Daily Financial News Analysis – 7th July’20

Table of Contents

WFH Relaxations

Big IT companies are batting for WFH relaxations
Companies may not need up to 30-50% of the real estate that it currently occupies.
National Association for Software and Services Companies has sought clarity on whether workfrom-home can be enabled on a permanent basis by units operating from SEZs and STPI.
Nasscom has also sought clarity from the finance ministry on the status of income tax exemptions granted to units in SEZ, as a bulk of the work is now done from home.
Benefits of Remote Work
1. Reduces operational risk
2. Decongest large cities
3. Opens up opportunities to larger portions of the workforce
4. Increases agility
Real estate experts: many companies are looking at reducing office space
Around 12-15% of real estate in premium office spaces is likely to be freed up in the short term

FICCI-DHRUVA Advisors Survey

Survey ‘Rebooting The Indian Economy’ conducted to capture improvements in business operations and expectations.
As many as 100 company chiefs from across sectors participated.
Close to 30% of India Inc reported 70% or higher capacity utilisation.
Still only half the units expect operations to reach this level in the near future.
Growth in exports, cash flows and improved supply chains
22% of the respondents witnessed increased exports
25% reported improvement in the number of orders since the lockdown.
60% firms cited cash management, weak demand and liquidity as key issues impacting business post-unlock.
2/5 firms said they still faced supply-chain and labour-shortage issues.

To beat China, focus on real issues, not faux rankings

India on World Bank’s EoDB: 133rd in 2009 to 63rd in 2019
This is hardly representative of the situation on the ground.
New study by Teamlease: how much red tape remains
In the case of labour, there are 463 Acts that need to be followed, 32,542 compliances and 3,048 filings that need to be made.
The Survey points to 35 Sections that need to be complied with for hiring contract labour and 83 rules and 36 sections and 52 rules for dealing with worker compensation; all told, a manufacturing unit needs to conform with 6,796 compliance items.
Survey: you require fewer documents to buy a gun than to open a small hotel.
There are more procedures today to register property.
There is no appreciable difference in how long it takes to pay taxes and the time to enforce contracts is also up.
The costs of enforcing a contract can eat up a third of the original value.
The situation is far worse when it comes to comparisons with China in the EoDB.
It takes double the time to start a business in India as compared to China, around six times as much to register property and double the time — and also in terms of the value of the contract— to enforce a contract.
Exports of labour-intensive goods have been growing slower than other goods and, as a result, their share in the overall export basket is down from 44% in FY17 to 37% in FY20.
While overall exports rose from $310 billion in FY15 to $313 billion in FY20, labour-intensive exports fell from $126 billion to $114 billion.
Agriculture exports fell from $30 billion to $26 billion; this is also due to bad policies like the increase in MSP that made exports less competitive.
In the case of textiles, exports fell from $37 billion to $34 billion in the same period.
The same happened for gems & jewellery, leather, etc; hardly surprising, then, that employment growth in India remains woefully inadequate.

Secure India’s Digital Systems

Chinese companies have been entrusted with managing grid stability in several states, using digital systems.
Infrastructure, particularly the digital systems must be secured against hacking and hostage taking.
Imagine the harm that could be done to banking network and demat account framework for stockholding.
Chinese companies are mandated by their domestic law to cooperate with the State in times of emergency.
Imagine the effect on India’s telecom network suddenly turning dysfunctional.
Instead of lapping up the security systems offered by Israeli startups, when will Indian infrastructure managers start identifying their vulnerabilities and putting out specific tenders for fixes to be delivered by indigenous companies?
It is time the government and State-owned companies put together large teams of India’s talented engineers to create defensive and offensive cyber capability in diverse areas of infrastructure.
Clear specification of problems would allow the private sector to play a role, too.

Reviving Tourism

After nearly 100 days, government allowed the opening of all centrally protected monuments, subject to approval of local authorities.
Monuments that are located in Covid-19 hotspots will remain shut.
Tourism is the industry that creates most jobs per rupee invested.
At a time when the country’s economic outlook remains bleak, we need the tourism industry to revive and bring back jobs.
E-tickets
Mandatory use of aarogya setu mobile app
Compulsory wearing of masks
Thermal scanning at entry points
Cap on the number of people who can be on the premises at a given time
But more needs to be done to give tourism a boost.
In that sense, the tourism industry can set the standards for managing Covid by stringently following safety guidelines and inculcating behavioural change.