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weekly analysis

The Weekly Analysis – Edition 47

There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Seventh Edition we are covering the following news:

  1. Govt inviting suggestions on the Blue Economy Policy
  2. CBDT to keep double tax avoidance, international practices in view on NRI tax residency
  3. SEBI eases norms for IPO of large entities
  4. India begins probe to continue anti-dumping duty on some steel imports from China

Govt inviting suggestions on the Blue Economy Policy


The ‘Blue Economy’ is an emerging concept that encourages better stewardship of our ocean or ‘blue’ resources. The Ministry of Earth Sciences (MoES) has rolled out the draft blue economy policy in the public domain, inviting suggestions and inputs from various stakeholders, including industry, NGOs, academia and citizens. It is in line with the Government of India’s Vision of New India by 2030. The draft, prepared by the economic advisory council to the Prime Minister outlines the vision and strategy that can be adopted by the government to utilise the plethora of oceanic resources available in the country. It aims to enhance the contribution of the blue economy to India’s GDP by around 4%, improve the lives of coastal communities, preserve marine biodiversity, and maintain the national security of marine areas and resources. Let’s see the essence of this policy.
The blue economy occupies a vital potential position in India’s economic growth.
It could well be the next multiplier of GDP and well-being, provided sustainability and socio-economic welfare are kept centre-stage. It emphasizes policies across several key sectors to achieve holistic growth of India’s economy. It aids the production of goods and services that have clear linkages with economic growth, environmental sustainability, and national security. It is understood as a subset of the national economy comprising an entire ocean resources system and human-made economic infrastructure in marine, maritime, and onshore coastal zones within the country’s legal jurisdiction.
Therefore, India’s draft blue economy policy is envisaged as a crucial framework towards unlocking the country’s potential for economic growth and welfare. Most importantly, it is the 17 sustainable development goal (SDG), also known as the Global Goal adopted by the United Nations member states including India. SDG 14 seeks to conserve and sustainably use the oceans, seas and marine resources for sustainable development. Several countries have undertaken initiatives to harness their blue economy. For instance, Australia, Brazil, the United Kingdom, United States, Russia, and Norway have developed dedicated national ocean policies with measurable outcomes and budgetary provisions. Canada and Australia have enacted legislation and established hierarchical institutions at federal and state levels to ensure progress and monitoring of their blue economy targets. With a draft blue economy policy framework of its own, India is now all set to harness the vast potential of its ocean resources.

 

CBDT to keep double tax avoidance, international practices in view on NRI tax residency


The Central Board of Direct Taxes (CBDT) is evaluating a number of facets together with double taxation avoidance, greatest practices by different nations, and tax treaties, earlier than arriving at a view on figuring out tax residency for non-resident Indians or NRIs having overstayed in India in FY 21. They want to make sure that it should not be the case that NRIs income becomes tax-free in India as well as their home country being a loss for both at the same time.
Measures or instructions taken by nations such because the US, UK, and others would even have to be thought-about such that the view India takes is in line with international friends. Several nations in Europe and the UK have initiated second or third waves of lockdowns due to resurgence in Covid 19 circumstances at the same time as vaccination drives have begun. CBDT also has to look at tax treaties before formalizing a view. However, the most important problem the Board is going through is an assortment of knowledge of the variety of folks having bought impacted by overstay and lack of readability of guidelines. The officials added that whereas international journey for many a part of FY 21 was barred and opened up later on in a restricted method, the precise quantity of people that could have stayed greater than 182 days could be robust to confirm. Data could be important for figuring out the size of reduction that the Board wants to present, and therefore formulate its response to the Supreme Court. The SC has given CBDT three weeks to determine on reduction to be granted to NRIs on the fee of revenue tax for the continued monetary year. It is listening to a petition filed by an NRI who had stayed more than 182 days in India due to the lockdown and subsequently could have to pay tax in India on his world revenue. The Board had issued a clarification in May final year for FY20, on the facet of residency beneath Section 6 of the I-T Act whereby numerous relaxations have been offered to NRIs who couldn’t journey again to their nation of labor or residence due to the lockdown.  CBDT has not issued any round for fee of revenue tax by NRIs staying past 182 days in India due to the pandemic in FY 21.
A thorough study should ensure that these people don’t escape a tax liability from both nations thus adding some part to both countries depending on various facts of residence and the various treaties but even if a small proportion added, the government revenue will increase and at the same time justice served.



SEBI eases norms for IPO of large entities

The most unexpected announcement at Budget was the proposed disinvestment of Life Insurance Corporation of India (LIC) as the government proposed to sell a part of its holding in LIC by way of an IPO. They are hoping that the listing would bring discipline while allowing retail investors to participate in wealth creation. But the plan to sell the stake has been marked by complications given the sheer size of the state-run company.
To put things in perspective, just a 10 per cent share sale to the public is pegged to be at least Rs 1 lakh crore, which will be tough for the market to absorb. India’s largest financial institution with assets of over Rs 32 lakh crore facing hurdles before the IPO. To deal with it, market regulator SEBI has relaxed the norms to make the listing process easier and smooth for large entities like LIC, making it easier for the government to sell a part of its stake through IPO.

