QBiz: 9% Increase in FDI; ED To Initiate Probe Against Softbank

Your roundup of important business stories.

SoftBank CEO commits big funding to grow startup promise in India. (Photo: AP)

1. FDI Inflows Rose 9% to Record $43.5 Billion in Fiscal Year 2016-17

Foreign direct investment (FDI) equity inflows into India rose 9% to a record $43.5 billion during fiscal year 2016-17, at a time when global FDI inflows are falling.

In the January-March quarter, however, FDI equity inflows fell 28% to $7.6 billion, data released by the department of industrial policy and promotion (DIPP) on Friday showed.

Mauritius remained India’s top source of FDI equity inflows at $15.7 billion, followed by Singapore at $8.7 billion during 2016-17. The services sector continued to attract the highest investment at $8.9 billion, followed by telecommunications, which attracted $5.6 billion.

(Source: Livemint)

2. Come GST, Which Services Will Burn a Bigger Hole in Your Pocket?

The Goods and Service Tax (GST) rates on services such as telecom, hospitality and cinema came as a surprise to the industry players.

While the 18 percent tax rate on banking and financial services was largely expected, the same tax incidence on the telecom industry was met with disappointment. The biggest pushback was seen from players in luxury hotel services which will bear the highest tax incidence of 28 percent under the new indirect tax regime.

This was an opportunity for the government to simplify the service tax rates, said Bipin Sapra, a tax partner for EY India to BloombergQuint. “There will definitely be some transaction issues because of intricacies of the rates announced. Even the 15 percent to 18 percent jump for sectors like telecom will be a challenge initially,” he added.

(Source: BloombergQuint)

3. ED Yet to Initiate Probe Against SoftBank and Executives

The Enforcement Directorate, the country’s top economic intelligence agency has not yet begun investigations into complaints filed against SoftBank, as well as one of its senior executives and a former top executive, by representatives of some shareholders in the Tokyo-based company.

A senior official with the ED said that while the agency is aware of the allegations, no investigations have been initiated yet. “These allegations pertain to actions of individuals, but what we may be interested in, is if the said companies have violated any foreign direct investment (FDI) rules,” said the official.

(Source: The Economic Times)

4. 7th Pay Commission Report: Updates on Revised Allowance May Be Announced Next Week

Seventh Pay Commission report: Are you a Central government employee and have been waiting for updates on higher allowances recommended by the 7th Pay Commission report? Relax, your wait is going to be over soon.

According to various media reports, updates on revised allowance structure for Central government employees are expected to be announced in the coming week. The Empowered Committee of Secretaries is likely to meet soon before presenting the report to the Union Cabinet.

The Committee on Allowances – headed by Ashok Lavasa, Finance Secretary and Secretary (Expenditure) and constituted by the Ministry of Finance to examine the 7th CPC recommendations on allowances – had submitted its report to Union Finance Minister Arun Jaitley in the last week of April.

(Source: Financial Express)

5. Fix Corporates First to Lift Credit Flow, Says Viral Acharya

Reserve Bank of India (RBI) Deputy Governor Viral Acharya said without fixing the corporates, it would not be possible to get credit going in the economy.

The deputy governor made this comment while discussing what exactly could have crippled the economy – was it lack of credit supply or lack of credit demand?

"Is it the bank lending channel which caused the economy to slow down, because the supply of credit from banks affected by non-performing loans is not too high? In our case, in a large measure, it's probably the public sector banks which have ended with the large proportion of stressed assets which are under-provisioned for, or is it the fact that it is really about the underlying corporates?”Acharya asked, while making a presentation on Economic Data Generation and Information Analytics at the Indian Chamber of Commerce Banking Summit here.

(Source: Business Standard)

6. SBI to Use Bankruptcy Code More Frequently to Resolve Bad Loans

Banks will use the Insolvency and Bankruptcy Code more frequently to try and resolve stressed assets, Arundhati Bhattacharya, chairman of State Bank of India (SBI) told BloombergQuint in an interview on Friday.

Bhattacharya, who spoke after the lender released its fourth quarter earnings, said the bank will remain focused on the resolution of bad loans in fiscal 2018, having completed the process of identifying stressed loans over the last two years.

Stressed assets in the banking sector have risen to nearly Rs 10 lakh crore but resolution has remained slow. SBI alone has gross bad loans of Rs 1.12 lakh crore, which account for 6.9 percent of the bank’s total advances. Fresh slippages, or new loans turning bad, stood at Rs 9755 crore in the fourth quarter. Recoveries and upgradation of bad loans were much lower at Rs 1203 crore and Rs 1002 crore respectively.

(Source: BloombergQuint)

7. States Asked to Complete NREGA FY17 Audit by September

The Centre has asked all states to finish the financial audit of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) for 2016-17 by September this year so that the remaining amount allocated to the scheme can be released early.

Delay in the financial audit of MGNREGS, the government’s flagship rural job guarantee scheme, is the key reason why several states have not been getting funds under the scheme on time. For instance, the Centre could transfer funds for 2016-17 to Bihar only in March this year because the state provided the audit report late.

(Source: The Economic Times)

8. Six Months Needed for GST Stability, Gains in 3 Yrs: Crisil

Domestic ratings agency CrisilBSE 1.51 % today said it will take six months for industrial stabilisation after GST is introduced but gains of the biggest indirect tax reform will take up to 3 years to materialise.

"Industry stabilisation, under the new tax regime, will take a couple of quarters. However, the benefits of GST on business practises and company strategies will be seen only in the medium term of 1-3 years," its research wing said.

Of the two, the efficiency in goods will be higher than that in services, it said in a note.

(Source: PTI)

9. Tata Power Swings Into The Red On One-Time Docomo Hit

Tata Power Company Ltd. reported a loss in the three months ended March on the back of a one-time hit from parent Tata Sons Ltd.’s settlement with Japanese telecom company NTT Docomo Inc.

The power generation company reported a Rs 262.4 crore loss compared to a Rs 21.6 crore profit in the same quarter last year, according to its stock exchange filing. Analysts tracked by Bloomberg had expected the company to report Rs 462 crore profit. Revenue declined 1.8 percent to Rs 7,166.8 crore, below the consensus estimate of Rs 8,121 crore.

Tata Power took an exceptional expense of Rs 651.4 crore for the arbitration award to Docomo. In April, the Delhi High Court had allowed Tata Sons to pay the Japanese firm $1.17 billion, to pave the way for the latter’s exit from the joint venture firm Tata Teleservices Ltd. Tata Power holds 7 percent stake in Tata Teleservices.

(Source: BloombergQuint)