Daily Financial News Analysis – 30th Jan’20

Table of Contents

Budget 2020 – Clean Air

Air pollution is a national crisis
It impacts every nook and corner of the country.
Every Indian now breathes air that doesn’t meet the World Health Organization’s standards.
Three-fourths live in places where the air quality does not meet our national standards.
In 2019, Delhi had some of the worst spells of ‘severe’ air in the last decade.
Poor air quality is quite common in a coastal city like Mumbai.
12.5% of the total deaths, in India can be attributed to indoor and outdoor air pollution.
The total number of deaths due to air pollution has increased from 1 million in 2005 to 1.25 million in 2017.

Travel disruptions
Reduced tourists
Increased hospital admissions
Higher medical bills
Premature deaths
Lost work hours
Missed school days
Damage to Brand India image

India is losing at least 5% of our GDP due to air pollution.
Cities have developed action plans that are too broad, and non-implementable.
Cities need funds to plan better, build capacity, and improve monitoring and enforcement.

Power plants

The coal-based thermal power sector is India’s most significant source of industrial pollution.
It accounts for 60% of particulate emissions, 50% of SO2, 30% of NOx, 80% of mercury emissions, and 70% of the freshwater withdrawal.
In December 2015, the environment ministry notified new pollution standards that would reduce various pollutants from the power plants by 50-85%.
But, the industry has refused to meet these standards citing reasons like weak balance sheets, and the reluctance of banks to fund pollution control equipment.
It has already missed the 2017 deadline, and is unlikely to meet the new 2022 one.
Lately, the industry is demanding relaxation in NOx standards, and a further extension of the deadline to meet the SOx standards.
It is also lobbying the government to waive the Goods and Services Tax (GST) compensation cess (earlier called the clean energy cess) on coal to reduce the financial burden of meeting the standards.
Announce a performance-based fiscal package to help the power sector meet pollution standards.

Minimise the use of solid cooking fuels

Ujjwala Yojana’s commendable performance
The use of biomass, dung cake, coal, etc, as cooking fuels remains high.
About 5 million deaths due to indoor air pollution.
Any effort to reduce the use of solid fuels would have a cascading positive impact on women’s health and empowerment as well as on the ambient air quality.
Reduce the use of solid cooking fuels by 75% over the next five years

Ecological restoration

Dust pollution is rising in India because of the mismanagement of land, forest, and water resources.
Nearly one-third of the land area is undergoing degradation, excluding the Thar desert.
Ecological restoration programme would have the added benefit of groundwater augmentation, biodiversity conservation, and air pollution reduction.

Secretary Shringla’s agenda

Harsh Vardhan Shringla is India’s new foreign secretary.
Top priorities
1. Enhancing India’s economic ties
2. Building synergies with major world powers
3. Seeking an “undifferentiated” and “unambiguous” approach to combatting terrorism
4. Sustaining a rules-based multilateral order
5. Sharing India’s developmental experience with countries in Africa and Latin America
6. Climate change
7. Challenges related to the internet and new technologies
Shringla is described by his peers, juniors and seniors as “no nonsense” and “sharp”.
In a statement, he said the primary objective of the foreign ministry was to “advance our national interests across the world and serve the people of India, wherever they may be”.
On the top of his to-do list would be managing US President Donald Trump’s visit to India next month.
Last year, Shringla played a major role in successfully hosting the “Howdy Modi” event in Houston.
Also next month is the Financial Action Task Force meeting in Paris.

Donald Trump’s Feb visit

India and the US have moved closer to a trade deal.
New Delhi’s commitment to extend greater market access in medical devices and agriculture.
But an agreement on Washington’s demand for a sharp cut in or abolition of import duties on seven ICT products, including mobile phones worth over Rs 10,000, is still elusive.
A ‘limited deal’ could be signed during US President Donald Trump’s expected visit to India in February
Deal could cover products with total annual bilateral trade of around $10 billion.
A broader trade deal could be hammered out later, said the source.
As for ICT products, New Delhi has already conveyed that an across-the-board cut of import duties on the 7 items would cost it a massive $3.2 billion a year and help only third parties (like China and Korea) that supply more; instead, it is willing to lower duties on those ICT products where it would benefit the US.
The US made up for only 2% of the Indian imports of the seven products in FY18.
India is pitching for an exemption from the extra duty imposed by the US on steel (25%) and aluminium (10%).
The resumption of duty-free export benefits for some Indian goods under the so-called Generalised System of Preferences (GSP).
Greater market access for its products in sectors ranging from agriculture and automobiles to engineering.
Washington is also interested in better access to the Indian market in civil aviation, oil and gas, education service and agriculture in the medium term (over three-five years).
New Delhi wants the Trump administration to recognise that India is the only large economy whose goods trade surplus with the US has been shrinking (unlike China’s).
India will remain one of the world’s fastest-growing large economy in the coming years, generating opportunities for US businesses in sectors ranging from defence and retail to oil.
India is also a thriving market for US services and e-commerce companies like Amazon, Uber, Google and Facebook with billions of dollars of revenue.

RBI fines HDFC Bank

RBI imposed a penalty of ₹1 crore on HDFC Bank
Reason: for non-compliance with its know your customer (KYC) norms
On-site Inspection for Supervisory Evaluation of the bank undertaken by RBI for the financial year ended 31 March, 2017, a scrutiny of 39 current accounts opened by its customers for bidding in Initial Public Offer (IPO) was conducted.
This scrutiny, RBI said, revealed that the bank had failed to exercise ongoing due diligence in those accounts.

EU suggests limiting, but not banning, Huawei

European Union countries can either restrict or exclude high-risk 5G vendors from core parts of their telecoms networks.
Looks like a move targeting China’s Huawei but falling short of a US call for a complete ban.
The non-binding recommendations, agreed by the bloc’s 28 countries, seek to tackle cyber-security risks at national and EU level.
The EU sees 5G as key to boosting economic growth and competing with the United States and China.