Daily Financial News Analysis – 25th May’20

Table of Contents

India ranks _______ on ‘starting a business’ in the World Bank’s ease of doing business table against an overall rank of 63.

Planes to Fly

Airlines will resume operations in a limited manner from today.
Some states were not on board, but after a discussion with Centre, they have opened their airports.
Centre has cut down many flights from original schedule announced by airlines last week.
Karnataka, Tamil Nadu and Kerala: arriving passengers have to go through some form of quarantine, either home or institutional.
Airlines will now have to sit together and decide allocation of slots with the DGCA and airport operators.
Aviation ministry officials said the latest flight numbers are dynamic and may be changed every day for the next 15 days.
Most states are batting for a fortnight quarantine.

Uniform Flexi Labour Laws

The Centre could tweak labour law changes and fast-track their implementation.
Uniform regulations that offer flexibility to new and existing businesses across the country.
Multinational companies looking at relocating from China to India would prefer flexible central laws over state laws for uniformity of operations across different locations.
Existing businesses in UP|MP|Gujarat are upset as they don’t get the benefit of the easier regulations.
BALANCE: Industry has requested the government to create a right ecosystem for employers to grow while keeping in mind the wellbeing of workers
The four labour codes, formed by subsuming as many as 44 labour laws, have given powers to the appropriate state and central authorities to make changes to suit industry requirements through simple notifications.
Fast-tracking these codes will also ensure the expeditious rollout of universal social security for all workers, particularly those in the informal sector.

Ecomm Cart

Ecommerce majors Flipkart and Amazon are seeing a sharp recovery in sales as pent-up demand for a range of non-essentials is restoring overall industry volumes lost during the nationwide lockdown to stall Covid-19.
Brisk sales of smartphones, laptops, tablets, kitchen and home appliances—in the week since all items were permitted to be sold online—have brought sales back to about 70% of pre-Covid levels.
Supply chain constraint still haunts the operation.
Manpower shortage + social distancing
The sale of essentials and grocery products continue to be robust and is expected to double in terms of overall sales to $3 billion this year, according to Forrester Research.
In the beauty and wellness category too brands have registered a spike.
Fashion, however, took a backseat with a tepid recovery of only 30% of sales.
Brands and online marketplaces told ET that they are reluctant to offer deep discounts currently as most consumers are looking for products they need and don’t need to be further incentivised.

DPIIT for Start-up fund

DPIIT will soon approach Cabinet with a proposal to create a Startup India seed fund and launch a credit guarantee scheme to help budding entrepreneurs and startups.
A National Seed Fund was announced in Budget 2020-21 to support ideation and development of early stage startups whereas the credit guarantee scheme will enable startups to raise loans for their business purposes.
The two schemes are part of a larger roadmap to improve India’s standing on the startup front and the overall vision for the sector will detail the priority areas that need support.
In its election manifesto in 2019, the Bharatiya Janata Party had promised to create a seed startup fund of Rs 20,000 crore to back early-stage companies and a scheme to provide collateral-free credit of up to Rs 50 lakh for entrepreneurs wherein 50% of the loan amount would be guaranteed towards female entrepreneurs, while 25% will be for male entrepreneurs.
The government is keen to attract investments in Indian startups and has already set the ball rolling to evaluate the progress of the Startup India programme.
Nasscom: 40% of startups have either temporarily halted operations or are in the process of shutting down, with around 70% having cash reserves to last less than three months.
At present, startups get support from the government-backed Rs 10,000 crore fund through Small Industries Development Bank of India (Sidbi).
The Fund of Funds does not directly invest in startups but provides capital to alternative investment funds (AIF), known as daughter funds, registered with the Securities and Exchange Board of India.
These AIFs invest in growing Indian startups through equity and equity-linked instruments.
Since the launch of the Startup India initiative on January 16, 2016, the DPIIT has recognised 28,979 startups as of March 1, 2020.
Of these, 27,137 startups employed around 337,000 people.

Abhijit Banerjee and Esther Duflo

India should immediately begin cash transfers of 1,000 per person per month as universal ultra-basic income (UBI) and implement the one-nation, one ration card scheme urgently.
Banerjee said that India could help in mass production of the Covid 19 vaccine, when it is developed, but cautioned that in the absence of one, India is set to see another lockdown since cases were only rising.
India’s strength as a vaccine producer could be leveraged further, but it will have to work with other nations to iron out the distribution, funding and intellectual property rights battles.
India is going to face a massive demand shock so pumping money in the hands of people might actually be the way to save the economy.
Duflo said that India could immediately start with UBI, as it was “very close” with the pipelines through JAM (Jan Dhan-Aadhaar-Mobile) trinity already in place.
She flagged that the government’s thinking that the grant or aid should not reach the undeserving poor, needs to change.

NCLAT

An appellate tribunal upheld NCLT order prohibiting appointment of a former bank official as a resolution professional (RP) of a bankrupt company due to the possibility of bias, in a judgement that experts say could have wide ramifications on ongoing and future corporate insolvency resolution process.
The National Company Law Appellate Tribunal (NCLAT) upheld an order passed by Delhi-NCLT over appointment of a former State Bank of India (SBI) official as resolution professional or RP in CIRP of Metenere Ltd.
According to experts, the ruling could have an impact on the resolutions of several companies including the Rs 40000 crore Videocon Industries case where former bank employees are working as RPs.
The financial creditor, in this case SBI, had appointed Shailesh Verma as the interim RP while initiating CIRP against the corporate debtor, Metenere Ltd.
As Verma had been associated with SBI for 39 years, retiring as chief general manager in 2016, the corporate debtor felt he was unlikely to act fairly while discharging his duties.
On January 4, the Delhi bench of the NCLT passed a judgment ordering SBI to substitute Verma as RP on the basis of an appeal of bias filed by Metenere against Verma.
SBI appealed against the order in the NCLAT.
Metenere argued that Verma was an ‘interested party’ as he was drawing pension from SBI, which was considered as salary under the Income Tax Act, apart from being an ex-employee.
SBI can now either provide an alternate RP or file an appeal in the SC.