As per the new norms now, for any company with a post-issue market capital of above Rs 1 lakh crore, the IPO size will have to be Rs 10,000 crore plus 5 percent of the incremental market capitalisation amount. It means large companies can now divest a minimum of 5 per cent in the IPO, instead of 10 per cent. Further, they will get five years, instead of three, to raise the public float to 25 per cent. The Central government will hold at least 75% in LIC for the first five years post the IPO, and subsequently, hold at least 51% in the insurer at all times after five years of the proposed IPO. This move eases the minimum offer and public holding norms will allow the government more time to abide by rules and pave the way for the much-awaited mega float of Life Insurance Corporation (LIC). This would also encourage large firms to opt for listing.

The government is betting on diluting its stake in state-run LIC via an IPO in the coming fiscal in an attempt to garner enough non-tax revenues to narrow the country’s fiscal deficit. LIC, which is preparing for its IPO and is currently undergoing an evaluation process by actuarial firms, will be the biggest beneficiary of this relaxation by Sebi.

Galwan Valley

India begins probe to continue anti-dumping duty on some steel imports from China


India has begun an investigation on the need to continue an anti-dumping duty on the imports of certain seamless tubes, pipes, hollow profiles of iron and steel from China based on complaints filed by ISMT Limited and Jindal Saw Limited. The applicants have alleged that dumping of these products from China has continued even after the imposition of anti-dumping duty, and there has been a significant increase in the volume of imports. The duty on the product was first imposed in February 2017 and is set to expire on May 16 this year. As per the notification issued by the Directorate General of Trade Remedies (DGTR), there is a likelihood that such activities would continue if such duties were to expire or removed thus bringing us back to square one in our problem. The period of investigation is April 1, 2019, to September 30, 2020.
Based on the duly substantiated application of the applicants and having satisfied itself, on the basis of the prima facie evidence submitted by the domestic industry, substantiating the likelihood of continuation or recurrence of dumping and injury, DGTR had declared that it initiates a sunset review investigation.
The DGTR, the quasi-judicial investigation arm of the commerce and industry ministry, has also begun a separate sunset review anti-dumping investigation in imports of Viscose Staple Fibre from China and Indonesia based on a complaint filed by the Association of Man-Made Fibre Industry of India on behalf of Grasim Industries Limited. The duty was first imposed on July 26, 2010, and then extended. The existing duties will expire on August 7, 2021. The period of investigation for the present investigation is September 1, 2019, to October 31, 2020.
While the other country might not be very happy from such duties being charged but there seems to be no option left for us as we could either keep an outside nation happy or let our markets prosper or rather survive. As unethical as it could ever get in dumping, it is only fair for India to continue with such duties to protect its own interests first. It is hoped that the new investigation shall ensure that the duties continue if not to be increased.

The First Forum

The First Forum – Edition 83

The First Forum is an initiative that focuses on covering the latest happenings in a brief format. This is in lieu of the importance of knowledge about current happenings in this fast-changing world.
In the Eighty Third- Edition of The First Forum we would be covering the following topics:
1. Politics
2. Science and Technology
3. Business
4. Economics
5. Finance

(By Ashika Deb, Shitij Goyal and Gunika Vij)

weekly analysis

The Weekly Analysis – Edition 46

There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Sixth Edition we are covering the following news:

  1. Decoding the Puducherry political puzzle
  2. Indian alternative to Twitter-Koo
  3. Govt shortlists four mid-sized state-run banks for privatization
  4. China overtakes the US, becomes European Union’s biggest trading partner
  5. Rising brent crude oil prices and its impact on India

Decoding the Puducherry political puzzle

Chief Minister V Narayanasamy’s government plunged into a crisis with resignation of two more MLAs from the party and have pushed the Congress-DMK government below the majority mark in the Union Territory. At present, the Congress government has the support of 14 MLAs, while the opposition also has 14 MLAs including the three nominated MLAs of the BJP in the house which has 28 MLAs at present. The peculiar nature of Puducherry politics and the size of each assembly seat explains what makes it easier for legislators to shift their loyalties in this territory.
The latest developments are similar to the strategies that BJP had been applying in other states like Kerala and Tamil Nadu, ahead of the upcoming polls. BJP has been the beneficiary in the latest Puducherry crisis too like the earlier ones. Two MLAs that resigned have already joined BJP and one more is soon going to join. However, Narayansamy claimed that his government continues to enjoy the majority. The opposition in Puducherry said they would be meeting the governor soon seeking action if the Congress government refused to step down.
The entry of Kiran Bedi’s as Lt. Governor has been a factor to shake the status quo in Puducherry. Narayanasamy’s running feud with Kiran Bedi all through his stint as chief minister. He accused the L-G of overstepping her jurisdiction on several occasions. The fact that Bedi would summon ministers and officials during her surprise visits and issue directions did not go down well with the CM. The turf war deteriorated to such an extent that the CM even went to the extent of sitting on a dharna outside Raj Niwas.
Hours after the MLAs resigned, Bedi was replaced as the Lieutenant Governor of Puducherry, with the Telangana governor being given the additional charge of the UT. The reason is linked to the assembly polls due by May. Sources in the BJP say with this move just before the Puducherry election, the Congress has been robbed of its single biggest election issue. The Congress accuses Kiran Bedi of blocking every move of its government and putting up hurdles in its way. But now with her out of the way, the BJP can give a fight to Congress and win. But V Narayanasamy  said that it is a victory in their fight for secularism. It is a victory for the people of Puducherry who are celebrating the removal of Kiran Bedi.
As for the only Congress government in South India right now, the future remains uncertain, multiple sources have said either they will manage the majority using the same resources used by BJP to weaken them or they will continue to rule the state until the government is dissolved by Delhi.

