The First Forum is an initiative which 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 Thirty Third Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Ankita Punjani, Mehak Gupta and Divyansh Gupta)

Business

US puts new sanctions on Huawei, restricts company from using its tech
The US imposed new restrictions on Chinese tech giant Huawei, severely limiting its ability to use American technology to design and manufacture semiconductors produced for it abroad. The new restrictions elicited an angry response from China, which threatened retaliation against US companies. Chip design and manufacturing equipment used in the world’s semiconductor plants is mostly US made, so the new rule aims to impact multiple foreign producers that sell to Huawei and affiliates including HiSilicon, which makes chips used in supercomputers. Read MoreUnder the new rules, foreign semiconductor makers must obtain a license from US officials in order to ship to Huawei-designed semiconductors to the Chinese company that were produced using US technology. Last year, the Trump administration barred US firms from using Huawei technology or providing technology to the Chinese firm without government approval, deeming it a national security risk. The Commerce Department exempted a narrow list of products and services and has continuously extended that limited waiver, largely to lessen the impact on US wireless carriers that use Huawei technology in their networks. This week, it added another 90 days. The new restrictions are separate from those exemptions, but loopholes have allowed US companies to continue to supply Huawei with chips made outside the US.

Sunil Mittal’s firm buys stake in AU Small Finance Bank
Bharti Mittal-owned Bharti (SBM) Holdings Pvt. Ltd has picked up a stake in AU Small Finance Bank buying 24 lakh shares. According to data available on BSE, Bharti SBM has bought 24, 12,000 shares in the bank at Rs 414.16 apiece on 15 May. At this price, the transaction is valued at Rs 100 crore. This (24 lakh shares) will constitute 0.79 percent of AU Small Finance Bank. Read MoreIn 2018, Singaporean wealth fund Temasek had picked up a 4.8 percent stake in the bank for $74 million through its wholly-owned subsidiary Camas Investments. This transaction happened in open market through block deal, according to the data. In Q4, AU Small Finance Bank posted a 3.45 per cent increase in its net profit to Rs 122.32 crore as against Rs 118.23 crore in the same period a year ago. The bank’s net income grew 43 per cent to Rs738 crore in the fourth quarter last fiscal from Rs 517 crore in the year-ago period. In April 2019, Bharti (SBM) had increased stake in CG Power and Industrial Solutions by purchasing 44.6 lakh shares at Rs 38.84 per share. Of late, private banks have witnessed an increase in investor interest.

Zomato to lay off 13% staff, upto 50% wage cut for rest
Food delivery Major Zomato will layoff 520 employees, or 13% of its workforce, and has proposed a temporary cut in salaries for the rest starting from June as the nationwide lockdown has hit its businesses, the company’s founder & CEO Deepinder Goyal has said. Employees who are being let go will receive half their salaries along with health insurance for the next 6 months or till they find another job, whichever is earlier. Read MoreOver the next couple of days, the company will get on Zoom video calls with the impacted employees to walk them through the next steps and help them find jobs as soon as possible.

Companies worldwide filing for bankruptcy
From iconic department stores to airline giants, the coronavirus has seemingly spared no one in its devastation. With the global economy thrashed by the ongoing pandemic, countless companies are now treading the waters of near insolvency. Some companies that have filed for bankruptcy during this pandemic include:

-Second oldest airline Avianca
-Luxury retailer Neiman Marcus
-Premium denim brand True Religion
-Canadian footwear retailer Aldo Group
-Department store chain JCPenney
-Fashion firm J.Crew
-Australian satellite internet company Speedcast International
-British airline Flybe
-Luxury grocery store chain Dean & DeLuca
-Largest gym chain Gold’s gym

However, bankruptcy filing doesn’t necessarily mean the end of companies. Many firms use bankruptcy to shed debt and other liabilities they can’t afford while closing unprofitable operations and locations.

Economics

Power distribution companies in UTs to be privatised announces MoF
Taking a leap towards enhancing private investment in power distribution companies (discoms), Union finance minister (FM) said the power distribution business in the Union Territories (UTs) would be privatised. This is the first such step after the draft amendments to the Electricity Act, 2003, were made public last month with the proposal of private participation in electricity distribution. Read MoreDelhi is the only Union Territory which has private power discoms — run by Reliance Infrastructure’s BSES and Tata Power Delhi Distribution in separate areas. Union Territories directly come under the central government. Hence, the path to privatisation is easier. The draft Electricity Bill, which was made public in April, has also proposed private power distribution franchisees. This paper had earlier reported that the ministry of power was asking states to join hands with private power distributors on a franchisee basis to improve their revenues. Earlier in the week, the Centre said it would extend a Rs 90,000 crore funding line to distribution companies. The Union power ministry said on Saturday the funding would be done in two tranches of Rs 45,000 crore each.

Agriculture, allied activities get Rs 1.5-trn package
The announcements Union Finance Minister Nirmala Sitharaman made on agriculture sector will require an expenditure of Rs 1.5 trillion, apart from what the administrative measures relating to them entail. Of this, Rs 35,000 crore will come from the Centre’s Budget over the next two to five years. Read MoreWednesday’s announcements will have a fiscal impact of nearly Rs 40,000 crore (6.7 per cent), the sources said, in a package of Rs 5.94 trillion. For the ones on Thursday, it is Rs 10,000 crore (3.2 per cent) of the Rs 3.16 trillion. For Friday, it is 23 per cent. The finance minister on Friday announced a Rs 1-trillion agriculture infrastructure fund for farm-gate infrastructure. She said a financing facility would be provided for funding infrastructure projects like cold storage, warehouses, and yards at farm-gate and aggregation points.

