received 9 observations for its Unit 4 located in Hyderabad in the state of Telangana. The worry is that Unit 4 is an injectables facility which is expected to maintain the highest standards of and this could impact the list of drug approvals that are pending for Aurobindo. These observations are beyond procedural aspects, especially because it pertains to the sterile manufacturing facility. Additionally, it needs to be remembered that Unit 4 in Hyderabad contributes to 15% of total US sales.
The government of India has set up a dedicated Fintech panel to make regulations more flexible and in sync with the times. The idea here is to use FinTech quite aggressively promote financial inclusion. Apart from technologists, the chairman of UIDAI and a deputy governor of RBI will also be part of the panel. The panel will look at how FinTech can be leveraged in critical sectors of the economy, especially financing of MSMEs and affordable housing as well as e-delivery of services to the vulnerable sections of society. Fintech has been emerging as a promising field in the confluence of finance and tech.
Almost a month after the PNB fraud first came to light, it has emerged that loopholes in the PSB’s system were flagged but never taken up seriously. It is actually quite surprising how this fraud was allowed to continue for over 6 years between 2011 and 2017 without being detected. This is despite the complete gamut of internal audit, external audit and repeated inspections from head office and the RBI. According to a report by Reuters, there was a virtual breakdown of basic standards of compliance and standard practices. According to senior officials in PSBs, the RBI inspection had focused more on macro issues rather than on checking the integrity of procedures. What was truly ironic was that even the auditor reports for the last financial reports made a passing reference without raising an alarm.
The Services PMI for the month of February came in lower at 47.8. Any number below 50 shows a contraction in the segment. This is slightly worrying as it comes in the aftermath of the Manufacturing PMI which also came in at a 4-month low. The services sector contributes nearly 60% to the $2.3 trillion Indian economy and rapid growth in this sector is essential for GDP growth to pick up meaningfully. Already, the GDP for the full year 2017-18 is likely to be lower at 6.6% compared to 7.2% in the previous fiscal year. With RBI flagging inflation risks, any rate cuts are also ruled out for now!
