India’s oil imports for the year 2017 surged to approximately 4.4 million barrels per day as refining capacity expanded sharply during the year. There was a sharp rise in refining capacity in the second half of 2017 to keep pace with the rising oil demand. During the year, Iraq has emerged as the top supplier of crude oil to India, ahead of Saudi Arabia. The Middle East has been India’s biggest supplier of oil accounting for 64% of the total imports. India’s trade deficit for December was sharply higher at $15 billion which led to a sharp depreciation of the INR to above the Rs.64/$ mark.
Reliance Industries has committed investments worth Rs.20,000 crore to the state of West Bengal and plans to make the state a hub of innovation and technology. This is in addition to the Rs.15,000 crore that the company has already invested in the state. The major investments in Bengal will include investments in Jio telecom, the digital eco-system, pure retail and oil retail. RIL also plans to connect hospitals and schools through the optic fibre network. Many business houses have expressed interest in investing in West Bengal due to the availability of quality manpower and favourable business conditions.
General Electric, once the hallmark of US industrialization, has been in deep trouble after the sub-prime crisis of 2007. Now General Electric plans to take a hit of $6.2 billion in its fourth quarter for its decade old insurance portfolio covering long term healthcare costs. Its unit GE Capital will now be making statutory reserve contributions of over $15 billion over the next few years. As a result, GE Capital will not be paying any dividend to its parent company. Since long-term healthcare covers beyond Medicare, rising life expectancy in the US has become a big challenge for insurers.
Bonds took a hit in the debt market today after the RBI made it clear that banks must handle their own risk better. The message was that banks should not count on the central bank to help them manage their interest rate risk. The debt market has already been on a rout as the bond yields have been steadily raising in the last 3-4 months after it became clear that the RBI may have reached the end of its rate cut exercise. With the US Fed planning up to 4 rate hikes in the coming year, the chances of RBI rate cuts are almost ruled. With prospects of a rate hike, bond yields have shot up.
Morgan Stanley believes that year 2018 could be a turnaround for the Indian IT industry. IT companies have been struggling for a variety of reasons. Firstly, the global IT spends were getting slower and margins were getting tighter on most projects. Secondly, the big shift was happening on the digital front and the traditional BFSI model, that Indian IT specialized in, was getting less lucrative. Thirdly, restrictions on the issue of H1-B visas and the uncertainty surrounding Green Card holders also added to the confusion. Morgan Stanley feels that business environment and new deals across Europe are picking up and the US could follow suit very soon. Morgan also expects that Banks and insurance companies may see a global revival in IT spending and Indian IT could be the big beneficiary.
The Ruias may be on target to retain control of Essar Steel after it was referred to the NCLT for initiation of insolvency proceedings. There is a clause for the Ruias that allows retaining stake by paying pending dues. The bidder could be structure as a special purpose vehicle in a tax haven like Mauritius which will be able to bid for the assets of Essar Steel. The deal will be structured in such a way that it does not violate the conditions of the IBC. If Ruias succeed then it could become a precedent because the government has been against the idea of promoters buying their own stressed assets.