India’s FOREX reserves rise by over $4 billion
India’s foreign exchange reserves rose by $4.235 billion during the week ended May 8th, RBI data showed. According to the RBI’s weekly statistical supplement, the overall forex reserves increased to $485.313 billion from $481.078 billion, just shy of the previous lifetime high of $487 billion. Read MoreOn a weekly basis, Foreign Current assets (FCAs), the largest component of the forex reserves, edged higher by $4.233 billion to $447.548 billion. Similarly, the value of the country’s gold reserves increased but marginally. It rose by $13 million to $32.291 billion. However, the Special Drawing Rights (SDR) value slipped by $3 million to $1.423 billion.

Germany plunges into Recession
Germany plunges into recession, with Europe’s biggest economy shrinking by 2.2% in the first quarter as shutdowns in the country and beyond started to bite, official data showed. The German economy’s decline reflects its biggest quarterly drop since 2009 when the country was engulfed in the global financial and economic crisis. Other countries in the European region have also reported horrific economic data. The UK’s economy dropped 2%. Read MoreWhile France and Spain shrank by 5.85% and 5.2% respectively. The eurozone economy as a whole, contracted by 3.8% in the first quarter of the year.

Finance

Finance Minister gives liquidity boost of Rs 75,000 cr to shadow banks, MFs
Finance Minister provided a major liquidity boost of Rs 75,000 crore to shadow lenders and microfinance institutions (MFIs), which are struggling with cash-flow problems as banks have become risk-averse in lending to them. Sitharaman announced a special liquidity scheme of Rs 30,000 crore for non-banking finance companies (NBFCs), housing finance companies (HFCs) and MFIs, which are finding it difficult to raise money from the debt markets. Read MoreUnder this scheme, investment will be made in both primary and secondary market transactions in investment-grade debt papers of NBFCs, HFCs and MFIs. And, all the debt papers bought through this special liquidity scheme will be guaranteed by the government. Earlier, the RBI had provided a corpus of Rs 50,000 crore via bids in the targeted long-term repo operation (TLTRO 2.0), wherein banks would borrow money from the central bank at the repo rate of 4.4 per cent and invest in the debt papers of shadow lenders. However, the RBI received bids for only about half the Rs 25,000 crore it offered in the first trance, indicating that banks were reluctant to lend to NBFCs. Banks put in 14 bids worth only Rs 12,850 crore. Second, the FM announced the government will extend the already in-force partial credit guarantee scheme (PCGS 2.0) to cover borrowings, such as primary issuances of bonds, commercial papers of NBFCs, HFCs, and MFIs, wherein the government will bear the first 20 per cent loss as guarantor for even unrated papers. This will enable another Rs 45,000-crore liquidity support to the shadow banking industry. Papers of lenders with credit rating AA and below will be eligible for investment under the scheme. Among major announcements, the government said it will provide 100 per cent credit guarantee on the principal amount to lending institutions for extending credit to the MSME sector. Loans totalling Rs 3 trillion will be for four years with a moratorium on principal repayment of 12 months.

India Ratings puts April revenue loss for 21 states at ₹97,100 crore
Twenty one major states could be staring at a collective revenue loss of ₹97,100 crore in April alone, according to a report by India Ratings (Ind-Ra) released on Wednesday. The disruption to the economy was so swift and severe that even if the lockdown was lifted in mid-May, economic normalcy would be unlikely until the second quarter of the fiscal, the report added. Read MoreAccording to the paper, states’ own revenue mainly comes from seven heads – state goods and services tax (SGST), state VAT (mainly petroleum products), state excise (mainly liquor), stamps and registration fees, tax on vehicle, tax and duty on electricity and own non-tax revenue. States which have a high share of own revenue in their total revenue, such as Goa, Gujarat, Haryana, TN, Telangana, Karnataka, Maharashtra and Kerala with 65%-76% would be the worst affected.

WORLD BANK approves $1Billion aid to India
The World Bank has approved $1 billion ‘Accelerating India’s COVID-19 Social Protection Response Program’ aid to support India’s efforts for providing social assistance to poor and vulnerable households. The social protection package for India is linked to central government’s programmes. This package is in addition to the previous package of $1 billion allocated to India for COVID-19. Read MoreOf the USD 1 billion commitment, $550 million will be financed by a credit from the International Development Association (IDA) and $200 million will be a loan from the International Bank for Reconstruction and Development (IBRD), with a final maturity of 18.5 years including a grace period of five years. Remaining $250 million will be made available after June 30.

US House passes $3 Trillion Coronavirus aid bill opposed by Donald Trump
The U.S. House of Representatives narrowly approved a $3 trillion bill crafted by Democrats to provide more aid for battling the coronavirus and stimulating a faltering economy rocked by the pandemic. By a vote of 208-199 Democrats won passage of a bill that Republican leaders, who control the Senate, and President Donald Trump have vowed to block despite some Republican support for provisions aimed at helping state and local governments.Read More It includes $500 billion in aid to struggling state governments, another round of direct payments to people and families to help stimulate the economy, and hazard pay for healthcare workers and others on the front line of the pandemic.

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