Indian alternative to Twitter-Koo


The government had asked Twitter to remove some accounts and controversial hashtag that spoke of an impending ‘genocide’ of farmers for allegedly promoting misinformation about the protests, adversely affecting public order. But the micro-blogging site reinstated the accounts and tweets on its own and later refused to go back on the decision, contending that it found no violation of its policy and it would violate the free speech of the people. Responding to the ongoing free speech debate between Twitter and the Indian government, it said that India has a robust mechanism for protection of freedom of speech and expression as this fundamental right is not absolute and it is subject to reasonable restrictions as mentioned in Article 19 (2) of the Constitution of India. It further said that non-compliance with government policies would invite penal action against Twitter. The stakes of Twitter are high in a country of 1.3 billion where it has millions of users and is ardently used by the Prime Minister, his cabinet ministers and other leaders to communicate with the public across the globe.
But when the largest microblogging site in the world has not responded favourably to the Government’s terms, the Indian Government then pushed an alternative in the market against Twitter. Koo app, an Indian alternative to Twitter, is creating a lot of buzzes lately. Recording more than 3 million downloads in just 24 hours, it has suddenly become the talk of the town with many big-ticket politicians and celebrities joining the platform in the wake of the government’s ongoing stand-off with Twitter. Most importantly, Koo has been recognised in a prestigious competition held by the Indian government itself under the Made-In-India initiative in August 2020 and won the Atma Nirbhar Bharat App Innovate Challenge which brought it under the limelight.
This move was taken to curb the way the platform Twitter allowed fake, unverified, anonymous content that raised doubts about its commitment to transparency and healthy conversation on that platform. Hence, Indian politicians are excited about the newly introduced Indian version of a microblogging site and are inviting everybody else to join the platform. But the only concern is using the Indian version of the microblogging site is being cut off from the rest of the world because the domestic audience would shift to this alternative app and the Indian audience may not be able to connect with the global audience in case they do not use other bigger microblogging sites.

Govt shortlists four mid-sized state-run banks for privatization

India’s government has shortlisted four mid-sized state-run banks for privatization, under a new push to sell state assets and shore up government revenues. Privatization of the banking sector, which is dominated by state-run behemoths with hundreds of thousands of employees, is politically risky because it could put jobs at risk. The four banks on the shortlist are Bank of Maharashtra, Bank of India, Indian Overseas Bank, and the Central Bank of India. Two of those banks will be selected for sale in the 2021-2022 financial year. The government is considering mid-sized to small banks for its first round of privatization to test the waters. In the coming years, it could also look at some of the country’s bigger banks. The government, however, will continue to hold a majority stake in India’s largest lender State Bank of India, which is seen as a ‘strategic bank’ for implementing initiatives such as expanding rural credit.
India’s deepest economic contraction on record caused by the pandemic is driving the push for bolder reforms. New Delhi also wants to overhaul a banking sector reeling under a heavy load of non-performing assets, which are likely to rise further once banks are allowed to categorize loans that soured during the pandemic as bad. Bank of India has a workforce of about 50,000 and Central Bank of India has 33,000 staff, while Indian Overseas Bank employs 26,000 and Bank of Maharashtra has about 13,000 employees, according to estimates from bank unions.
The government hopes that the Reserve Bank of India, the country’s banking regulator, will soon ease lending restrictions on Indian Overseas Bank after an improvement in the lender’s finances that could help its sale. Some economists said there could be a few takers for weak and small banks – saddled with bad assets – but that Modi should consider the sale of bigger banks like Punjab National Bank or Bank of Baroda. While past has proven that many times privatization helps improve the efficiency of the enterprises so it is expected that the customers can expect better service and better returns for investors both short term and long term.

