Weekly News Roundup at 10:00 am on 22nd June, 2024

Let’s begin – The government is undertaking a revamp of the production linked incentives, by relaxing the norms for release of funds, adding more sectors under the scheme’s ambit, and extending the benefits to MSMEs in many labour-intensive sectors via special carve-outs. The restructuring would also include incentives for R&D for creating a manufacturing ecosystem, even as the total Budget for the scheme would not be stretched, official sources said. While scheme was launched over three years ago and as many as 14 sectors are covered, only around 5% of the funds earmarked have so far been disbursed. According to the sources, the government has just started accepting applications for release of incentives on a quarterly basis.

Up next – Customers of mid-sized universal banks, including RBL Bank, India Post Payments Bank, Punjab & Sind Bank, Bandhan Bank and Central Bank of India, have seen higher Unified Payments Interface transaction failure rates in the past year, according to National Payments Corporation of India data. According to the data, on the remitter banks’ side, Baroda UP Gramin Bank had the highest technical default rate at 16% on an average between May 2023 and April 2024, followed by RBL Bank, Andhra Pragathi Grameena Bank and IPPB at 5.3%, 4.9% and 4.47%, respectively. On the beneficiary banks’ side, Baroda UP Gramin Bank again topped the list with 12% TD rate.

Moving on – Bharti Airtel has bought around 1% stake in Indus Towers, by acquiring around 26.95 million shares, thus raising its stake to 48.95% from 47.95% it held earlier. The shares were acquired by Bharti as UK’s Vodafone Plc sold an 18% stake in the tower firm for 1.7 billion euro. The shares were sold at Rs 310-341. UK’s Vodafone, owned a 21.5% stake in the tower firm, and had initially planned to sell a 10% stake but strong investor demand promoted it to nearly double the sale size, sources said. Following the transaction, Vodafone’s stake comes down to 3.1%. The company will use the major portion of the proceeds to pay 1.8 billion euro outstanding bank borrowings taken against Vodafone’s assets in India.

In another development – Fitch Ratings has raised India’s GDP growth projection for the current financial year to 7.2% from 7% estimated earlier, mainly due to the assumption of recovery in consumer spending. In its June ‘Global Economic Outlook’ report, the global ratings agency said that investments will continue to rise but “more slowly” than in recent quarters in FY25, while consumer spending will “recover with elevated consumer confidence”. Fitch’s projection of growth is in line with the Reserve Bank of India’s forecast of 7.2% for the current fiscal, and much higher than the International Monetary Fund’s projection of 6.8%. Most economists, however, expect the growth to be sub-7% in FY25.

Meanwhile – Fast-moving consumer goods companies are hoping the upcoming Budget will improve the purchasing power of rural consumers, as the firms eye a faster recovery in the market. Market researcher NielsenIQ said rural growth has outpaced urban growth for the first time in five quarters in the January-March period this year. Companies hope this pace will quicken with a consumption-friendly Budget coupled with a likely good monsoon. CII has proposed initiatives such as industry engagement with the National Rural Livelihood Mission and setting up rural industrial parks to boost development. It has suggested that the Centre encourage states to reduce stamp duty on land transfers to 3-5% to lower the cost of acquisition for economic activity.

In other news – A little over a decade ago, Nykaa disrupted the beauty space, creating a specialised platform in a segment where none existed. But that glow is fading now, with competition catching up fast. Reliance Retail’s Tira has raised the competitive heat in the last one year within the $19-20 billion beauty and personal care (BPC) market in India, and so have players such as Tata Cliq Palette, Myntra and Shoppers Stop. Bengaluru-based Redseer Strategy Consultants estimates that the BPC market in India will touch $30 billion by 2027, making up about 5% of the global opportunity as Indian consumers aspire to look and feel good with organised beauty products, both national and international.

Lastly – With bilateral consultations with the EU earlier this month failing to break the logjam over extension of safeguard duties on its steel exports, India has “reserved the right” to retaliate in equal measure by imposing extra duties on imports from the 27-member bloc. The EU has extended the safeguard duties on steel imports, which were expiring this month, by another two years till 2026. This is the second extension of the safeguards that take the form of Tariff Rate Quota and were first imposed in 2018. With the latest extension the safeguard would have run for eight years. Under WTO rules another safeguard measure for these product categories of steel could then not be put in place for another eight years.