Economists advise Reserve Bank to hike policy rate by 0.25 percentage point
Economists have suggested in a meeting with officials that the Reserve Bank raise the repurchase rate by 25 basis points at its next policy review meeting that starts on April 3, as the prevailing macroeconomic situation and high inflation call for further monetary tightening. One basis point is hundredth of a percentage point. The monetary policy committee will release its statement on April 6. The repo rate is the interest rate at which the central bank lends money to commercial banks.
Why it’s important: The Reserve Bank has raised the policy rate by 2.5 percentage point since May last year, but inflation continues to be above its mandated target. Central banks in the West also have been raising rates to tame inflation.
3. Authorities unlikely to rationalize GST rates before 2024 parliamentary elections
An overhaul of the goods and services tax structure, including possible changes in the tax slabs, may be taken up only after the 2024 Lok Sabha elections since a number of states that are going to the polls in its run-up. Both the central and state governments are not in favor of frequent changes in the rates amid inflationary uncertainties. Any major change should be brought in after extensive deliberations, they have said. A group of ministers has been tasked with making suggestions on rationalization in the tax rates and merger of the tax slabs.
Why it’s important: The GST system introduced in 2017 was expected to simplify the indirect tax regime, which hasn’t happened due to the multiplicity of tax slabs that increased the compliance burden. A rationalization is required but will be delayed because of electoral compulsions.
3. Reliance, Tata, ReNew and eight others secure Rs 14,000 crore solar incentives approval
Reliance Industries, Tata Power Solar, and ReNew are among the firms chosen to receive Rs 14,007 crore in production-linked incentives to encourage domestic manufacturing of solar modules. The Solar Energy Corporation of India, established to implement India’s solar mission, has allocated 38,600MW of capacity to 11 companies. India aims to boost its renewable energy capacity to 500 GW by 2030, with solar power accounting for over half of the target.
Why it’s important: India’s ambitious energy transition target includes building a domestic solar module production ecosystem that will reduce dependence on Chinese imports. The huge incentive scheme will go a long way to achieve that.
4. Market regulator mulling a pledge-repledge mechanism to ringfence investors and ensure earnings
India’s capital market authorities are examining a pledge-repledge mechanism to meet the twin objectives of ringfencing unused investor money lying with the stockbrokers while letting them earn from the float. Since earnings from unutilized money of clients comprise a significant part of the income of many brokers, there has been a disquiet among intermediaries ever since the market regulator proposed that everyday brokers and clearing members would have to transfer surplus investor funds to clearing corporations.
Why it’s important: There have been recent concerns that fees charges by brokerages could rise in the event they are deprived of the income from the fund float. The pledge-repledge mechanism works for the depository system and could be replicated for funds as well.
5. Adani Group stocks crash again on fears that banks have not released pledged shares
All 10 stocks of the Adani Group plunged the most by value in 23 trading sessions after a report in The Ken cited regulatory filings to show banks have not released a significant portion of promoter shares held as collateral. It means the group’s debt hasn’t been fully paid off despite its claims of repaying $2.15 billion in share-backed debt.
Why it’s important: There seems to be no end to troubles for companies led by Gautam Adani. The conglomerate has been trying to reclaim business credibility by repaying loans against shares but that too has now come under a cloud.
6. Power distributors may hike tariffs by up to 40 per cent as demand and fuel costs soar
Power distribution companies plan to raise tariffs ranging from single digits to as high as 40 per cent across states if approved by the state electricity tariff regulators. Distribution utilities in states such as Uttar Pradesh, Maharashtra, Madhya Pradesh, and Himachal Pradesh have already proposed increases in tariffs. Others are expected to follow soon. The increase in electricity rates will help compensate for higher fuel expenses, the cost of power purchase agreements and the requirement to blend costly imported coal to meet peak power demand in April and May.
Why it’s important: The weather bureau has predicted a scorching summer that is likely to lead to record demand. Higher fuel costs leave no alternative for power distributors but the increase tariffs. This could feed in inflationary pressures.
7. ITC plans to push growth by investing Rs 3,000 crore annually for the next few years
ITC will hasten investments, which had slowed during the covid pandemic, with a corpus of around Rs 3,000 crore annually for the next few years, mainly to build manufacturing capacity and accelerating growth, chairman and managing director Sanjiv Puri has said. Puri expects the FMCG industry to bounce back by volume sales growth from the next financial year, led by rural demand, with early signs of recovery already visible.
Why it’s important: FMCG firms are seeing green shoots of demand recovery that would ease pressure on margins amid high inflation. Higher capacity would prepare them to meet the increased demand.
8. EPFO raises interest rate on provident fund deposits marginally to 8.15 per cent for 2022-23
The Central Board of Trustees of the Employees' Provident Fund Organization has decided to raise the interest rate on the provident fund deposits marginally to 8.15 per cent for 2022-23 from a four-decade low of 8.1 per cent in the previous financial year. The social security organization is expected to distribute Rs 90,000 crore this year to its members’ accounts on a total principal amount of Rs 11 lakh crore. The expected surplus this year is likely to be about Rs 660 crore.
Why it’s important: The paltry increase of five basis points is inadequate to offset the persistently high inflation for nearly two years. It might demotivate people to save as much as they did earlier.
9. Government to amend law to protect Delhi Metro assets being attached
After a dire warning from the higher judiciary, the central has moved to amend the Metro Railways Act to protect Delhi Metro Rail Corporation’s assets from being attached. Delhi Metro is embroiled in a long legal battle with a subsidiary of Anil Ambani-owned Reliance Infrastructure. The urban affairs ministry has issued a draft legislation that excised the sub-section that allows courts to attach properties of metro corporations. On March 17, the Delhi High Court handed down an order to ensure the payment of an arbitral award due for over five years.
Why it’s important: In the event of an adverse order that leads to seizing of the metro properties, the public transit system could grind to a halt. The government cannot allow that to happen in larger public interest.
10. Increasing excellence in sports land record endorsement deals for India’s women stars
As an increasing number of Indian women excel in cricket, boxing, badminton, hockey and other sports, the number of deals and endorsement fees they’re getting have hit a record, executives said. The rising star power of some of them has seen brands eager to sign them up for endorsement pacts. Brands such as Hyundai, Boost, Himalaya Wellness, Puma, Ceat, Lotus Herbals, Dream11, Amul and Tata Group are signing long-term pacts.
Why it’s important: There seems to be a tectonic shift happening in brand endorsements by women sports stars. The brand deals scored by women will only go higher from here on.