Let’s begin. Manufacturing activities in India continued to demonstrate resilience in November, despite fears of global recession and slowdown, inflationary pressures and geopolitical tensions. The seasonally-adjusted S&P Global India Manufacturing Purchasing Managers’ Index is at 55.7 up from October’s 55.3. Manufacturing PMI has now grown for a fifth straight month after the first contraction in 11 months in June. A reading above 50 showcases expansion, while a score below 50 indicates contraction. Factory output in November expanded after October’s robust growth. Companies made higher input purchases to create an inventory that could match the expected demand and prediction of sales doing better, as business optimism was highest in almost eight years. November recorded the seventeenth consecutive expansion in the manufacturing production in India, resulting in a sharp upturn in output – above the trend.
Meanwhile, the Centre is unlikely to soften its stand on taxation of virtual digital assets even as the industry is hoping for a review on the 1% TDS provisions in the Union Budget 2023-24. According to sources, the tax provisions on virtual digital assets came after a lot of thought and discussion and do not require a review. A person familiar with the development said, that the tax provisions were brought about based on the large number of transactions and investments, and the need to monitor them. As of now, it is not felt that any review or rollback is needed. Finance minister Nirmala Sitharaman had in the Budget FY23 announced a scheme for taxation of virtual digital assets, which includes a 30% tax on income on transfer of these assets, no offsetting of loss from transfer of these assets and a 1% TDS on payment made in relation to transfer of these assets. However, the cryptocurrency industry, which has witnessed a tumultuous year with global volatility and troubles at various exchanges, believes that the tax scheme, particularly the 1% TDS, has made many investors move to foreign exchanges.
On to industry. Amazon Food Services will close this month in India after being launched in 2020. When it was created two years back with its office in Bangalore and other select parts of the country, it turned out to pose as a rival of online food delivery giants Zomato and Swiggy. But now it is confirmed to the news agency- Reuters that as part of the annual operating review process the company will remove the employees and shut down their operations in the coming month. Earlier, Amazon ed-tech services were shut down on similar grounds which was working in presence of ed-tech giants like Byju’s in the Indian market. Both these products were launched by Amazon during Covid-19 pandemic to provide these services to customers which they can avail from their homes. It was never heavily marketed but Amazon Food services tied up with many restaurants across Bangalore.
Moving on. With a sharp spike in prices of liquefied natural gas which has pushed up the cost of production of urea, the fertilizer subsidy is likely to cross Rs 2.5 trillion in the current fiscal, 138% higher than the budget estimate of Rs 1.05 trillion, according to official sources. The government reckons that the natural gas prices, which constitute about 85% of cost of production for urea, is likely to be at elevated levels in 2023-24 as well. A similar level of fertiliser subsidy expenditure is expected in FY24 too, the sources added. The government is working out measures for ensuring that LNG is supplied to fertiliser companies at a lower price. One of the proposals being discussed is asking state-run GAIL (India) to procure the fuel on behalf of Indian companies under short-tern contracts. It would be the fourth year in a row that the annual Budget spending on fertiliser would be above Rs 1 trillion mark this fiscal, against a lower range of Rs 70,000 – 80,000 crore in the past few years.
Lastly, the rising number of layoffs by startups and digital platforms is expected to slow down by mid-2023, hiring experts told FE. By the middle of next year, companies in the digital space may go back to hiring to fuel their growth plans, they said. Further, employees who may have been laid off by startups but possess skills in niche areas stand a good chance to get hired by MNCs across other IT domains in industries like insurance, banking, finance, and others. The tech industry, including Big Tech and startups, together have laid off over 16,000 employees in the current calendar year so far. Many of these include unicorns, late-stage firms and even early-stage startups that were unable to raise crucial cash amid the funding crunch. Startups in edtech, fintech, hyperlocal delivery, insurtech, content and gaming, logistics and online commerce are some of the worst affected.