China overtakes the US, becomes European Union’s biggest trading partner

China last year overtook the United States as the EU’s biggest trading partner, the EU statistics agency Eurostat said. According to news agency AFP, Britain which is no longer part of the European Union, was the third-largest trading partner for the bloc, behind China and the United States. The supremacy of China came after it suffered from the coronavirus pandemic during the first quarter but recovered vigorously with consumption even exceeding its level of a year ago at the end of 2020, AFP said. This helped drive sales of European products, particularly in the automobile and luxury goods sectors, while China’s exports to Europe benefited from strong demand for medical equipment and electronics.
The dethroning of the US comes as the EU and China are seeking to ratify a long-negotiated investment deal that would give European companies better access to the Chinese market. Eurostat said the trade volume with China reached 586 billion euros ($711 billion) in 2020, compared to 555 billion euros ($673 billion) for the US. The EU exports rose by 2.2 percent to 202.5 billion euros while at the same time, imports from the People’s Republic of China increased by 5.6 percent to 383.5 billion euros. EU exports to the United States fell by 13.2 percent in the same period and imports by 8.2 percent. In addition to the Covid-19 crisis, transatlantic trade has been impaired by a series of tit-for-tat feuds that have resulted in tariffs being on steel and products such as French champagne or Harley-Davidson motorcycles. Eurostat said trade with the UK plummeted in 2020, the year Britain officially left the bloc, though it was in a transition period to blunt the effects of Brexit until December 31. EU exports to the UK fell by 13.2 percent, while imports from across the channel dropped by 13.9 percent. While the Covid-19 can be given a reason to have had a rigged response on the entire global economy, but with the improving global condition different regions have different recovery rates so we can expect improving results everywhere apart from the export affected by Brexit in the European Union.

oil during coronavirus

Rising brent crude oil prices and its impact on India

The price of Brent crude crossed the $60 per barrel mark after over a year. The price of Brent Crude has risen by over 50 per cent since the end of October after prices had remained around $40 per barrel for five months. The rise in prices is because major oil-producing countries had cut oil production last year amid a sharp fall in demand due to the Covid-19 pandemic. However oil-producing countries have continued to limit production despite an increase in prices with Saud Arabia cutting its oil production by 1 million barrels per day to strengthen crude oil prices. Expectations of strong improvements in demand with the global rollout of the Covid-19 vaccine have also put upward pressure on crude oil prices. Let’s see how this will impact India?
Rising crude prices may have a cascading impact on petrol and diesel prices in India, which have now hit a new record high which will further increase the fuel bill of the consumers. The increase in oil prices will increase the country’s import bill, and further, disturb its current account deficit (excess of imports of goods and services over exports). India imports 80 per cent of its crude oil requirements and the average price of Indian basket of crude oil has already risen to $54.8 barrel for January. This could also increase inflationary pressures that have been building up over the past few months and will decrease the space for the monetary policy committee to ease policy rates further. The government had hiked central taxes on petrol and diesel in 2020 to boost revenues amid lower economic activity. The increase in taxes had prevented consumers from getting the benefit of low fuel prices as international prices crashed during the first quarter of this fiscal and are now contributing to record high prices as international prices have recovered. Petrol and diesel prices in India are pegged to the international prices of the two products. If oil prices continue to increase like this, the government shall be forced to cut taxes on petroleum and diesel which may cause loss of revenue and deteriorate its fiscal balance.  However, there could be a positive side to the oil price hike as the value of Indian oil and gas companies could be positively impacted. The government could get greater value from disinvestment in Bharat Petroleum Corporation Limited and remittances from the Persian Gulf could increase.

 

 

 

The First Forum

The First Forum – Edition 82

The First Forum is an initiative that focuses on covering the latest happenings in a brief format. This is in lieu of the importance of knowledge about current happenings in this fast-changing world.
In the Eighty Second- Edition of The First Forum we would be covering the following topics:
1. Politics
2. Science and Technology
3. Business
4. Economics
5. Finance

(By Ashika Deb, Shitij Goyal and Gunika Vij)

weekly analysis

The Weekly Analysis – Edition 45

There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Fifth Edition we are covering the following news:

  1. Brexit and Covid slash UK exports to the EU
  2. Alternative Smart Wall offered by Joe Biden
  3. What may have caused Uttarakhand flash floods?
  4. Four-day week likely for some firms as final rules of labour codes are set
  5. Access to G-secs directly by Retail Investors

Brexit and Covid slash UK exports to the EU

Brexit and coronavirus have slashed the volume of surface freight leaving Britain for the European Union by 68 per cent from last January. The stark drop in goods carried on ferries and through the Channel, the tunnel was registered by lobby group the Road Haulage Association (RHA) after a survey of its international members. RHA chief executive Richard Burnett has sent a letter to minister Michael Gove warning that the new checks required since Britain fully left the EU’s single market on January 1 were deterring exporters from shipping to the continent. He said the government had only hired around 20 per cent of the extra border staff needed to process the extra paperwork. Britain sent around £294 billion ($403 billion, 335 billion euros) of goods to the EU in 2019, accounting for around 43 per cent of its total exports, according to official figures. The situation threatens to get worse in July when Britain implements its full range of physical border checks. Britain and Europe have imposed tight travel restrictions during the latest wave of the pandemic, with France temporarily imposing a total ban on vehicles entering from Britain shortly before Christmas. Truckers heading over the Channel to France now require a negative Covid test before making the crossing. While the consequences of Brexit and the pandemic were individually evaluated by everyone, the effects that both of them together made was always a variable which has not started to come out of the shadow. For once, we might think that the pandemic is almost over and everything is back to normal but cutting off a major partnership while half of the population struggles with an illness isn’t something a nation can recover from easily. The fall takes the country years back of the development and makes it difficult to come out of suddenly. At the same time, the worst struck are the poor ones who might have entered debt traps that could continue for their entire lives and maybe even to the next generation. One opinion has been that it would have been rather sensible to consider something so huge like Brexit maybe once the economies would have recovered from the pandemic fall but at the same time, we cannot ignore that such extreme measures don’t come with a pause and might be impossible to be voted on the next time.

