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-Third 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

Reliance breaks into the top 50 most valued companies globally, ranks 48

Billionaire Mukesh Ambani’s Reliance Industries Ltd has broken into the top 50 most valued companies globally after it became the first company with a market capitalization of over Rs 13 trillion. The oil-to-telecom conglomerate is ranked 48th in market cap globally, according to stock market data. Read More Globally, Saudi Aramco is the company with the highest market cap of $1.7 trillion, followed by Apple, Microsoft, Amazon, and Alphabet. Reliance is the 10th highest m-cap company in Asia. China’s Alibaba Group is ranked 7th globally. The only other Indian company in the top 100 firms is Tata Consultancy Services. As per its closing price of Rs 2,170.75 on the BSE, TCS has an m-cap of Rs 8.14 trillion or about $109 billion.

 

Wipro to acquire 4C for 68 mn euros, expected to be close by Sept-end
IT major Wipro on 23rd July said it will acquire 4C, one of the largest Salesforce partners in the UK, Europe, and the Middle East, for 68 million euros (about Rs 589 crore). Established in 1997 with its headquarters in Mechelen (Belgium), 4C has delivered over 1,500 projects for more than 500 customers. Read MoreWith over 350 employees based out of local offices in London, Paris, Brussels, Copenhagen, and Dubai, 4C has a Salesforce practice in the UK, France, Benelux, the Nordics, and United Arab Emirates regions. The acquisition is subject to customary closing conditions and is expected to be closed in the quarter ending September 30, 2020, the filing added. 4C will be consolidated as part of Wipro’s Salesforce practice, which provides solutions globally around multiple Salesforce clouds and its ecosystem of products.

Britannia to pump in Rs 700 crore in 2.5 years
Biscuits major Britannia Industries has its plate full, catering to in-home consumption and rural demand. But the company is getting future-ready, lining up new investments and putting in place its new product pipeline. Varun Berry, managing director, Britannia, said that the firm was looking to double its capital expenditure (CAPEX) from Rs 300 crore to Rs 600 crore in two years, led by investments in new plants and categories. Read More The company reported 22% volume growth in the April-June quarter (Q1) of FY21, beating Street estimates by a wide margin. Besides new plants, Britannia, which gets 80% of its sales from biscuits, will set aside Rs 300 crore for expansion into new categories and products, including yogurts, beverages, fresh dairy, immunity-boosting snacks, and biscuits. Trial runs of its previously announced products, such as croissants and salty snacks, will begin in about six months.

 

Voda-Idea to get Rs 833 cr refund as SC rejects govt plea against HC order
In a relief to Vodafone Idea, the Supreme Court (SC) on 22nd July dismissed the petition filed by the finance ministry against the Bombay high court order that had directed the revenue department to refund Rs 833 crore to the cash-strapped telecom company. The refund was held by the income tax (I-T) department citing possible future demands. Read More Earlier this month, the high court had ruled that such a power did not exist at the time of the assessment year 2014-15, to which the case pertained. The revenue department filed a special leave petition against the high court order in the apex court. The refund amount increased from Rs 733 crore to Rs 833 crore after rectification. This relief is, however, a drop in the ocean for Vodafone Idea, which is grappling with a huge AGR (adjusted gross revenue) payment. The SC has ordered the company to pay Rs 50,399 crore as AGR payments, according to the assessment done by the Department of Telecommunications (DoT).

 

Chinese handset makers lost market share in Q2 amid border clash, Covid-19
In a rare break in the trend for the past five years, Chinese handset firms lost a significant market share in the local smartphone market after clashes on the border and at the same time the distrust among people for Chinese products. Read MoreWhile the leading brands continued to gain share, fringe players had to bear the brunt of supply chain constraints and growing anti-China sentiments to some extent. Despite poor business during the quarter due to the lockdown with the ongoing pandemic situation everywhere, the market quickly recovered in June, backed by solid offtake for Samsung and Xiaomi. And for the first time, India’s smartphone user base crossed the 500-million mark – inching closer towards China (851 million).

