Daily Financial News Analysis – 11th Dec’19

Table of Contents

ADB on India’s GDP

Asian Development Bank
ADB was conceived in the early 1960s
Financial institution that would be Asian in character.
Foster economic growth and cooperation in one of the poorest regions in the world.
19 December 1966: Philippines capital of Manila
From 31 members at its establishment in 1966, ADB has grown to encompass 68 members—of which 49 are from within Asia and the Pacific and 19 outside.
Takeshi Watanabe was ADB’s first President.

ADB forecast for India’s economic growth in 2019-20: 5.1%.
1. September: 6.5 per cent in 2019-20 and 7.2 per cent in the year thereafter.
Reason:
1. consumption was affected by slow job growth
2. rural distress aggravated by poor harvest
3. rise in risk aversion by major non-banking financial company

Asymmetry in FTAs on govt radar

Commerce and industry minister Piyush Goyal in Rajya Sabha
India pulled out of the RCEP trade deal as its concerns over a host of critical issues were not addressed.
1. risks to farmers
2. market access
3. non-tariff barriers to trade to strict rules of origin
He also promised to “correct the asymmetry” in existing free trade agreements (FTAs) with Asean, Japan and South Korea.
“Any trade deal like RCEP must consider that countries have very different sizes and population, unequal levels of economic development and human development indicators, contrasting levels of prosperity, investment capacity, cultural diversity and significantly different political and judicial systems.”
The government’s priority is also to correct the asymmetry in the existing agreements and maximise its export potential to benefit domestic industry and farmers.
“We have also secured an agreement to initiate a review of Asean-India Trade and Goods Agreement…”
1. For example, in the Asean-India FTA (AIFTA), we enabled greater market access by eliminating tariffs on 74.4% lines, however, some of the Asean countries eliminated tariffs on only 50.1% and 69.7% lines
India’s trade deficit with FTA partners grew substantially.
The trade deficit with Asean jumped more than four times – from $5 billion to $21.8 billion —from 2010-11 through 2018-19.
The deficit with all the RCEP countries increased more than 9 times in a decade — from $7.1 billion in FY04 to $65.1 billion in FY14.
It may be noted that in the case of China alone, India’s trade deficit rose 33 times, from $1.1 billion in FY04 to $36.2 billion in FY14.
He also questioned the UPA government’s decision to get into the RCEP negotiation in 2012, despite the experience of growing trade imbalance with FTA partners.

KYC norms compliance

The Ministry of Corporate Affairs (MCA) has amended the Companies Act.
Under it a non-compliant firm can now update details of its directors and other related information, thereby allowing it to meet compliance norms.
The move is aimed at breaking the deadlock wherein non-compliant companies were not allowed to update their details.
In February this year, the MCA issued Companies (Incorporation) Amendment Rules, 2019 and Companies (Registration offices and Fees) Amendment Rules, 2019, under which every company incorporated on or before December 31, 2017, was required to file the company’s particulars and its registered office, in Form ACTIVE by June 15, 2019
Any company which had not filed its financial statements or annual returns or both with the Registrar of Companies (RoC) was restricted from filing the same.
Since these firms were not allowed to file returns, they were not able to update details like change in authorised capital or paid-up capital or information regarding mergers, etc.
Through the E-Form INC-22A, or ACTIVE (Active Company Tagging Identities and Verification), the government wants to ensure that a proper check is maintained, and also, to ensure that shell companies can be tracked.
The form records address of the registered office along with a photograph, latitude and longitude of the place where the office is situated and enables geo-tagging.

Direct Tax Collections

Direct tax collections, net of refunds, for the April-November period grew just 1.6% against the required rate of 17.4% to achieve the budget estimate of Rs 13.35 lakh crore for the current fiscal.
In the first eight months of the fiscal, the government collected Rs 5.56 lakh crore in direct taxes compared with Rs 5.48 lakh crore in the same period in FY19
The tepid growth is partly due to the economic slowdown and also on account of the deep corporate tax cuts announced by the government in September.
The income tax department has processed refunds worth Rs 1.46 lakh crore till November 28, up 23% compared with the same period a year ago.

India-EU summit

European Union: it was hopeful of forward movement in negotiations with India on the long-pending free trade agreement (Bilateral Trade and Investment Agreement).
Ambassador of European Union Ugo Astuto said the EU-India partnership is going through momentous transformation and that there has been a clear commitment by both sides to expand ties in key areas.
Next India-EU annual summit is expected to take place in the first half of next year.
Focus of summit: deepen cooperation in key areas including trade and investment.
1. Government procurement
2. Labour standards
3. Sustainability

EU wants

Significant Duty Cuts In Automobiles
Tax Reduction On Wines & Spirits
Dairy Products
A Strong Intellectual Property Regime

India wants

Granted data secure nation status by the EU
Both sides can work more closely in areas like
Environment protection
Countering terrorism
Connectivity
Trade and investment

China Digital Currency

China plans to launch its own digital currency.
Aim: to stay ahead of the global competition
China’s central bank – the People’s Bank of China (PBC) – has stepped up efforts to roll out its Digital Currency Electronic Payment (DCEP).
The initial test, set at the end of this month in Shenzhen, will involve some of the largest banks in the country and telecom carriers.
The test will be expanded to more areas next year.
Domestic internet giants Alibaba and Tencent will also participate in the trials.
By launching a digital currency earlier than other countries, the PBC will be able to set rules related to currency’s cross-border clearing and payment system.
In 2020, digital currency competition will heat up not only among central banks and governments but also multi-nationals like Facebook and large cross-border financial institutions.

Climate Change Performance Index

CCPI measures the emissions, renewable energy share and climate policies of 57 countries and the European Union.
It found the US ranks last, followed by Saudi Arabia and Australia, although several countries did report falls in emissions last year, largely due to an industry-wide fade out of coal.
The report found that none of the countries surveyed were currently on a path compatible with the Paris climate goals.
The 2015 accord saw nations agree to work towards limiting global temperature rises to “well below” two degrees Celsius above pre-industrial levels.
China, the world’s largest single emitter, was found to have taken “medium action” due to its high investment in renewables.