Alternative Smart Wall offered by Joe Biden

In 2019, the USA declared a national emergency to fund construction of a border wall along the US-Mexico Border citing “invasion” of drugs and criminals from Mexico. The Mexico–US barrier is also known as the border wall is a series of vertical barriers along the border intended to reduce illegal immigration to the US. But the new US president Joe Biden stopped the construction of the much-published “border wall” between the US and Mexico as a brick and mortar wall between them presents a variety of logistical, environmental and operational challenges, many of which could be circumvented through the implementation of digital border security technology a “smart wall”. Hence, an alternative Smart Wall has been proposed to replace the physical and armed patrolling with advanced surveillance technology at the border. The concept is not new and the novelty of it cannot be directly associated with Biden. As the U.S.-Mexico border wall proposed by Donald Trump envisaged this concept. A technology firm was sought to be hired by the Trump administration, and it was indicated that artificial intelligence shall be used at a novel scale to complement the steel barrier i.e. border wall.
The concept of ‘smart wall’ technology could solve border security issues without the need for a physical barrier. It would use sensors, radars, and surveillance technology to detect and track border break-ins, and technology capable of performing the most difficult tasks dedicated to border security. Along with surveillance towers and cameras, thermal imaging would be used, which would help in the detection of objects. The system would even be capable of distinguishing between animals, humans, and vehicles, and then sending updates to handheld mobile devices of the patrol agents. Moreover, these technologies are cost-effective, less harmful to the environment, require a lesser amount of land, speedier deployment and overcome the limitations of terrain.
Hence, the concept of smart walls has been introduced in the US. India should also explore the possibilities of using smart walls to protect borders as it has been struggling to curb cross-border.

What may have caused Uttarakhand flash floods?

On February 7, 2021, the sudden flood in the Dhauli Ganga, Rishi Ganga and Alaknanda rivers triggered widespread panic and large-scale devastation in the high mountain areas which led to the Dhauliganga dam being completely obliterated and at least 31 people have died, 165 people are missing and many more are feared to have died, as the rescue operation continues in Chamoli district of northern Uttarakhand state. The deluge first smashed into a small dam, gathering more energy as it grew heavier from the debris it collected along the way. Then it smashed into a larger, under-construction dam and gathered even more energy. Two power projects – NTPC’s Tapovan-Vishnugad hydel project and the Rishi Ganga Hydel Project – were extensively damaged with scores of labourers trapped in tunnels as the waters came rushing in.
The reason for the flood remains unclear. Whether it was a GLOF (glacial lake outburst flood) or a cloud burst or an avalanche, the impact of climate change or “development”, scientists are not sure what triggered the sudden surge of water. An unusual reason the villagers suspect could be a radioactive device which was lost in the region years ago during a secret expedition to Nanda Devi, and the heat produced by that device could have led to the disaster as they noticed a pungent smell as well.
Whatever the reason maybe it is not just climate change but is human-induced as well. High-intensity stone quarrying, frequent blasting of mountains and digging of tunnels through the base of the fragile mountain system for the back-to-back under-construction dams, each on the Rishi Ganga and Dhauli Ganga rivers, have played havoc with the local ecology. There is no doubt that the impact would have been far less with more prudent development of projects in the region. Environmentalists who have observed and covered the region extensively said that the cascade of dams and developmental projects are the cause of the frequent disasters in the Himalayas.
Development was needed for the enhancement of the impoverished region, but experts said that the paradigm shift was necessary so that executing such projects take into account the ecological fragility of the mountains, and the unpredictable risks posed by climate change. This disaster may well be nature’s way of telling humans that it can strike back when the ecological balance is destroyed. If the present pace of Himalayan destruction continues, a future disaster will be devastating. Nature will strike back again. Damaging today and repairing tomorrow is not an option. India has only one option — save the Himalayas.

Four-day week likely for some firms as final rules of labour codes are set

Companies will be able to provide even a four-day week to employees as the labour ministry would provide flexibility in this aspect in the final rules to be brought out under the labour codes. However, the working hours cannot go beyond 48 hours. Those who give a four-day week will have to provide three consecutive holidays after that. So, there would be flexibility for employers to give a four, five or six-day week. However, there must be an agreement between employers and employees over a four-day week, it cannot be thrust on employees.
The four labour codes were passed by Parliament in September. The ministry came out with the first draft of the rules in December and received comments in January. Most of the states are in the process of framing the rules. Some of the major states such as Uttar Pradesh, Punjab, Madhya Pradesh would be coming out with the draft of their rules by February end. It was also disclosed that concerns were raised during tripartite talks on draft rules regarding spread over time. The draft rules on the Code on Occupational Safety, Health and Working Conditions proposed 12 hours of spread overtime in an establishment in a day, up from 10.5 hours currently. The spread overtime refers to working hours, besides the time for lunch and other breaks. Labour secretary in his statement also mentioned some changes as follows. The number of people who are contributing more than Rs 2,50,000 a year to employees’ provident fund (EPF) is 1,23,000 out of total 65 million subscribers, which is a very small number. The Budget brought these people under the tax net. The decision will stop high net worth individuals from misusing a welfare facility and earn wrongfully tax-free income as assured interest return. The labour secretary also said that four major surveys have been commissioned by the labour bureau on migrant workers, domestic workers, transport workers and professional workers. These would-be household surveys to be conducted by the labour bureau. These changes introduced with the incoming flexibility for employers could also mean a better lifestyle for the employees and more time for personal growth and also the mentioned tax evasion would be removed thus higher revenue for the government.

