The First Forum is an initiative that focuses on covering the latest happenings going around in the world in a brief format. This is in lieu with the importance of catching up with these events in this fast-changing world.
In this Fifty-Fourth Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Mehak Gupta, Nikunj Gulati, and Kanika Meena)

Business

Apple grows 25% as global smartphone market declined in the second quarter
As the global smartphone market plummeted 14% in the June quarter, Apple was the only vendor to grow as it shipped 45.1 million iPhones globally, a growth of 25% compared to the previous year, according to a new report. Samsung fell 30% while Huawei 5%, Xiaomi 10%, OPPO 16%, and others 23% in terms of shipments in the second quarter, reported market research firm Canalys. ReadMoreThe smartphone market worldwide fell to 285 million units, a second consecutive quarter of freefall, as lockdown orders caused by the Covid-19 pandemic persisted through April and May. Xiaomi came fourth, shipping 28.8 million units, which was down 10%, and OPPO reclaimed fifth place from Vivo, shipping 25.8 million units with a 16% decline.

KLM airlines announce massive layoffs, set to cut nearly 5,000 positions
The pandemic-stricken Dutch airlines, KLM has announced that it would cut 4,500 to 5,000 positions. This means that the workforce will be reduced to around 28,000 full-time equivalents (FTEs) in the course of 2021 from the current 33,000 FTEs. At the end of June, the Dutch government presented an aid package of 3.4 billion euros ($3.8 billion) for KLM to overcome the consequences of the Covid-19 crisis. ReadMoreOne of the conditions for financial support was that KLM would take measures for a cost reduction. “A great deal has already been done in recent months with respect to adjusting the size of our company in the face of a new reality,” KLM CEO Pieter Elbers stated.

Tata Power to raise green energy portfolio to 50% with a focus on renewables
Tata Power will focus on the renewable front for future growth, and it aims to raise its green energy portfolio to 50%. Its growth would be concentrated on renewables, distribution, and transmission of power along with new and value-added businesses, including rooftop solar, smart metering, micro-grids in rural areas, and setting up EV charging stations, the company said in a statement. Read MoreThe proposed Renewable InvIT is a growth engine and targets to be India’s largest renewable InvIT with a capacity of 15-20 GW, as per the company. Around 30% of Tata Power’s total generation comes from clean and green sources — 3.9 GW out of 12.7 GW and the company has to achieve around 50 percent clean energy portfolio by 2025.

Samsung, Foxconn to take part in govt’s PLI scheme for phone manufacturing
Leading South Korean mobile device maker Samsung and third-party manufacturers of Taiwan — Pegatron, Foxconn, and Wistron — have made applications to the ministry of electronics and information technology (MEITY) to participate in the production-linked incentive (PLI) scheme offered to global players. The scheme aims to make India a manufacturing and export hub for mobile phones. The three Taiwanese firms make mobile phones for Apple across the globe. Read MoreIn India, Apple has been using two of them — Foxconn (through its company Hon Hai Precision Industry) and Wistron — to manufacture iPhones in India. The foreign firms have to make a staggering investment of Rs 1,000 crore over four years and are required to manufacture handsets with an incremental production value of Rs 4,000 crore in the first year and go up to Rs 40,000 crore in the fourth year. However, incentives will be given only if these foreign companies manufacture phones which have a production value of over $200 apiece.

Two-pronged strategy: Mukesh Ambani is coming for India’s phones & wallets
The oil-and-petrochemicals tycoon’s digital services start-up requires him to dominate the use of mobile devices, while his retail chain, India’s largest, needs maximum grip on customers’ moneybags. Through the fog of the pandemic, the billionaire’s flagship Reliance Industries is showing glimpses of this twin-track strategy. Although padded by a one-time gain from selling 49% of its fuel retail business to BP, net income of $1.8 billion in the June quarter beat all analyst estimates. And this when retail garnered only $145 million in earnings before interest, taxes, depreciation and amortization, a 47% drop from last year. Read MoreA big jump in digital services helped Reliance cushion the Covid-19 blow, which has hit its petrochemicals and refining cash cows very hard. This remaking of Reliance will be watched keenly both in Silicon Valley and on Wall Street. A $20 billion fundraising spree from marquee investors and tech giants, including Facebook and Alphabet, has established Ambani’s Jio Platforms Ltd as the most ambitious digital services play to emerge from India.

