Daily Financial News Analysis – 4th Nov’20 – Free PDF Download

Nourishing Green Shoots of Economy

• Data suggests a welcome pick-up in growth in the festive season.
• October – Manufacturing activity – climbed the most in more than a decade
  1. IHS Markit Purchasing Managers’ Index for manufacturing rose to 58.9 in October, the highest reading since May 2010
• Gita Gopinath, IMF – underscored the need for a fiscal stimulus
• So far, RBI has done all the heavy lifting
• The global economy is in a liquidity trap where monetary policy has a limited effect
• The government must spend, without worrying about a near-term spike in the fiscal deficit
• Absence of corresponding bounce in the jobs data
• Payroll numbers declined for the seventh consecutive month
• Jobs cannot be created unless there is sustained economic activity
• The good news is that white collar hiring is up sharply, both in established companies and startups
• To sustain recovery, the government must catalyse large-scale investment, in social and physical infrastructure.

PM to meet top investors

• Virtual Global Investor Roundtable (VGIR)
• Prime Minister Narendra Modi will on Thursday meet top officials of leading sovereign wealth funds and pension funds including British Columbia Investment, Qatar Investment Authority, Temasek, US International Development Finance Corporation, Teachers Retirement Texas, GIC and Japan Post Bank to highlight the India story.
• These funds have total assets under management of about $6 trillion.
• The funds will have one-to-one interaction with the prime minister post the meeting over next two weeks.
• Tata Group’s Ratan Tata, RIL chairman Mukesh Ambani, Sun Pharma founder Dilip Shanghvi, and Kotak Mahindra Bank MD Uday Kotak are among the 20 investors participating in the meet.
• Economic affairs secretary Tarun Bajaj: the whole idea is to highlight to these investors various investment opportunities and the present economic situation in India and added that the government would also try to take care of their concerns, if any.
• Representatives of other funds likely to attend include Australian Super, CDPQ, CCP Investment Future Fund, Japan Bank for International Co-operation, Korean Investment Corporation, Nippon Life, Pension Denmark, and PGGM Investment Management.

Oil PSUs’ Capex

• State-run oil companies have spent a third of their 2020-21 capex target in the first half of the year.
• State-run oil companies have spent a combined ₹31,956 crore in April-September, 32.4% of the capital expenditure of ₹98,522 crore targeted for the financial year
• ONGC Videsh is the fastest spender – Indian Oil Corp is the slowest
• Finance minister Nirmala Sitharaman has been regularly monitoring their capital spending.
• Mobility restriction, disruption of international supply chains and slow return of domestic migrant workers to project sites slowed execution in the first half of the year.

Container Shortage

• A sudden improvement in exports and a slump in imports, especially from China, have created a shortage of containers for exports.
• The waiting time for an access to a container for exporters is now two-three weeks, compared with a maximum of four days earlier.
• During July-September, India’s exports in terms of volume grew 24% from a year earlier, even as imports reduced 28%.
• When exports rebounded and imports fell, it led to a pileup of containers in some ports and a scarcity in others.

International Digital Tax

• Under the Base Erosion and Profit Shifting (BEPS) framework, large economies have come together to tax the global income of digital companies.
• The tax department has reached out to some of the top multinationals and asked them about issues they could face under OECD’s (Organisation for Economic Co-operation and Development) plan to tax large corporates across jurisdictions.
• India would be required to submit its suggestions to the OECD in December
• Pillar 1 approach of OECD includes how digital giants allocate profits and which countries have the first right to tax them.
• Pillar 2 proposes a mechanism that would determine how to calculate the amount of taxes each jurisdiction can charge from the total profit pool.
• Large digital giants are under the scanner for escaping tax in several countries through complex holding structures.
• OECD had been trying to bring large economies on one page under BEPS framework.

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