Future

Access to G-secs directly by Retail Investors

In a monetary policy review, The Reserve Bank of India (RBI) said that it will give retail investors direct access to the government securities trading platform. It means retail investors can directly open their gilt accounts with RBI, and trade in government securities through the ‘Retail Direct’ facility and can access both the primary market and secondary markets without the help of intermediaries. Currently, direct G-secs trading is not popular among retail investors. Retail investors are non-professional investors who buy and sell securities or funds that contain a basket of securities such as mutual funds and Exchange Traded Funds (ETFs). The g-sec market is dominated by institutional investors such as banks, mutual funds, and insurance companies. These entities trade in lot sizes of Rs 5 crore or more. So, there is no liquidity in the secondary market for small investors who would want to trade in smaller lot sizes. However, in the current proposal, the RBI intends to make the whole process of G-sec trading smoother for small investors and hoping to create a market of small investors who will invest in these instruments. The Governor of the RBI Shaktikanta Das described this as a “major structural reform”. Let’s take a look at the significance of this reform.
Direct retail investment in G-secs will broaden the investor base and provide retail investors with enhanced access to participate in the government securities market. This structural reform will place India as the third nation in the world after the United States and Brazil, where retail participants can take direct exposure to the government bond market. And allowing direct retail participation will promote financialisation of a vast pool of domestic savings and could be a game-changer in India’s investment market. Most importantly, it will help the smooth completion of the government borrowing programme for 2021-22. The central bank has been tasked with managing a whopping Rs 12 lakh crore in government borrowing target next fiscal.
Moreover, this is not the first time that the RBI has moved to improve retail participation in government securities. It has announced several initiatives for this in the past but it has not enhanced much. But this move will likely change the dynamics of the bond market in India.

 

The First Forum

The First Forum – Edition 81

The First Forum is an initiative that focuses on covering the latest happenings in a brief format. This is in lieu of the importance of knowledge about current happenings in this fast-changing world.
In the Eighty First- Edition of The First Forum we would be covering the following topics:
1. Politics
2. Science and Technology
3. Business
4. Economics
5. Finance

(By Ashika Deb, Shitij Goyal and Gunika Vij)

MERGERS AND ACQUISITIONS

Every now and then there is a headline in newspapers “XYZ acquired some percentage of ABC company” or “XYZ company to get merged into ABC company”. The question is why do companies take such a step and how it can impact the consumers. To start with, let us first understand the difference between acquisition and merger. 

weekly analysis

The Weekly Analysis – Edition 44

There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Fourth Edition we are covering the following news:

  1. Myanmar Coup: What is happening and why?
  2. Experts ‘disappointed’ over the reduction in allocation to the environment ministry
  3. Economic Survey sees counter-cyclical fiscal policy, 11% growth
  4. Infra thrust: Capital-intensive sectors get boost in Union Budget 2021
  5. Why India has the highest levels of OOPEs?

Myanmar Coup: What is happening and why?

Myanmar’s de facto leader and former nobel peace prize winner Aung San Suu Kyi was detained, along with her ally President Win Myint, and other senior leaders as Myanmar’s military launched a coup ending the country’s decade-long dalliance with democracy and declared a one-year state of emergency.