Economics

Banks cannot refuse credit to MSMEs covered under the emergency credit facility
Finance minister Nirmala Sitharaman has warned banks that they cannot refuse credit to MSMEs under the emergency credit facility and any refusal should be reported. Speaking at FICCI’s National Executive Committee Meeting she further said that every step which is being announced and taken to deal with the current situation is being done after exhaustive consultation with the stakeholders and industry experts. Read MoreAs part of the Atmanirbhar Bharat Package, the government had announced Rs 3 lakh crore Collateral-free Automatic Loans for businesses, including MSMEs. And the total amount sanctioned under the 100% Emergency Credit Line Guarantee Scheme by public sector banks and private banks stands at Rs 1,30,491.79 crore, of which Rs 82,065.01 crore has already been disbursed. She also assured that the focus is on restructuring and the Finance Ministry is actively engaged with RBI on this. 

India’s forex reserves at a new record high of $523 billion
The Indian economy is going through one of its worse phases in living memory. Yet not all is lost. Forex reserves continued to hit record high levels as they rose by $4.993 billion for the week ended July 24 to $522.63 billion, according to the latest data put out by the Reserve Bank of India. Forex reserves are external assets, in the form of gold, SDRs (special drawing rights of the IMF), and foreign currency assets (capital inflows to the capital markets, FDI, and external commercial borrowings) accumulated by India and controlled by the Reserve Bank of India. Gold rose by $1.357 billion to $36.10 billion. Read MoreSpecial drawing rights (SDR) from the IMF increased by $9 million to $1.464 billion while the reserve position in the IMF increased by $25 million to $4.585 billion. And Foreign currency assets (FCA), which form a key component of reserves, rose by $3.602 billion to $480.482 billion. The major reason for the rise in forex reserves is the rise in investment in foreign portfolio investors in Indian stocks and foreign direct investments (FDIs). Foreign investors had acquired stakes in several Indian companies. 

Eurozone economy contracts a record 12%
The coronavirus pandemic caused the largest GDP drop ever recorded for the 19 EU countries using the euro as currency, according to estimates. The eurozone economy has shrunk by over 12%, with Spain bearing the brunt. The pandemic had the largest impact on Spain, the EU’s fourth-largest economy, which saw its GDP plunged by 18.5%. Italy and Portugal also endured steep declines, but no country escaped the impact of the pandemic.Read More The European Central Bank is pumping €1.35 trillion in newly printed money into the economy, a step which helps keep borrowing costs low. The eurozone’s gross domestic product fell 40.3% on an annual basis, far exceeding the 32.9% contraction in the U.S. economy over the same period. European governments are countering the recession with massive stimulus measures. EU leaders have agreed on a €750 billion recovery fund backed by common borrowing to support the economy from 2021. National governments have stepped in with loans to keep businesses afloat and wage support programs that pay workers’ salaries while they are furloughed.

Coronavirus impact on GDP will be felt for years to come: Fitch
The impact of 2020 coronavirus recession on GDP will continue to be felt for years to come with GDP levels in the largest advanced economies expected to remain around 3 to 4% below their pre-virus trend path by the middle of this decade, Fitch Ratings has said in a new report. “There will be lasting damage to supply-side productive potential from the coronavirus shock as long-term unemployment rises, working hours fall, and investment and capital accumulation slow,” said Maxime Darmet, Director in Fitch’s Economics team. Read MoreFitch said US productive potential growth has been revised to 1.4% from 1.9%, the UK to 0.9% from 1.6%, and the eurozone to 0.7% from 1.2%. These revisions partly reflect the expectation of a rise in long-term unemployment in the aftermath of the shock. The jobs shock is likely to see many workers – particularly in the most adversely affected and labour-intensive travel, tourism and leisure sectors will struggle to find re-employment quickly, resulting in detachment from the labor market, said Fitch. 

RBI must continue monetary easing policy, says IMF official
The Reserve Bank of India (RBI) will have to continue its accommodative monetary stance as COVID-19 cases are on the rise in India and economic recovery would be slow going forward, a senior official at the International Monetary Fund (IMF) said. Since March, the RBI had lowered the repo rate by 115 basis points and reverse repo by 145 bps boosting liquidity, he said, adding additional measures were focused on increasing liquidity in parts of the financial system with largest needs, easing public financing and financial sector balance sheet pressures. Read MoreRanil Salgado, Assistant Director, IMF said in a webinar that there is scope for further easing of policy rates and additional measures by the RBI. He further said the RBI had adopted an accommodative monetary policy stance amid limited fiscal space. And recent structural reforms undertaken by the government would support medium-term growth. But more efforts were needed for land, labour, and trade. Observing that the sharp rise in COVID-19 cases despite lockdowns was of concern, he said the pandemic could worsen a credit crunch and India needed to address corporate sector vulnerability.

