The Modi government may have finally won a big psychological victory. The UK Home Secretary approved the extradition of Vijay Mallya to India, although that is only the first step. Legally, Mallya has recourse to the UK High Court and then to the UK Supreme Court. Once the legal niceties are completed, the final call on extradition will be made by the Secretary of State and that is indisputable. It may be recollected that the Indian government has been pursuing Mallya for his wilful default of Rs.9,000 crore as well as laundering of funds borrowed from IDBI Bank.
It was a volatile day in trade for crude oil as it retreated after a sharp rally during the day. After touching a high of $63.63/bbl, Brent crude gave up gains in the second half to close at $62.45/bbl. With the US shale production at record levels of 11.5 million bpd, it remains an overhang apart from the fears of growth slowdown. In the last few days, Brent Crude had rallied sharply on the back of strong economic data in the US and the OPEC sustaining supply cuts. The joker in the pack could be the way the global growth and consequently oil demand pans out during the year.
The INR appeared to be following the weakness warnings given by Reuters as the Indian Rupee weakened by 55 paisa to 71.80/$ on the back of a strong dollar. The dollar displayed strength on Monday vis-à-vis all the emerging market currencies after strong manufacturing and jobs data from the US raised hopes of a growth recovery. The INR also weakened on the back of a sharp rise in crude oil prices. According to an ET report, there was also demand from importers and banks looking to buying forward dollars to hedge open positions. Dollar strength could hold the key.
Despite fiscal deficit overshooting the target, December 2018 showed some betterment in the fiscal deficit numbers. In fact, fiscal deficit for fiscal year 2018-19 touches 112% of full year target in the first 9 months of the fiscal crossing the Rs.700.000 crore marks. The latest budget has allotted Rs.20,000 crore in the current fiscal year towards the PM-KISAN income support program. The full year fiscal deficit number will depend on the revenue flows from GST collections and disinvestments of PSUs. The government has set aggressive divestment targets for the fiscal year 2020 also.
The stakes and the structure of the Essar Steel transaction appear to be changing on a daily basis. In fact, the Ruias and other Essar Directors have moved the National Company Law Tribunal (NCLT) to quash Arcelor Mittal bid for Essar Steel. The petition has been moved by the directors of Essar group in the NCLT Ahmadabad bench so as to retain control over the group. The petition comes up for hearing on 05th February. After Arcelor Mittal’s Rs.42,000 crore bid had been accepted by the Committee of Creditors, Essar Directors had filed a counter bid for Rs.54,000 crore. Currently provisions do not permit defaulting promoters to bid for their own companies, however the NCLT had made an exception in the case of Ruchi Soya, which could become a precedent for this case.
This time around there is not really much of sweetness in sugar. Indian sugar mills owe nearly Rs.20,000 crore to cane farmers. The delay in payment is due to the massive glut of sugar in the global market which has led to the market price of sugar falling below the cost or production. India is the world’s second largest producer of sugar after Brazil, but is the world’s largest consumer. For the sugar cycle beginning October 2018, the government had hiked cane procurement prices for farmers by 8%. That explains why the sugar stocks have corrected so sharply in the last few months.
