With the BREXIT now likely to be triggered without a BREXIT deal in place, it may be time for the British companies to trigger Plan-B. If the UK is forced to leave the EU without a full-fledged BREXIT deal, then it could have 2 broad implications. While this leaves UK free to negotiate fresh treaties with all nations, it makes them vulnerable to short term disruptions. Companies are already putting Plan-B in action which includes stockpiling parts to halting production to moving distribution and testing new trade routes. Most large companies are also looking at shifting their plants and their headquarters out of UK.
In the battle between the government and the RBI over PCA compliance, it looks like the government may be finally gaining an upper hand. Three PSU banks; Bank of India, Bank of Maharashtra and Oriental Bank have been taken out of the PCA framework. The PCA framework was applied by the RBI as a special case for banks that had net NPAs above the 10% mark. PCA banks were barred from fresh lending to customers and there are also severe restrictions on management compensation, dividend payouts, business expansion etc. Urjit Patel had strongly argued against diluting the PCA.
Pressure from the core sector deepened in the month of December as core sector growth slowed to just 2.6%. The weak core sector growth was impacted negatively by crude oil and fertilizers. This is also the lowest monthly core sector growth in the last 18 months. Crude oil, refinery products and fertilizers reported negative growth of -4.3%, -4.8% and -2.4% respectively. Even sectors like cement, electricity and steel showed a slowdown despite showing positive growth. Core sector growth is critical because it constitutes nearly 42% of the IIP and thus indirectly has a big weightage on the GDP growth too.
When paper currencies turn less capable of holding value, central banks across the world normally tend to gravitate towards gold. In the year 2018, central banks globally bought record gold in 50 years to the tune of nearly 651 tonnes of gold in 2018 accounting for 15% of all gold that was sold globally. Normally, central banks add on to gold ahead of any major economic or geopolitical turmoil that they foresee. This could also be an indication that central banks may be preferring gold as a reserve currency over the general preference for the US dollar.
Even as the government has been counting heavily on the LTCG tax collections, there may not be encouraging news on that front. According to a report n BQ, only 1/5th of the stocks may be liable to attract long term capital gains (LTCG) tax. That is because; only 98 out of the NSE 500 index companies are quoting at prices that are higher than the price on the cut off date of January 31st 2018. That means; nearly 80% of the investments will not attract LTCG tax this year. Even in the remaining 20% stocks, the actual tax paid will be subject to actual selling and net profit after write-offs. Last year the LTCG tax was introduced on equities and equity funds with aggressive price targets. It is believed that if the LTCG tax is not too productive, then the government may opt to just revert back to its STT days.
Wal-Mart and Amazon scramble to comply with new ecommerce rules deadline. With the government refusing to relent on its Feb 01st deadline for the new ecommerce rules, foreign ecommerce players are working against time to rejig ownership structures and to rework key vendor relationships. Under the new ecommerce rules, global ecommerce companies cannot have an equity stake in a vendor nor can they have exclusive selling arrangements. In an election year, the government obviously wanted to make a statement that it was keen to protect the interests of the small and medium sized traders.
