The First Forum – Edition 45

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 Forty-Fifth 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

Xiaomi puts ‘Made in India’ banners to cover branding at stores
Chinese handset maker Xiaomi has begun covering its retail store branding with ‘Made in India’ logo in white color amid fears of vandalism at outlets in the backdrop of the Sino-India border tension, the All India Mobile Retailers Association (AIMRA) said. The association had written to Chinese mobile brands to highlight the threat of vandalism at offline stores by people amid calls for boycotting Chinese products in certain sections. Read MoreWhile mobile phone makers have remained quiet, industry executives, not wishing to be identified, have said sales have largely remained unaffected. Xiaomi India Head Manu Jain has also said the anti-China sentiment was limited mainly to social media and it had not impacted its business in the country. Four of the top-five smartphone brands in India (Xiaomi, Vivo, Realme, and Oppo) are from China and accounted for almost 76% share of the 32.5 million smartphones shipped in India during the March 2020 quarter. In a tweet, Jain had said Xiaomi’s Redmi Note9 Pro Max was out of stock in less than 50 seconds during a sale.

Jio poised to play a key role in the development of 5G ecosystem in India: RIL
Reliance Jio would play a key role in the development of the 5G ecosystem in India based on the market dynamics, Reliance Industries said in its latest annual report. The government has also expressed its intentions of conducting the next round of spectrum auctions during the fiscal year 2020-21. Read More“Jio with its 5G-ready network and extensive fiber assets would play a key role in the development of the 5G ecosystem in India, based on market dynamics,” the annual report stated further. Ambani noted that Jio’s success in building technology specifically for India and its ability to proliferate across the country has attracted global technology leaders Facebook and Microsoft to forge partnerships with it. Reliance Jio continues to add subscribers at a rate unprecedented in the telecom world with 387.5 million mobile data subscribers (as of March 31, 2020), Ambani said.

HUL completes acquisition of hygiene brand VWash from Glenmark Pharma
Hindustan Unilever Limited (HUL) on 26 June, announced that it has completed the acquisition of intimate hygiene brand VWash from Glenmark Pharmaceuticals Ltd. In a regulatory filing, HUL said that it has acquired the intellectual property rights including trademarks, design, and knowhow related to the VWash brand worldwide. Read MoreWith this acquisition, HUL can unlock significant synergies and scale up the brand by building awareness, driving penetration, leveraging distribution and enhance the offering for the chemist channel, it said. The company, however, did not disclose the transaction value involved. VWash was launched by Glenmark in 2013 and the brand has established itself as the market leader in the female intimate hygiene category backed by strong product proposition, consumer endorsements, and brand building investments.

Google adds ‘Fact-Checked’ labels for search images to limit misinformation
Google announced that it will start identifying some misleading photos in its specific search tool for images with a fact-check label. This new feature is introduced to help people navigate issues around determining the authenticity of images and make more informed decisions about the content they consume. As per the blog post by Google product manager Harris Cohen, when a user searches for an image, some of the images will reflect a ‘Fact check’ label just underneath the thumbnail of the image. Read MoreOnce the user clicks on such an image to enlarge it, a larger preview of the photo will show up with a short summary of the fact-check and direct users to its source. Google says that the fact check label would appear for both cases – if the fact check article is about the specific image or if the fact check article contains that image in the story. These labels appear for fact-checking articles from independent sources that meet the criteria of Google, as per the statement.

‘Boost with Facebook’ to help businesses adjust to the challenging time
The social network has kicked off a new initiative called Boost with Facebook Summer of Support during which, it will help millions of people get the digital skills and information they need to navigate these challenging times and adjust to a new normal. The six-week program features free on-demand online training, live sessions, and conversations around topics like reimagining customer service, creative reinvention, going from brick and mortar to digital, and more, the company announced. Read MoreIt also launched an ‘Online Business Guide’ to help people move their business online or further transform business in today’s rapidly changing environment. The guide offers step-by-step instructions to help you establish a digital presence, connect with customers for free, and get started with advertising. Earlier this year, Facebook had also announced $100 million in cash grants and ad credits to help businesses through this challenging time.

