QBiz: Record Low Inflation; RBI Draws Debtors List With Bad Loans

QBiz: Top business news from across the country.

After scrapping Rs. 500 and Rs. 1,000 notes, the government said that high-value transactions will come under the tax department’s scanner and that there will be no immunity for cash deposits made. (Photo: Reuters)

1. Record Low Indian Inflation Adds Pressure for Patel to Cut Rates

If India’s central bank wasn’t feeling the pressure to cut interest rates after last week’s imbroglio with the government, it may be now.

Consumer price inflation in the $2 trillion economy slid to fresh record low of 2.18 percent in May, figures showed on Monday, below the 2.4 percent estimate in a Bloomberg survey of economists. The data come just five days after the Reserve Bank of India, led by Urjit Patel, refrained from cutting interest rates at its latest policy announcement, provoking a swift rebuke from Prime Minister Narendra Modi’s chief economic adviser.

(Source: BloombergQuint)

2. Debtor List Being Drawn up for Resolution Under Insolvency Law

Finance Minister Arun Jaitley said the Reserve Bank of India (RBI) is drawing up a list of debtors with bad loans that need to be resolved under the insolvency law.

“Under the new ordinance issued, the RBI is at a fairly advanced stage of preparing a list of those debtors where a resolution is required through the Insolvency and Bankruptcy Code (IBC) process,” he said after reviewing the quarterly performance of state-run lenders and financial institutions.

The finance minister also noted that the government is “actively working” toward consolidation of public sector banks (PSBs) but refused to provide details, saying this was price-sensitive information.

(Source: Economic Times)

3. Ministers' Panel Starts Hearing Case for Bailing out Debt-Laden Telecom Firms

An inter-ministerial panel led by a senior official in the Telecom Ministry started its hearings on a possible bailout of debt-laden telecom companies even as most telecom firms increased the pitch of their demand for one.

India’s telcos are loaded with debt – around Rs 4.85 trillion at the end of December 2016 – and face the burden of payments due to the government for spectrum (close to Rs3 trillion). They also face intense competition, with the average revenue per user (ARPU) of most falling sharply since the launch of Reliance Jio Infocomm Ltd in September 2016.

The telcos want major cuts in various statutory payments such as the spectrum user charge and the interconnect charge and a liberal payment schedule, allowing them to pay for spectrum over 20 years instead of 10, according to a telecom industry executive who asked not to be identified.

(Source: Livemint)

4. Bad News for Flyers: Airlines May Soon Push up Fares to Lighten GST Load

The Goods and Services Tax (GST) may not provide a tailwind to India’s aviation industry, which anticipates fares could increase to help offset the rising cost of operations under the new levy.

“Under GST, airlines will be taxed for importing spares for their use and on aircraft lease rentals, and these are not being taxed in the current regime. Any new tax on the aviation industry, which operates under thin margins, may drive fares higher,” said a senior airline executive, who did not want to be identified.

(Source: Economic Times)

5. GST: Single Rate on Cinema Exhibition, Plead Multiplexes

The goods and services tax (GST) cut for movie tickets below Rs 100 by the GST Council on Sunday has come as a breather for largely single-screen operators. From 28 per cent, this rate was reduced to 18 per cent.

Close to 75 per cent of the 8,500-9,000 screens in India are single ones i.e. 6,000 to 6,500.

Multiplex operators are disappointed. The revenue from tickets priced above Rs 100 is higher than that from tickets below Rs 100. While PVR and Inox Leisure, two of the country's leading multiplex operators, drive six to seven per cent of their revenue from movie tickets priced below Rs 100, for Mukta A2 Cinemas (from the Mukta Arts stable), the revenue from tickets priced below Rs 100 is 20 per cent.

(Source: Business Standard)

6. Telecom Woes Due to Incumbents Not Investing in Equity, New Tech: RJio

Even as the incumbent telcos talk about decreasing profitability in business, the latest entrant on the block Reliance Jio feels that telecom continues to remain one of the highest profitable sectors with an Ebitda margin of 30 per cent and the 'so-called' financial stress has been caused by the old operators themselves as they did not invest in equity as well as in new technology but kept on taking more debt.

Jio, which presented its views while meeting the inter-ministerial group (IMG) today, is believed to have said though incumbent operators have made significant returns over the years, they have not invested in equity. Jio said the financial stress has been caused due to aggressive financing strategies and not investing in new technologies, even though the sector fundamentals remain robust.

(Source: Business Standard)

7. Flipkart's Snapdeal Buy May Face Fema Bump

The anticipated acquisition of troubled online marketplace Snapdeal by its rival Flipkart will have to deal with Reserve Bank of India rules on foreign exchange and may have to be specially structured to protect the interest of Snapdeal shareholders.

Flipkart, the country’s largest ecommerce company which was valued at $11.6 billion after its last funding in April this year, will have to make sure that the acquisition does not violate rules under the Foreign Exchange Management Act (Fema), given that its holding company Flipkart Pvt Ltd is domiciled in Singapore.

(Source: Economic Times)

8. Now, Telcos Offer Insurance, Backup to Retain Customers

For Rs 49 Rs 79 a month, your telecom operator will pick up a broken phone from your home and repair its damages, provide anti-virus to protect your handset and data from any attack, give a cloud backup and even give you an insurance cover that can go as much as Rs 50,000 for a year.

No. 1 telco Bharti Airtel and second ranked Vodafone India offer such benefits under their Airtel Secure and Vodafone Red Shield, respectively. Industry experts say such offers are aimed at increasing stickiness of subscribers -especially, higher paying ones -at a time when telcos are battling brutal price competition post the entry of Reliance Jio.

(Source: Economic Times)

9. India's Industrial Output Grows 3.1% in April

India’s factory output picked up for a second straight month in April after the government revised the base year to calculate the Index of Industrial Production (IIP) last month.

Industrial production in April rose 3.1 percent compared to a year ago, according to data from the Ministry of Statistics and Programme Implementation. IIP had risen 2.7 percent in March. For the April-March 2016-17 period, industrial output grew 5 percent on a year-on-year basis.

The trajectory of industrial output, however, tells a story of growth which has been on the decline since last year. This is consistent with the gross domestic product (GDP) data released last month which showed a decline in growth to 7.1 percent in fiscal 2017 compared to 8 percent in the previous year.

(Source: BloombergQuint)