Economics

Arab economies to shrink by 5.7% amid coronavirus fallout, says UN report
The UN’s Economic and Social Commission for Western Asia expects some Arab economies to shrink by up to 13%, amounting to an overall loss for the region of $152 billion. Another 14.3 million people are expected to be pushed into poverty, raising the total number to 115 million a quarter of the total Arab population, it said. More than 55 million people in the region relied on humanitarian aid before the COVID-19 crisis, including 26 million who were forcibly displaced. Read More The pandemic will exact a heavy toll on Arab countries, causing an economic contraction of 5.7% this year, pushing millions into poverty and compounding the suffering of those affected by armed conflict, a UN report said. The Gulf countries hit hard of low oil prices and Middle-income countries like Jordan and Egypt have seen tourism vanish overnight and a drop in remittances from citizens working abroad during the pandemic.

 

India can attract global supply chains away from China: Mike Pompeo
In the virtual keynote address to the annual “India Ideas Summit” of the US India Business Council (USIBC), Pompeo said it was important that democracies like the US and India work together, especially as they see more clearly than ever the true scope of the challenges posed by the Chinese Communist Party. Read MoreHe also said India has a chance to attract global supply chains away from China and reduce its reliance on Chinese companies in areas like telecommunications, medical supplies, and others. “India is in this position because it has earned the trust of many nations around the world, including the United States”, Pompeo was quoted as saying. Pompeo’s remarks come at a time when worsening tensions between the U.S. and China are threatening global trade ties prompting companies and governments to seek to move resources out of the world’s second-largest economy to diversify supply chains. India is looking to establish itself as a regional manufacturing hub and attract companies seeking to move their supply chains out of China.

The right time for fiscal push when COVID-19 vaccine is available: Chief Economic Advisor
Recently, scientists at Oxford University said they have had encouraging results in early trials for a vaccine that seems to be safe and induces an immune reaction. However, the experimental vaccine is still at a trial stage. Chief Economic Advisor (CEA) Krishnamurthy Subramanian said the right time for a fiscal push from the government’s side will be once the vaccine for COVID-19 is available, at a webinar organized by the Federation of Indian Chambers of Commerce & Industry (FICCI). Read MoreHe said the government is willing to do whatever is necessary to push consumption but pointed out that the “question is not about if, but about when”. He pointed out that fiscal policy is important, but timing is very crucial as, at a time of uncertainty, people were unwilling to spend. He cited higher balance data from Jan Dhan accounts to argue that people are more inclined to save than spend, thus flattening demand. He also laid emphasis on the role of the banking sector in the economy which is holding back the growth. The third-largest economy cannot be built by a banking sector low on the scale. In the top 100 global banks list, India has only one bank while China has 18 banks. India lags in terms of large banks, a lot of work needs to be done.

Raghuram Rajan says monetization by RBI has a cost and cannot be everlasting
Former RBI Governor Raghuram Rajan has said that the government’s plan to monetize debt using banks’ liquidity with the Reserve Bank of India’s help may not be sustainable. Since the banks have surplus liquidity at present, the government may ask the RBI to buy sovereign debt by borrowing from banks at the reverse repo rate. However, once the economy rebounds, such an arrangement may not work. Read MoreThere are limits to monetization and the process can go long only for a limited period of time. Meanwhile, he said the central bank has been expanding its balance sheet and buying government debt on the back of excess liquidity amid the economic slowdown but cautioned that this comes at a cost and cannot be a lasting solution. Rajan said once economies like India open up fully, a lot of damage wrecked on the corporate sector by the lockdowns will be uncovered gradually, these costs will be transferred to the financial sector and the government has to ensure that lenders are adequately capitalized to tackle the situation and not let this slip into becoming a financial sector problem. 

Government planning to offer production linked incentives to boost manufacturing
The government is working on offering production linked incentives for up to five sectors to boost domestic manufacturing, a top finance ministry official said to bolster the efforts to attract new investments in the coronavirus-stricken economy. Asia’s third-largest economy is expected to contract by as much as 10 percent in the current fiscal year. Read MoreThe government has announced a raft of measures including direct food subsidy to nearly 810 million people and credit guarantees of 3 trillion rupees ($40.17 billion) on loans to small businesses. Tarun Bajaj, economic affairs secretary at the Ministry of Finance, told a virtual conference that incentives would be offered to sectors to push manufacturing and help struggling industries. But he didn’t specify the sectors that may be eligible for incentives. As the earlier government announced production linked incentives for large scale electronic goods makers for five years, to attract investments in mobile phone manufacturing and electronic component units as it was expecting a “V” shape economic recovery beginning next fiscal year.