Economics

Cabinet decides to bring cooperative banks under RBI through an ordinance
The Union Cabinet decided to bring all cooperative banks under the RBI through an ordinance. This was announced by Union Information and Broadcasting Minister, Prakash Javadekar during the virtual press conference. It will bring nearly 1,500 urban cooperative banks and multi-state cooperative banks under RBI supervision. Read MoreThe decision assumes significance after the Punjab-Maharashtra cooperative bank crisis where several depositors lost their hard-earned savings hence the government decided to strengthen the regulatory framework around cooperative banks. There are more than 8.6 crore depositors in over 1500 urban and multi-state cooperative banks across the country. “Depositors money amounting to Rs 4.84 lakh crore in the cooperative banks will stay safe”, Javadekar said. And now these banks come under dual regulation of the RBI and the Registrar of Cooperative Societies. This action has been taken to increase the accountability of the banks that keep public money and to prevent instances of fraud, corruption, and mismanagement.  

Money supply surges signals uncertainty amid a pandemic
Heightened uncertainty caused by the COVID-19 pandemic has led to a surge in currency circulation as people are hoarding money in cash to protect them from future job losses or pay cuts. Currency in circulation measures the money with the public and that in banks has also surged. Growth in currency notes held by the public was much higher than the deposits made in banks. Read MoreSince the end of the month, currency held by the public rose 8.2% compared to a 4.1% increase in term deposits. People are increasing cash holding just to fight the uncertain future, while lenders are restraining from lending on the presumption of reduced economic demand in the future. A rise in money supply usually is seen as a leading indicator of growth in consumption and business investment but rise this time is unlikely to bolster either, analysts said. 

IMF predicts a significantly deeper recession for virus hit the global economy
The International Monetary Fund (IMF) warned that the global economy is facing an even deeper downturn than it previously projected as the coronavirus pandemic continues to sow uncertainty and businesses around the world are struggling to operate amid the virus. It expects the global gross domestic product to shrink 4.9% this year, more than 3% predicted in April. For 2021, the fund sees a growth of 5.4%, down from 5.8%. Read MoreIt noted that even as businesses began to reopen, voluntary social distancing and enhanced workplace safety standard were weighing on economic activity and mass job cuts and business closure means that the world economy will recover much more slowly with the IMF projecting 5.4% global growth in 2021, far below its pre-pandemic projections.  Overall IMF expects that the cumulative loss of total output for the global economy this year and next year will top $12 trillion.  

FM Nirmala Sitharaman irked over non-essential imports from China
After the brutal face-off between India and China, there is a nationwide rage to boycott Chinese goods. Finance Minister Nirmala Sitharaman said that there is nothing wrong with imports that help to boost production and provide job opportunities but importing non- essential goods such as Ganesh idols is unacceptable. Read MoreShe also highlighted that if rather than importing household products of everyday use they are made locally in India, they would support self-reliance. Self-Reliant India does not mean that imports should not be done at all such as importing raw materials that were not available in the country and needed for industries was not wrong, she said addressing the workers via a virtual link.  She also undermined that self-reliance was practiced in India for long, but the trend changed, and we started to depend on foreign nations to import goods. 

The US sent $1.4bn in stimulus checks to dead people
The Trump administration sent almost $1.4bn in coronavirus stimulus payments to dead people, according to its watchdog report. In the report released, the US Government Accountability Office (USGAO) said almost 1.1 million dead people received payments of about $1200 each, as of 30 April. The payments were part of about $3 trillion of the economic relief approval by congress in March and April. The GAO said the problem relates to the way data on who is deceased is made accessible to government agencies. Read MoreThe Internal Revenue Service (IRS) has access to the Social Security Administration’s death records, but the arm of the Treasury Department that issued the stimulus payments does not. As part of its report, the GAO recommended that Congress give the Treasury Department access to that death data. It also recommends that the IRS consider its options for notifying the people about how to return payments they received quickly.