Finance

India not close to situation for debt monetisation: former RBI chief Subbarao
Former RBI Governor D Subbarao on Friday said India is not close to the situation where the central bank has to go for debt monetisation amid rising government spending and falling revenue collection due to the COVID-19 crisis. There just are not enough savings in the economy to finance borrowing of such a large size. Bond yields would spike so high that financial stability will be threatened. Read MoreThe RBI must therefore step in and finance the government directly to prevent this from happening, he said. Referring to the idea of debt monetisation, Subbarao said that there is no reason to believe that India are anywhere close to that situation. Through its Open Market Operations (OMOs), the RBI has injected such an extraordinary amount of systemic liquidity that bond yields are not only soft but are continuing to soften further and in such a situation, the government is able to borrow at a real rate of zero per cent. So, can a direct monetisation be justified in such a scenario?

Negative real rates may be a new normal, unlikely to cut repo rate in Aug meet: SBI Report
The Reserve Bank of India is likely to leave repo rate unchanged in the upcoming policy review meeting and the Monetary Policy Committee may look for “unconventional policy measures” to ensure financial stability, State Bank of India(SBI) said in its report ‘Ecowrap’. Negative real interest rates are likely to become the new norm as household savings continue to rise in India despite lower rates on deposits at a time of intensified cash conservation and falling consumption.Read More It is important to keep real rates negative at present as it could have a sobering effect on asset quality, and it is unlikely that there would be a further cut in the repo rate in the August monetary policy review. With the 115 basis points (bps) reduction in repo rate beginning February, banks have already transmitted 72 basis points to the customers on fresh loans and some large banks have transmitted as much as 85 basis points. As part of its effort to improve connectivity, Beijing-based multilateral funding agency AIIB is looking to provide loans worth USD 3 billion for various large infrastructure projects in India, including Delhi and Meerut Rapid Rail, Mumbai Metro Rail and Chennai Peripheral Ring Road project, over the next 12 months.

AIIB plans to approve loans worth $3 bilion over next 12 months
India is the largest borrower, which accounts for 25% of the total lending by Asian Infrastructure Investment Bank (AIIB) so far, the bank’s vice president D J Pandian told in an interview. As of July 16, 2020, AIIB has approved up to USD 19.6 billion for 87 projects in 24 economies. Read MoreSince its inception in 2016, AIIB has approved loans to the tune of USD 4.3 billion across 17 projects in India. Last month, a USD 750 million-loan was approved to India to help the government strengthen its battle against the adverse impact of COVID-19 on poor and vulnerable households.

US dollar suffers its worst month in a decade
For the first time this year, every major currency in the world rose against the dollar, the euro rose the most in a decade this month and the British pound is headed for its best July since 1990. A gauge of the dollar against its biggest peers. A gauge of the greenback against its biggest peers was down 4.4% in July, the worst rout in a decade.Read More The world’s reserve currency of choice was already on the back foot when US President Donald Trump raised the idea of delaying elections this year. Falling US Treasury rates, real yields near record lows and disappointment over America’s response to the coronavirus compared to Europe just added to the fire. It shrank at a record 32.9% annualized pace in the second quarter, even amid unprecedented levels of monetary and fiscal stimulus from the Federal Reserve and the US government, while that is a 9.5% contraction on a non-annualized basis.

UCO Bank ready to come out of PCA framework: Official
State-owned UCO Bank, which posted net profit for two successive quarters, is ready to come out of the RBI’s prompt corrective action (PCA) framework. In May 2017, the central bank had initiated PCA against the lender due to high non-performing assets and negative return on assets. Read MoreTo ensure that banks don’t go bust, RBI has put in place some trigger points to assess, monitor, control and take corrective actions on banks which are weak and troubled which is known as Prompt Corrective Action, or PCA and finally UCO Bank will come out of it. Net NPA of UCO Bank during the quarter to June was lower at 4.95%, while the capital adequacy ratio stood at 11.65%, an official said. The bank had reported a net profit of ₹21.46 crore in the first quarter.

Get The Connectere directly in your E-mail inbox !

Enter your email address to subscribe to The Connectere and receive notifications of our new content on your E-Mail