Now, that we are done celebrating the news of Virushka’s upcoming baby, let’s move on to business.
A different GST – Government State Tussle
Giving in to pressure from states, the government finally went through a long-overdue GST Council meet. Although there was much flutter in the market about reduction of for two-wheelers from 28% to 18%, existing rates were left largely untouched. The bone of contention on the agenda were dues from the Centre to the State.
Crux of the matter: When the GST came into action, there was a clause that assured the state governments of Centre making up for any tax shortfall for the first five years. In this “Act of God” circumstance, the Centre has a shortfall of Rs. 2.35 Lakh Crore already in FY2021. On the other hand, states like Punjab with a demand bill of Rs. 4,400 and Gujarat with a demand of Rs. 12,000 as compensation are not helping matters.
So what’s the solution? Options given by Centre to States – two. Days to mull over it – Seven. In the first option, the Centre has proposed that the states borrow the Rs. 97000 Crore GST shortfall from RBI at special low rates which can then be repaid post 2022 from the cess collected. Second option allows states to borrow the entire shortfall of Rs. 2.35 Lakh Crore from RBI and keep repaying it from the cess collected. In either case, states will need to borrow to compensate for the loss in GST in the first five years of transition. And of course, politics has made it’s presence felt. So much so that Sonia Gandhi herself swung into action.
Trickle down of Nirav Modi proceeds for PNB
Nirav Modi and Punjab National Bank are in the news again. This time for a very surprising reason – some money flowing back from NM assets to PNB.
Flashback: Flashy diamantaire Nirav Modi stunned the nation after pulling off the country’s biggest scam worth Rs. 10,000 Crores. If you want some of the grisly details, check out this article which talks about the false Letters of Undertaking and the over 1,000 fraudulent guarantees that were secured from PNB, with obviously some employees hand-in-glove in the whole scheme. Days before the scam came to light, Nirav Modi and involved relatives had made fled India. In March 2019, he was arrested in UK and is now appealing against extradition to India.
So now PNB has got all it’s money back? Lol! This naivete does not suit us Indians who have grown up listening to scam stories. But, the needle has finally begun to inch towards justice. PNB has received a first tranche of a grand Rs. 24 Crore (approx. $3.25 million) after sale of assets to recover about $11 million. An additional Rs. 50 Crores is expected to make it’s way to PNB soon. An Interpol red notice has been released against NM’s wife Ami Modi and two siblings. The judgement in his extradition trial is due to be heard after December 1st. In the middle of all this, Mehul Choksi (another prime accused) would rather move the court to block out an upcoming Netflix docuseries Bad Boy Billionaires with an episode featuring this scam. Yes, it’s all happening in this case.
Operation Clean Plate in China
The world’s largest food producer and consumer is causing palpable anxiety of it’s food security across the world with announcement of it’s Clean Plate campaign.
What is Clean Plate all about? Chinese Premier Xi Jinping called on the public to shame wastefulness and cultivate thriftiness. This comes in the backdrop of rising tensions in different parts of the world and the umpteen floods that they have had to deal with. But, with any such guidelines wrapped in vague communication, different interpretations find their way. There was panic about food shortage. A restaurant in Changsha announced a policy to weigh patrons and recommend food quantity, quickly withdrawing it after social media backlash. And then there is a special niche of vloggers in China called “big stomach kings” who have made their name on the basis of gluttony. One of them, “Big Stomach Mini” is already singing a different tune of savouring every bit.
Why this Kolaveri di? Some numbers suggest that consumers in Chinese cities wasted 17 to 18 million tonnes of food in 2015! According to The People’s Daily annual food waste could reach a whopping 35 million tonnes, equivalent to 6% of China’s annual grain output. Two possible contributing factors to the trend are one, a custom of leaving food on the plate to show host generosity and two, a growing genre of “big stomach kings”. With the current crisis, food prices increased by 13% in July over last year, while the price of pork shot up by 85%. When you add A and B, talking austerity seems to be a good move.
Ambitious goal posts for India’s GDP: Remember the days when we were still quibbling about whether the GDP will be 6% or 5% and then coronavirus simply added a negative sign to those debates? A new report by Mckinsey Global Institute has now come to the conclusion that India actually needs a consistent 8-8.5% rate of growth from 2023-2030 to be able to create 90 million non-farm jobs by 2030 just to avoid stagnation. Go figure!
Irony of the aviation sector: If you have been paying attention to economic news, then it’s a no-brainer that one of the most impacted sectors has been aviation. While the sector still struggles to find it’s feet, under Udan 4.0, the civil aviation ministry has approved 78 new routes to remote and regional areas of the country with a special focus on the North East.
Axis Bank trims its’ stake in Max Life: Post IRDAI reservations, Axis Bank announced a move to cut it’s stake purchase in Max Life from 29% to 17%. At this news, Max financial services shares jumped 14%. This is much in line with the recent good run the company seems to be having what with an announcement of a 235% increase in net profit in Q1.
Another giant enters wearable tech: Amazon has made quite an entry into the booming market of wearable tech with it’s entry of Amazon Halo. Not wanting to let go of their innovation in voice recognition, the band comes with two microphones which will record your voice and tone to gauge mood. The company’s love of tip toeing around the fine lines of user privacy seems to continue unabated.
Long road of low interest rates lies ahead: A small word can mean a world of a difference in economics. Federal Reserve chief Jerome Powell has announced that instead of a fixed goal of 2% inflation, the Fed Reserve will target an “average” of 2%. This simply gives it more room for cutting rates if deemed fit rather than being forced to increase them to maintain the 2% inflation.
As regular readers would notice, we have made changes to market pulse. It now displays one large cap index (Nifty 50), one mid cap index (BSE Mid 150), a debt index (10 year Government securities yield), USD and Gold prices to give a more consolidated picture. Also, the movements are depicted for a week, Thursday to Thursday instead of a day’s movement. Hence, more substantial changes.
In this week, we notice a discrepancy where both equities and bond have moved in the same direction with almost the same intensity. The shimmer of gold seems to have reduced slightly while Rupee posted a figure close to it’s 5.5 month high.
With innovations like automatic lids and bum-warming seats, Japan is back with the latest advancement in toilet tech. To allay the fear of safety and hygiene, transparent toilets have been installed in two public parks of Tokyo. Before you exclaim “sick minds”, let’s clarify that the material used in these colourful toilet cubicles is a smart glass. These toilets when locked properly get all frosty and opaque. However, this is one tech which could still take some time before large scale adoption.