Earlier this week when the new Parliament was scheduled to convene, the coup was launched. Myanmar has toggled between military and civilian leadership since 1948, though the Tatmadaw, as the country’s armed forces are formally known, has remained the most powerful institution the entire time. In the late 1980s, a civilian pro-democracy movement gained strength with Suu Kyi as its leader and in 2015, the Suu Kyi-led  National League of Democracy (NLD) won 77% of the seats in Parliament in Myanmar’s first recognized, free and fair election in 25 years.
Why did the military stage this coup?
For weeks, the top leadership of the Tatmadaw had been accusing Suu Kyi’s party, the NLD, of voter fraud in elections. Although the allegations of fraud against Suu Kyi were rejected by Myanmar’s Election Commission, the Tatmadaw continued to claim that there was “widespread violation of laws and procedures” and threatened to “take action”.
However, it is believed that the real motivation behind the military’s action is Suu Kyi’s growing power and popularity, which could erode its control over critical policy domains. With Senior General Min Aung Hlaing’s tenure set to end soon and a convenient excuse in form of voter fraud allegations, the Tatmadaw decided to act.
Another reason could also be that taking over in a coup could allow the Tatmadaw to write a new constitution that weakens the pro-democracy movement and solidifies the military’s supreme role as NLD came very close to curtailing their influence. Widespread rejection of Tatmadaw could have also led the armed forces to act out in revenge and frustration. What could be the aftershocks of this coup?
Firstly, the shift in governance could create even worse management of the COVID-19 crisis, as people may try to flee the country or migrate to other parts of the country, as they did after prior coups, potentially spreading the virus.
Secondly, the coup could lead to an unwinding of deals with ethnic minority Rohingya’s insurgencies, who could go back to war, further splintering Myanmar and leading to a massive spike in violence in what is already a conflict-ridden country. Mobile and internet communications in Rakhine state have already been heavily restricted amid accusations from rights groups that the atrocities are going on.
As the NLD try to rally Myanmar citizens, who now have lived through a decade of some degree of freedom, Suu Kyi has released a statement calling on Myanmar people to oppose the coup that could crack the army, the party or citizens, try to hold protests or rallies.
For now, all signs indicate that the Tatmadaw is unlikely to allow a return to democracy in Myanmar any time soon. It has pledged to hold new elections within a year and said it will respect the results of that election and transfer power. But this one-year timeline appears arbitrary and leaves open the possibility that the military will delay the election and hold on to power for a longer-term.

Future

Experts ‘disappointed’ over the reduction in allocation to the environment ministry

The Rs 230-crore reduction in the budgetary allocation to the environment ministry has drawn flak from environmentalists who say it may slow down or completely halt green initiatives. Besides the shrunk budget, they also feel that the Centre has not clarified how a separate amount of Rs 2,217 crore, set aside for tackling air pollution in 42 cities with minimum population of one million, will be utilised. The budget presented by Finance Minister Nirmala Sitharaman has also reduced the sum allotted to the climate change action plan by Rs 10 crore to Rs 30 crore. Experts also felt that the amount of Rs 470 crore allocated for “Control of Pollution” out of Rs 2869.93 crore, was not enough.
The Budget document mentions that under Control of Pollution’, a total of 470 crore are allocated for 2021-22. This includes providing financial assistance to Pollution Control Boards/Committees, funding to the National Clean Air Programme (NCAP). There are 122 cities presently under NCAP and the allocation for it is merely around Rs 470 crore, which is clearly not enough. According to Greenpeace India’s annual Airpocalypse report 2020, 231 cities out of 287 had PM10 levels exceeding the 60 g/m3 limits, prescribed under National Ambient Air Quality Standards (NAAQS) by CPCB, implying that all these cities/towns belong to the non-attainment list.
In her budget speech, Sitharaman also announced a voluntary vehicle scrapping policy, to phase out old and unfit vehicles as per which vehicles will undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles and after 15 years in case of commercial vehicles.
The minister also proposed to provide an additional capital infusion of Rs 1,000 crore to Solar Energy Corporation of India and Rs 1,500 crore to Indian Renewable Energy Development Agency. She also announced the extension of the city gas distribution project to 100 more districts. Despite being one of the cleanest and most easily available gas, Auto LPG remains highly under-utilized in India’s transport sector.
Air pollution is a far greater public health emergency than COVID; while COVID claimed 1.5 lakh lives in 2020, air pollution is responsible for about 18 lakh deaths across India. Thus, a reduced portion of spending towards cleaner air quality and environmental protection will lead to a much larger threat than what the government thinks of and also another factor which can’t be completely eliminated is that how many of the COVID survivors still have side effects on their body and adding polluted to it is definitely not going to be safe unless proper measures are strictly taken.

NPAs

Economic Survey sees counter-cyclical fiscal policy, 11% growth

The Economic Survey 2020-21 authored by Chief Economic Advisor Krishnamurthi Subramanian, has analysed the state of the Indian economy across various dimensions. It predicts India’s economy is in the middle of a V-shaped recovery and will bounce back to record 11% growth after an estimated 7.7% contraction this year. Growth has been termed as a ‘lockdown dividend’ from the country’s stringent response to the COVID-19 pandemic. These projections are in line with the International Monetary Fund (IMF) which estimates real GDP growth of 11.5 per cent in 2021-22 for India and 6.8 per cent in 2022-23. India is expected to emerge as the fastest growing economy in the next two years as per IMF, the Survey has noted. Moreover, the Survey calls for more active, counter-cyclical fiscal policy as it is desirable to use to enable growth during economic downturns. The countercyclical fiscal policy is part of the cyclical fiscal policy.
Let see how this policy works?
Cyclicality of the fiscal policy simply refers to a change in direction of government expenditure and taxes based on economic conditions. There are two types of cyclical fiscal policies one is counter-cyclical and second is pro-cyclical policy. Counter-cyclical fiscal policy refers to the steps taken by the government that go against the direction of the economic or business cycle. The survey gives a colourful example of ancient Indian kings who used to build palaces during famines and droughts to provide employment and improve the economic fortunes of the private sector. Economic theory, in effect, makes the same recommendation: in a recessionary year, the government spends more than during expansionary times. Such counter-cyclical fiscal policy stabilizes the business cycle by being contractionary (reduce spending/increase taxes) in good times and expansionary (increase spending/reduce taxes) in bad times. On the other hand, a pro-cyclical fiscal policy is the one wherein fiscal policy reinforces the business cycle by being expansionary during good times and contractionary during recessions. It was acknowledged in the economic survey of 2017.
To sum up, Counter-Cyclical Fiscal Policy is the only way forward to decrease the economic slowdown in the country when private consumption contributes to 54% of GDP is contracting, and investment, which contributes to around 29% is uncertain, the relevance of counter-cyclical fiscal policy is paramount.