 

 

Finance

Banks Non-performing assets may skyrocket in coming months
A stress test conducted by the Reserve Bank of India says alarm bells are ringing for the Indian economy. The Covid-19 crisis could push the problem of Indian banks’ gross bad loans to their highest in nearly two decades. Read MoreFinancial Stability Report showed that the gross non-performing assets (NPA) ratio of all SCBs may increase from 8.5% in March 2020 to 12.5% by March 2021 under the baseline scenario. It may even rise to 14.7% under the worst-case scenario. The results of the RBI stress tests show that public sector banks could see their gross NPAs rise to 15.2% by March 2021 from 11.3% a year earlier in the baseline scenario. In the “very severe stress” scenario, this could go as high as 16.3%. Private banks and foreign banks would also see a spike in their bad loans because of the worsening macroeconomic factors.

India extends $ 400 mn currency swap facility to Sri Lanka
The Reserve Bank of India has signed necessary documents for extending a USD 400 million currency swap facility to the Central bank of Sri Lanka to boost the island nation’s draining foreign exchange reserves due to the coronavirus pandemic, the Indian High Commission said. Read MoreThis currency swap arrangement will remain available till November 2022 will help Colombo address the economic hardships caused due by the pandemic. The request from Sri Lanka came in the backdrop of the Sri Lankan economy, like many other countries, slowing down due to the COVID 19 pandemic. The increasing foreign exchange outflows in Sri Lanka has been resulting in loss of USD reserves and adding pressure on the Sri Lankan Rupee. While the Agreement for USD 400 million currency swaps under the SAARC framework is concluded, the bilateral swap request for USD 1.1 billion is being considered.


Rs 8 lakh crore excess cash in India won’t go away in a hurry, say strategists
Reserve Bank of India’s efforts to keep a lid on borrowing costs in Asia’s third-largest economy, India created more than Rs 8 lakh crore or $108 billion of excess cash in the banking system. Sponging away the extra money is not going to be easy. Bloomberg Economics expects a record $95 billion surplus on the balance of payments in fiscal 2021. That would largely be met by forex purchases to prevent the rupee from gaining further. Read More The central bank’s management of the liquidity glut came into focus this month when Governor Shaktikanta Das spoke about the need for a careful strategy to exit from the extraordinary monetary stimulus. He made it clear that it was not imminent. The situation has drawn parallels to late 2016 demonetization. RBI then began the open-market sale of bonds, mopping up about Rs 900 crore. This time around, the authority needs the excess liquidity to induce banks to absorb the government’s blowout bond supply.

 

Asian markets sink as U.S.-China tensions upward thrust, U.S. tech stocks tumble
The three major market indexes opened lower Friday morning on fears of growing tensions between the U.S. and China, as well as poor performances from major tech stocks. The S&P 500 was down nearly 1% to 3,204, the Dow was down 0.5% to 26,507, and the Nasdaq tumbled 2.2% to 10,236. Read MoreAlong with these Hong Kong’s Hang Seng index HSI, fell 1.9% while the Shanghai Composite SHCOMP, sank 2.3%, and the smaller-cap Shenzhen Composite slide 2.9%. China ordered the U.S. consulate in the western city of Chengdu closed, in retaliation for the U.S. closure of the Chinese consulate in Houston following allegations of spying on Friday.

Impact of Moratorium on Private NBFCs and HFCs Can Be Substantial: RBI reports
Impact of the loan moratorium on private non-banking financial companies (NBFCs) and housing finance companies (HFCs) can be substantial, with close to 50% of the aggregate assets under moratorium as of April-end. Read MoreRBI had announced a moratorium on repayment of loan till 31 may but it was extended for three more months. Based on the disclosures made by NBFCs/ HFCs, the assets under moratorium are dominated by wholesale customers and real estate developers, although retail portfolios in the micro-loans and auto loan segments have also been affected. The reports also flagged fresh liquidity concerns for NBFCs with their share of market funding falling ever since the IL&FS fiasco came to light. The stress test on NBFCs also revealed that up to one-fifth of the NBFCs may fail to comply with the minimum capital norm. Banks and market borrowings account for over 70% of the total outside liabilities of the NBFC sector.

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