There are two aspects to 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 Seventh Edition we are covering the following news:
1. Zoom faces a Privacy and Security Backlash
2. All you need to know about Sovereign Gold Bond Scheme: 2020-21
3. Government approval necessary for FDI from China and neighbouring countries
4. Donald Trump haults the funding of World Health Organisation
5. The Concept of Helicopter Money: Explained
6. What could be Zomato’s offer to acquire Grofers?
Over the past month, the teleconference software Zoom has seen explosive growth amidst the quarantine lifestyle. The moment of huge growth has seen Zoom rocket to the top of iOS and Android app stores as people gather around it for yoga classes, school lessons, and virtual nights out. Even the UK government has been holding daily cabinet meetings over Zoom. But that growth has also come with increased scrutiny and a slew of uncovered security glitches.
With all this extra attention, Zoom is now facing a huge privacy and security backlash as security experts, privacy advocates, lawmakers, and even the FBI warn that Zoom’s default settings aren’t secure enough. Zoom now risks becoming a victim of its own success. Some major concerns regarding the Zoom App are:
- Questionable Routing: There are questions about where Zoom is sending the data it collects from your computer. Zoom was found to be sending data to Facebook, even if you weren’t logged in to a Facebook account. Zoom also apologized this month for mistakenly routing traffic through China, where the internet is heavily monitored by the government. Most tech companies operating in China have strict separations between domestic and international online traffic.
- Dubious encryption: That monitoring would be less of a concern if Zoom were encrypted end-to-end, as the company claimed in marketing materials. But it admitted to The Intercept that Zoom did not use E2EE for video calls. Zoom uses suspicious encryption (known as transport encryption) but not the more secure end-to-end type. Some of the confusion stems from defining what an “end” is. Zoom coded the end as its servers, acting as middlemen between users.
- Zoombombing: There’s also the rash of “Zoombombing” that has gone on. People are guessing or finding Zoom meeting ID numbers online and entering uninvited to leave disruptive comments or share disruptive media using Zoom’s screen-share feature. Finding open meetings, which have IDs from nine to 11 digits, is relatively simple and has already been automated. Until a patch issued this week, the meeting ID would often be highly visible in screenshots.
The Ministry of Home Affairs has also issued an advisory stating that ‘Zoom’ app for videoconferencing is not a ‘safe platform’. The Cyber Coordination Centre (CyCord), under the Union Ministry of Home Affairs (MHA), has issued an advisory on secure use of ZOOM Meeting Platform by private individuals. This advisory state that the platform is not for use by Government officers/officials for official purposes.
Zoom may well be forced to tighten up the very parts of its app that make it so appealing for consumers and businesses alike in the coming months. The company now faces some tough decisions on how to better balance its default settings, user privacy, and ultimately its ease of use.
The Reserve Bank of India (RBI), after consultation with the government, recently announced the issue dates of the sovereign gold bond (SGB) scheme 2020-21. The first tranche (2020-21 Series I) for subscription will open on April 20 and close on April 24. The bonds will be issued on April 28. The sixth tranche (2020-21 Series VI) has been scheduled for August 31-September 4.
In view of this, let’s understand what is SGB and how it works:
- SGB is a government-run scheme that allows gold investments in non-physical form. It comprises government securities denominated in gold wherein investors are required to pay the issue price in cash. The bonds are redeemed in cash on maturity. It bears interest at the rate of 2.5 percent per annum on the amount of the initial investment.
- These bonds are sold through scheduled commercial banks (except small finance banks and payment banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd, according to RBI. These are restricted for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions. The SGBs are denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
- The issue price of these bonds is fixed in Indian rupee on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Ltd for the last 3 working days of the week preceding the subscription period. The tenor of the bond is for a period of 8 years with exit option after fifth year to be exercised on the interest payment dates.
The minimum permissible amount allowed for investment in SGB is one gram of gold. The maximum limit of the subscription is four kilograms for individuals and HUFs, and 20 kilograms for trusts and similar entities per fiscal year (April-March), which is notified by the government from time to time.
The sovereign gold bond scheme was launched in November 2015 with an objective to reduce the demand for physical gold and shift a part of the domestic savings — used for the purchase of gold — into financial savings.
India has clamped down on investments, making prior government clearance mandatory for all forms of investments, even indirect ones, for all countries sharing land border, with China being the prime target. Until now, a non-resident entity or a foreign investor could invest in India, subject to FDI rules, except in sectors which are prohibited. However, countries such as Bangladesh and Pakistan could invest only after government approvals and only in select sectors. But now others like Nepal, Sri Lanka, Bhutan, Myanmar and China, all would require a government nod for investments.
- The Department for Promotion of Industry and Internal Trade (DPIIT) has said that the revision of the FDI policy is meant to curb ‘opportunistic acquisitions’ of Indian companies which are hit due to the current COVID-19 pandemic.
- People’s Bank of China (PBOC) had raised its stake in HDFC, the home lender from 0.8% to 1.01% in the March quarter through open market purchases. This led to many voicing concerns that India’s important companies could be susceptible to take over from foreign investors as their valuations have been hit given the correction in equity markets because of the pandemic and the consequent lockdown.
- The total current and planned Chinese investment in India has now crossed $26 billion, according to estimates in the March 2020. It has increased 5 folds since 2014. China ‘s footprints in Indian business market have been increasing since then. While an economic crisis in the country would have given a perfect opportunity to China to take over vulnerable domestic firms. But this policy protects them now.
