QBiz: US Now India’s Top Trading Partner; 28% GST on Lotteries

Your daily round-up of the latest business news on QBiz.

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(Photo: Reuters)

1. US Surpasses China to Become India’s Top Trading Partner

The United States has surpassed China to become India’s top trading partner, showing greater economic ties between the two countries. According to the data of the commerce ministry, in 2018-19, the bilateral trade between the US and India stood at $87.95 billion. During the period, India’s two-way commerce with China aggregated at $87.07 billion.

Trade experts believe that the trend will continue in the coming years also as New Delhi and Washington are engaged in further deepening the economic ties.

An expert said that if the countries will finalise a free trade agreement (FTA), then the bilateral trade would reach different levels.

(Source: The Hindi Business Line)

2. Lotteries to Attract Uniform 28% GST Rate From 1 March

Lotteries will now attract a 28 percent uniform Goods and Services Tax (GST) from 1 March. This GST rate will be applicable to state-run and authorised lotteries from 1 March, according to a notification.

The GST Council, led by Finance Minister Nirmala Sitharaman, had in December last year decided to increase the rate as well as implement a single rate for lotteries. Buyers of tickets for lotteries would now have to shell out 28 percent.

According to the notification issued by the revenue department, the GST rate on the supply of lotteries has been amended to 14 percent and a similar percentage will be levied by the states. As a result, total GST on lotteries will increase to 28 percent.

(Source: Livemint)

3. Indian Firms’ Ability to Service Debt Improves

Corporate India’s ability to service interest improved slightly in the December quarter, a Mint analysis showed, possibly indicating the success of recent central bank measures to improve monetary policy transmission.

The ability of 329 companies on the BSE 500 index to repay loans, as measured by interest coverage ratio (ICR), rose to 3.79 times in the December quarter from 3.67 times in the September quarter and 3.77 times a year ago, Capitaline data showed.

The review excluded banks, financials, and oil and gas companies, which follow a different accounting procedure.

The uptick in ICR follows five repo rate cuts by the Reserve Bank of India (RBI) between February and October last year. The central bank reduced the key policy rate by 135 basis points (bps) in 2019 but has remained on pause since December.

(Source: Livemint)

4. Market to Remain Volatile Ahead of F&O Expiry; Investors Eye Trump Visit

Domestic market is expected to remain volatile ahead of derivatives expiry as investors await fresh cues from US President Donald Trump’s visit next week, according to analysts. Market participants will also be eyeing GDP estimates and infrastructure data, due to be released on Friday, 21 February.

Trump is scheduled for a two-day visit to India from 24 February. Analysts expect the broader market to continue to outperform benchmark indices on the buying interest by domestic institutions.

China is also expected to slowly limp back to normalcy as more factories resume work and the raw material constraints reduce, said Vinod Nair, Head of Research at Geojit Financial Services.

(Source: Financial Express)

5. Mega Bank Consolidation: Meeting 1 April Deadline Appears Challenging

With the deadline of 1 April fast approaching for the mega-merger of ten public sector banks, there seems to be more odd in the way of meeting the target date as a series of regulatory approvals and clearances are still pending, bank officials said.

Even after Cabinet approval to the proposed mega-merger plan, officials said, fixation of share swap ratio, shareholders consent, and other regulatory approvals are expected to take at least 30-45 days.

It is believed that the Prime Minister's Office (PMO) has sought details from these lenders about their financial projections for the next three to five years. Details in respect of NPAs, capital requirement, credit growth and cost savings on account of the mergers have been asked for, officials said. So, chances of the merger became a reality beginning next fiscal year seems a little unrealistic at the moment, a senior public sector bank official said.

(Source: Moneycontrol)

6. Bengal Jute Industry Hit by Fund Crunch as Banks Set Stringent Credit Norms

The jute industry in West Bengal is facing difficulties due to the dearth of working capital as banks have allegedly tightened the lending standards for the sector, officials said.

The lenders have been seeking "clear land papers" from mills' owners for extending loans, they said. At present, three major jute mills remained closed due to working capital crunch, industry sources said.

"Lack of banking credit has hit several jute mills in the state. Mill owners are not getting adequate credit to run their businesses. Banks make lending norms more stringent for land titles, which is used as collateral," a jute mill promoter told PTI on condition of anonymity.

(Source: Moneycontrol)

7. Indian Firms’ Ability to Service Debt Improves

Corporate India’s ability to service interest improved slightly in the December quarter, a Mint analysis showed, possibly indicating the success of recent central bank measures to improve monetary policy transmission.

The ability of 329 companies on the BSE 500 index to repay loans, as measured by interest coverage ratio (ICR), rose to 3.79 times in the December quarter from 3.67 times in the September quarter and 3.77 times a year ago, Capitaline data showed.

The review excluded banks, financials, and oil and gas companies, which follow a different accounting procedure. A high ICR indicates a greater ability to meet interest obligations from operating earnings. The ratio is derived by dividing a company’s earnings before interest, tax, depreciation, and amortization with its interest cost.

(Source: Livemint)

8. Coronavirus Puts Global Economy Recovery at Risk, Says IMF to G20

The deadly coronavirus epidemic could put an already fragile global economic recovery at risk, the IMF warned on Sunday, as G20 financial chiefs discussed ways to contain its economic ripple effects.

Global growth was poised for a modest rebound to 3.3 percent this year, up from 2.9 percent last year, International Monetary Fund chief Kristalina Georgieva said after a two-day meeting of G20 finance ministers and central bank governors in Riyadh.

Alarm has been growing over the new virus as Chinese authorities lock down millions of people to prevent its spread, with major knock-on effects economically. The virus has now claimed 2,442 lives in China, cutting off transportation, disrupting trade and fanning investor alarm as businesses are forced to close their doors.

(Source: Financial Express)

9. Coal-Fired Power Falls 3% in April-Dec 2019

Capacity utilisation fell to 55.78% compared with the previous year’s achievement of 59.51%

Thermal power seems to be on a terminal decline. Generation from India’s coal power plants fell 3 percent in April-December 2019, compared with the same period of 2018, and 9 percent over the target for the period.

India has installed a coal power capacity of 198,842 MW. Data given in the National Power Portal shows that the generation from these plants fell to 718,710 GWh in April-December period of 2019, compared with 740,862 GWhr in the corresponding period of 2018, and the target of 791,401 GWhr.

(Source: The Hindu Business Line)