Birkin

Infra thrust: Capital-intensive sectors get boost in Union Budget 2021

The Budget, with its emphasis on capital expenditure and infrastructure projects, is a boost for capex-related companies but this has been tempered by a reduction in overall government expenditure in FY22. The latter could dampen the pace of consumer demand in the next fiscal year and is negative for companies in the FMCG, consumer durables, and automotive sectors. Gross Budgetary support for capital expenditure is up 26.2 per cent in the Budget estimates for FY22 compared to the revised estimates for FY21. The Budget has allocated Rs 5.54 trillion for capital expenditure in FY22 against the actual capex of Rs 4.39 trillion in FY21 and Rs 3.35 trillion in FY20.
The BSE Infrastructure Index was up 5.6 per cent and closed the day at a fresh 52-week high. The Budget proposals are also positive for industrial commodity sectors such as metals and cement. The fiscal multiplier is, however, likely to be tempered by a cut in capital expenditure by central public sector companies including those under the Ministry of Railways. Public capital expenditure is budgeted at Rs 11.37 trillion in FY22 against the FY21 revised estimates of Rs 10.84 trillion and Rs 9.77 trillion in FY20. Overall the Budget is not expansionary compared to the level of public spending in the current financial year. Central government expenditure is budgeted to rise by just 1 per cent y-o-y in FY22 over FY21 revised estimates. And the net of interest payments, government expenditure is expected to decline by 3 per cent in FY22. The interest payment is expected to grow by 16.9 per cent in FY22. In comparison, central government gross tax revenues are expected to grow by 16.7 per cent in FY22.
The Budget impact on corporate earnings in FY22 is likely to be neutral, given that CAPEX-related stocks have a small share in corporate profits. Most of the corporate earnings are accounted for by top companies in technology, retail lending, FMCG, oil and gas, automotive and pharma sectors. Apart from this as we get into more depths of analysis, we see that we still can’t completely trust our own predictions because we might be getting flexible with the restrictions on our movement but the COVID virus has still not completely vanished and the fear of the side-effects that come with the vaccine are still there in minds of people especially those working in corporate jobs finding themselves comfortable in work from home and at the same time the companies saving their costs with the work from home setups.

Telemedicine

Why India has the highest levels of OOPEs?

The global coronavirus pandemic has showcased how a healthcare crisis can be transformed into an economic and social crisis. One of the central problems has been the low levels of public spending on health and as a result, there is low access to affordable and good quality of healthcare to the majority of India’s population. And to battle with this, the Economic Survey saw the need of the hour to increase the spending on healthcare services from 1% to 2.5-3% of GDP, to reduce out of pocket expenditures (OOPE) from the current level of 60% to 30%.
The Out-of-pocket (OOP) expenditure for health is direct payments made by individuals to health care providers at the time-of-service use. It includes cost-sharing, self-medication and other expenditure paid directly by private households. And constitute a major access barrier to access the needed health care and contribute to high OOP payments that generate problems of financial protection and leads to catastrophic health expenditure (CHE). It observed that India has one of the highest levels of OOPE in the world, contributing directly to the high incidence of catastrophic expenditures and poverty. The reasons that led to OOP expenditures to rise are many as increasing health care cost is one of the major public health challenges in developing countries like India. While the household remains the major source of financing health care, the extent of poverty, impoverishment and indebtedness due to high out-of-pocket expenditure is on the rise. The poor quality of services at public health centres and low insurance coverage lead to the increasing use of private health centres and high OOPE in India.
The bulk of healthcare services in India is provided by the private sector. The Survey added that for enabling India to respond to pandemics, the health infrastructure must be agile and incorporate flexibility. And applauded that Pradhan Mantri Jan Arogya Yojana Scheme (PMJAY) has been a marquee evolution in the direction of providing financial affordability to a large percentage of the Indian population. The states that have higher per capita spending have lower out-of-pocket expenditure and hence it is vital to increase spending to lower the OOP expenditure. OOP increases the risk of vulnerable groups slipping into poverty because of CHEs. It is a need to increase the prioritization of healthcare in the central and state budgets which crucially impacts how much protection citizens get against financial hardships due to OOP payments. And the Finance Minister Nirmala Sitharaman has proposed ₹2,23,846 crore budget outlay for health and well-being for 2021-22, compared to ₹94,452 crore in the current fiscal, registering an increase of 137% which could help reduce the OOP expenditure.

 

 

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