Globally, transactions by Chinese firms and institutions have come under scrutiny recently since the assets are being purchased at low valuations. Nations such as the US, Japan and Australia have already placed restrictions on Chinese companies buying assets.
US President Donald Trump stunned world leaders and health experts on when he announced he was halting funding to the World Health Organization, in the middle of the global coronavirus pandemic. He first accusing the WHO of mismanaging the spread of the novel coronavirus, and of not acting quickly enough to investigate the virus when it first emerged in China in December 2019. Of all the countries, the US is by far the biggest donar. The US’ donations make up 14.67% of all voluntary contributions given globally.
- These funding cuts may cause the WHO to go bankrupt in the middle of a pandemic. That might mean the WHO has to fire staff, even as they are trying to many small countries save lives. It will also mean the WHO is less able to coordinate international efforts around issues like vaccine research, procurement of personal protective equipment for health workers and providing technical assistance and experts to help countries fight the pandemic.
- More broadly, these are cuts for other global health initiatives coordinated by the WHO, it will likely cause people in low income countries to lose access to vital medicines and health services. Lives will be lost. Countries specially in the global south, will suffer a lot like Africa. Other countries like India neither has the economic and hard power nor the expertise to drive global outcomes, regardless of how much rhetorical power projection the government might indulge in.
- While WHO is questioned time and again, it still can’t be denied the work it has done in eradicating some diseases. WHO needs funds now more than ever. This move by the US could jeopardise global efforts to stop the coronavirus pandemic. As the second largest donor of WHO, Bill Gates also said that it is as dangerous as it sounds.
Skepticism has been aimed toward the WHO’s relationship with China, critics have questioned whether the WHO is independent enough, given China’s rising wealth and power. Trump may in fact give China more influence over WHO by cutting US funding. Cutting funds at a time of pandemic could be decision that might be regretted later, as it would have a damaging effect worldwide.
With no quick escape in sight for COVID ravaged economies, authorities the world over are going back to the drawing board to find strategies to deal with this crisis. One such strategy doing the rounds is ‘helicopter money’. It basically means non-repayable money transfer from the central bank to the government. It seeks to lure people into spending more and thereby boost the sagging economy. Understanding the concept of Helicopter Money in current scenario, given questions stand important to be answered:
- What is helicopter money? This is an unconventional monetary policy tool aimed at bringing a flagging economy back on track. It involves printing large sums of money and distributing it to the public. American economist Milton Friedman coined this term. It basically denotes a helicopter dropping money from the sky. Friedman used the term to signify “unexpectedly dumping money onto a struggling economy with the intention to shock it out of a deep slump”. Under such a policy, a central bank “directly increases the money supply and, via the government, distributes the new cash to the population with the aim of boosting demand and inflation.”
- Why is helicopter money in news now? Telangana chief minister KC Rao suggested that helicopter money can help states comes out of this morass. He asked for the release of 5% funds from GDP by way of quantitative easing (QE). Rao belives that to counter (economic crisis) a strategic economic policy is needed and RBI should implement the policy of helicopter money to facilitate the states and financial institutions to accrue funds.
- Is helicopter money the same as quantitative easing? Quantitative easing also involves the use of printed money by central banks to buy government bonds. But not everyone views the money used in QE as helicopter money. It sure means printing money to monetise government deficits, but the govt has to pay back for the assets that the central bank buys. It’s not the same as bond-buying by central banks “in which bank-owned assets are swapped for new central bank reserves.” Helicopter money is also different from a central bank directly financing the debt of a government.
The economic impact of the 2019–20 coronavirus pandemic in India has been hugely disruptive. World Bank and credit rating agencies have downgraded India’s growth for fiscal year 2021 with the lowest figures India has seen in three decades since India’s economic liberalization in the 1990’s.
In what potentially would become a million-dollar deal to consolidate the online delivery and grocery business, Zomato is reportedly in talks with the e-grocer Grofers for a merger. Grofers, which has seen heightened demand in the past few weeks on the back of the Covid-19 pandemic, is expected to be valued at around $750 million.
While nothing has been officially disclosed, the development comes after Zomato and Grofers recently partnered for the delivery of essentials, thereby meeting the surge in demand for grocery and food essentials. Let’s see why Zomato might be looking forward to acquiring Grofers:
- If the deal goes through, Zomato would be able to tap into the wide range of private labels that Grofers manufactures, while leveraging its last-mile delivery expertise to rise to the top in the grocery space which is presently dominated by Alibaba’s BigBasket.
- With an eye on Grofers, the homegrown food delivery giant is aiming for a bigger pie in this rapidly growing segment. The proposed deal would take Zomato on par with Swiggy, which entered hyperlocal delivery space with the acquisition of milk delivery startup Supr Daily in 2018 and last year with its twin hyperlocal services: Swiggy Stores and Swiggy Go. It also expanded its grocery deliveries to over 125 cities through tie-ups with local kirana stores as well and FMCG majors.
- In the low margin grocery delivery segment, fresh funding from SoftBank will help Zomato battle its rivals as it is likely to pump $100million dollars in Zomato. Interestingly, SoftBank is also a significant shareholder in Uber and is now an investor in Zomato after the UberEats India sale. The merger will also help the company to take on deep-pocketed players such as ecommerce players Flipkart, Amazon and JioMart.
Grofers, which has been in the thick of demand from consumers staying put in homes over the past few weeks due to the Covid-19 pandemic and also a bright future for the company can been seen. Expansion to adjacent businesses is the only way to grow in such a time. If this bold acquisition is made by Zomato what all will it change for Zomato, that only time will tell.