Daily Financial News Analysis – 10th June’20 – Free PDF Download

The world is not flat

• Between mid-March and mid-May, with the US and many parts of the world under lockdown, Amazon CEO Jeff Bezos and Facebook CEO Mark Zuckerberg added $34.6 billion and $25 billion to their respective kitties.
• In the same period, US billionaires became richer by $434 billion.
• Due to the same Covid-19 impact, more than 60 million are being pushed into poverty.
• Disruptive events such as wars, epidemics and even attempts to ‘redistribute’ wealth exacerbate inequalities.
• The ‘99 percenters’ — those outside the ambit of the nation’s ‘wealthiest 1%’ who have a disproportionate share of capital — saw through the rigged game, where the ‘house’ (read: incumbent wealthy) always won.
• Behind the veil of ‘poor-friendly’ rose rampant corruption, black money and special-interest vote banks.
• Covid-19 is a disruption of unprecedented scale, prophesied to aggravate inequality.
• The Modi government has a chance to create a fairer India by continuing reforms and using the ‘Covid fiscal headroom’ to invest in equality-enhancers.
• GoI must embrace enablement over limiting initiatives, bridge ‘opportunity gaps’, protect the ‘small fish’ and provide paths to, and celebrate the success of, the ‘many’.
• Equality needs improved basic living.
• Toilets and housing schemes were important steps.
• A pivot towards social infrastructure investment — healthcare and education — will revolutionise social inclusion.
• We need to invest 2-4% of GDP in healthcare infrastructure for the medium term.
• Education, too, needs a revamp.
• Rote-based instructions need to be replaced by an application-focused, employability creating education.
• Vocational training needs to be mainstreamed.
• Every student must have access to the digital world.
• Resolving the ‘housing-medical education’ deficit of the underprivileged will unchain them, and let their aspirations take flight.
• Adopt more digital delivery systems based on accurate, comprehensive data covering all affected people.
• Simultaneously, India needs to consolidate the plethora of schemes into a few, clearly defined ones.
• Issues caused by an overburdened judiciary are exacerbated by significantly differentiated access to justice.
• High-profile bail pleas, or pleas to rename India to ‘Bharat’, get heard.
• Meanwhile, 60% of jail inmates are poor undertrials.
• Standardised matters, like bail, can be largely automated, with limited appeals being heard in person.
• This will reduce the burden on courts, and prevent use of jail as a harassment tool.
• Higher courts can be segregated into two streams: a ‘general’ stream dealing with regular matters and appeals, and staffed by junior judges; and a ‘singular’ stream that hears cases of constitutional and social importance, or with precedent-setting potential.
• Recruitment of judges has to be significantly increased.
• In an increasingly free-market economy, regulators need to protect consumers, small entrepreneurs and the vulnerable.
• Regulators need to be more proactive, taking suo motu action.
• Technology needs to be a key monitoring tool, especially for capital markets.
• More domain-experienced technocrats are needed, not just as members but also as leaders.
• MSME credit-support measures announced by GoI will hopefully save thousands of firms.
• Post-Covid-19, these need to be converted into ongoing dedicated credit pools to encourage MSME development and growth. We also need a credible equity capital pool.
• Sarvodaya (universal uplift) through antyodaya (uplift of the most vulnerable) was Gandhiji’s dream.
• There is a chance to turn this pandemic from being an inequality accelerator to helping people achieve economist Gene Sperling’s ‘third pillar of dignity’ — contributing and participating in the economy with respect.

No jingoistic frenzy, we are not Chinese

• Indians should take the cue from their government when it comes to dealing with China rather than taking a leaf out of China’s book.
• It would be more productive to focus on innovating and building up Indian products that would prove to be alternatives of better quality and value than those offered by China.
• An emotional response is easy but not productive.
• Neither does it reduce the dependence on China.
• While it may be argued that history demonstrates that boycotting products has worked to bring rogue nations and governments in line, the fact is that China is a vital player in the global economy.
• As witnessed during the early days of the pandemic, most supply chains are concentrated in China.
• Indians should take a leaf from the government’s book on Beijing — firm, polite, holding one’s ground, demanding accountability, at the same time protecting and promoting national interests.
• India must leverage its open, diverse and democratic society and economy to excel China.
• It must build better, innovate and collaborate to provide greater value to consumers in India and abroad.
• Focus on competing better. Getting mad is poor strategy.

Decriminalising some financial offences

• The government is looking to reclassify several offences under financial sector laws, including the bouncing of cheques, as civil offences rather than criminal ones.
• To improve the ease of doing business and unclog the courts.
• These will then be punishable only by monetary penalties, not jail time.
• The Department of Financial Services has sought public comments on decriminalising 39 sections in 19 acts under its administrative purview including the Banking Regulation Act, the Reserve Bank of India (RBI) Act, the Insurance Act and the Negotiable Instruments Act.

• Improving ease of doing business has been one of the Centre’s prime aspirations.
• The principles that will inform the process of reclassification are that it should decrease the burden on businesses and inspire confidence among investors besides focusing on economic growth, while upholding the public interest and safeguarding national security.
• Experts say the government should raise monetary penalties to deter offences.

FM: Focus on MSME outreach

• Finance minister Nirmala Sitharaman on Tuesday asked public sector banks to make proactive outreach to the micro, small and medium enterprises (MSMEs) and ensure supply of credit to them.
• Sitharaman asked banks to cut down on paperwork and keep the formalities simple for the sector, the Department of Financial Services tweeted.
• The minister on Tuesday reviewed the performance of the recently launched ₹3 lakh crore Emergency Credit Line Guarantee Scheme for MSMEs via videoconference.
• As per official data, public sector lenders have sanctioned loans of Rs 1,109 crore as of June 8 to 17 MSME hubs in 12 states under the credit guarantee scheme. These include ₹183 crore to 2,430 accounts in the Surat hub and ₹165 crore to 2,126 accounts in the Coimbatore hub.
• They have disbursed ₹599.12 crore of this to 17,094 accounts, including Rs 143 crore to 1,758 accounts in the Coimbatore hub and ₹97 crore to 760 accounts in the Tirupur hub.
• Public sector banks have sanctioned loans worth ₹17,705.64 crore at a concessional rate of 9.25% from June 1, the minister had said on Monday.

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