Finance

India slips to 77th rank, accounts for 0.06% of all foreign funds with Swiss banks
India has moved down three places to 77th rank from 74^th rank last year in terms of money parked by its citizens and enterprises with Swiss banks at the end of 2019, while the UK has retained its top position, as per the latest data from Swiss National Bank (SNB). According to reports funds parked by Indian individuals and enterprises in Swiss banks, including through India-based branches, fell by 5.8% in 2019 to 899 million Swiss francs (Rs 6,625 crore). Read More

Zimbabwe suspends stock exchange, mobile payments over ‘economic sabotage’
Zimbabwe suspended all monetary transactions on mobile-phone platforms and halted trade on the local stock exchange in an effort to stabilize its currency. The measures come two days after President Emmerson Mnangagwa warned his government will tackle “malpractices” that he said has undermined his government’s efforts to end an economic crisis. Read MoreThe government spokesman Nick Mangwana said the move was part of efforts to arrest the slide of the Zimbabwe dollar, which has sharply devalued since its reintroduction last year after a decade of dollarization. Inflation is at 786%, its recently revived currency has collapsed and the World Bank estimates the economy will shrink as much as 10% this year. The decision to suspend mobile payments will hit the economy hard as more than 80% of all transactions are conducted on phones due to a shortage of banknotes, according to the central bank.

UCO Bank Eyes Non-Oil import from IRAN to sustain Rupee-Rial Trade
As India is no longer importing oil from Iran, India’s UCO bank is looking at other avenues to keep the rupee payment mechanism with Iran alive. In the wake of US sanctions on Iran, India cannot engage in dollar-denominated trade with Iran. Hence, a special rupee-rial trade mechanism has been put in place. MD and CEO of UCO Bank, A K Goel says that the lender is in talks with importers to use the mechanism for other imports. Read MoreHe said that in the last few months, there has been no fresh inflow into the payments account. And they are exploring the opportunity to import other commodities, like fresh fruits. Their role here is not only settlement but, also to facilitate trade between India and Iran. According to government data, imports from Iran stood at nearly $13 billion in 2018-19, which came down to nearly $1.35 billion between April and January in 2019-20. 

RBI extends enhanced borrowing limit under MSF till 30 September
The Reserve Bank of India has decided to extend the validity of the enhanced borrowing limit provided to banks under the marginal standing facility (MSF) scheme till 30^th September 2020 to meet their liquidity shortage due to the ongoing economic crisis due to the pandemic. As a temporary measure, the RBI had increased the borrowing limit of scheduled banks from 2% to 3% of their Net Demand and Time Liabilities (NDTL) with effect from March 27, 2020. Read MoreUnder the MSF, banks can borrow overnight funds at their discretion by dipping into the Statutory Liquidity Ratio (SLR). This relaxation, which was granted till June 30, 2020, has now been extended till September 30. The marginal standing facility rate currently stands at 4.25%. The RBI has also extended the relaxation on the minimum daily maintenance of the Cash Reserve Ratio (CRR) at 80% for a further period of three months till September 25, 2020.

Government launches 7.15% floating-rate bonds
The government has announced the launch of a seven-year Floating Rate Savings Bonds 2020 (Taxable) scheme from July 1, giving an opportunity to invest in secured government instruments. As per RBI, the interest will be paid semi-annually on January 1 and July 1 every year, the first reset being on January 1, 2021, at an interest of 7.15%. There is no option to pay interest on a cumulative basis i.e. having an option to receive it at maturity. Read MoreThe minimum investment starts from Rs 1,000 and in multiples of Rs 1,000, thereof. These bonds will not be eligible for trading in the secondary market and cannot be used as collateral for loans from banks, financial institutions, NBFCs, etc. The new scheme has been brought in place of 7.75% Savings (Taxable) Bonds, 2018, which was withdrawn from the close of the banking business on May 28, 2020.