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Government moves to rein in current account deficit, rupee fall

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Arun Jaitley

New Delhi, Sep 14 ; To stop further depreciation of rupee and widening of current account deficit (CAD), the government on Friday took five measures and a broad policy decision to curb non-essential imports and increase exports.

Finance Minister Arun Jaitley, after holding a detailed discussion with Prime Minister Narendra Modi, said the government is committed to maintain its fiscal deficit target even as it monitors the impact of external factors on the Indian economy.

“One broad policy decision was to address the issue of expanding current account deficit. The government will take necessary steps to cut down non-essential imports and increase exports,” Jaitley told reporters after the high-level meeting.

The meeting was attended by Reserve Bank of India (RBI) Governor Urjit Patel and senior officers from the Prime Minister’s Office (PMO), Finance Ministry and the RBI.

“The non-essential import items would be decided in consultation with various ministries and will be announced as and when the decisions are taken in the next few days.”

Jaitley said policy decisions by the US increased inflow of dollar in the US economy compared to other economies. The government is monitoring the impact of external factors like crude oil prices and trade wars on India despite its strong fundamentals.

“Due to these two factors our current account deficit has increased. We have to face this challenge,” he said.

India’s current account deficit widened to $15.8 billion, about 2.4 per cent of the country’s GDP in the first quarter of this fiscal as against $15 billion in the year-ago quarter.

Jaitley said while other suggestions from both RBI Governor Patel and Economic Affairs Secretary Subhash Chandra Garg will be considered in the days to come, some issues need immediate action.

“The aim of these five immediate decisions is to attract more foreign currency to India as we try to control the current account deficit,” he said.

He said the mandatory hedging condition for infrastructure loans related to External Commercial Borrowings (ECB) will be reviewed.

In another move, the government has decided to allow manufacturing sector entities to avail ECBs up to $50 million with a minimum maturity of one year, instead of three years previously, according to him.

On measures related to Foreign Portfolio Investment (FPI) and debt, Jaitley said the authority concerned will review the removal of exposure limit of 20 per cent of FPI’s corporate bond portfolio to a single corporate group (company and related entities) and 50 per cent of any issue of corporate bonds.

The Finance Minister also announced two crucial decisions related to Masala bonds. These are bonds issued outside India but denominated in Indian rupees rather than the local currency.

“There will be exemptions from withholding tax for issuance done in this year, i.e., up to March 31, 2019. Also, there will be removal of restrictions on Indian banks’ market making in Masala bonds, including restrictions on underwriting of such bonds,” he said.

During the meeting, RBI Governor made a detailed presentation on world’s economic scenario and external factors that can impact Indian economy. He said India’s growth rate compared to other economies is very high and its inflation is in a moderate range.

“The government and Finance Ministry’s top priority is to maintain the fiscal deficit and we are trying to maintain it and we are confident we will be able to maintain it,” assured Jaitley.

The country’s fiscal deficit in the first four months of 2018-19 at Rs 5.40 lakh crore has already touched 86.5 per cent of the full year’s target of Rs 6.24 lakh crore.

Economic Affairs Secretary Garg, who was present in the meeting, said no domestic measures on oil were discussed.

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Online grocery to become $18bn industry in India by 2024: Report

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Online shopping, sharing data

As companies from Reliance to Amazon put their top dollar in serving daily grocery at your doorstep, a new report said on Friday that online grocery is going to be the next battleground for growth, expanding to over $18 billion by 2024.

According to a joint report by a joint initiative by Bengaluru-based market consulting firm RedSeer and Bigbasket (Brand Intelligence), driven by the significant rise in organic adoption during Covid-19, eGrocery has been on a surge with clocking 1.7 times in gross merchandise value (GMV) in June this year as compared to January.

Online grocery will remain steady for the rest of the year to reach more than $3 billion, the report mentioned.

“The industry has seen more than 70 per cent ARR (annual recurring revenue) jumps in the last quarter across categories. This brings the opportunity to serve a larger set of customers, and some challenges with it,” said Hari Menon, co-founder and CEO of BigBasket.

The report found that demand for comfort foods like noodles and cookies, immunity boosters like lemon and hygiene products like sanitizers picked up after the pandemic while essentials remained strong.

Snacks and branded foods grew by 5 per cent quarterly pre-Covid, however growth jumped to 75 per cent in the June quarter.

Within snacks and branded foods, biscuits and cookies was the largest sub-category and grew the most in Q2.

Beverages grew by 2 per cent quarterly pre-Covid, however growth jumped to 50 per cent in Q2.

“Personal Care grew by 5 per cert quarterly pre-Covid but jumped to 24 per cent in Q2 due to Covid.

“We have observed that traditional brands which pivoted quickly to be digitally ready brands have seen 2x+ jump in sales compared to offline brands. We are excited to have this opportunity to serve the ecosystem,” said Anil Kumar, founder and CEO of consulting firm RedSeer.

Home utilities grew by 6 per cent quarterly pre-Covid but jumped to 11 per cent in Q2.

Within home utilities, detergents and dishwash were the largest sub-category but grew the least in the last quarter.

According to the report, home utilities were not severely affected by the pandemic.

-IANS

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Centre suspends fresh IBC proceedings till Dec

In June, the Union Cabinet approved the suspension, which came into effect from March 25 and was brought in through the ordinance route.

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Nirmala Sitharaman

New Delhi, Sep 24 : In a major relief for stressed companies amid the pandemic woes, the Centre on Thursday announced the suspension of fresh insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) by three more months till December.

In a gazette notification, the Ministry of Corporate Affairs (MCA) said that the suspension on operation of Section 7, 9 and 10 of the IBC has been extended.

“In exercise of the powers conferred by section 10A of the Insolvency and Bankruptcy Code, 2016, the Central Government has extended the suspension of sections 7,9, 10 of the IBC for a further period of three months,” the Minister of Finance and Corporate Affairs, Nirmala Sitharaman said in a tweet.A

She said that the decision reinforces the government’s commitment to protecting businesses.

“It also gives companies breathing time to recover from financial stress,” she said.

In June, the Union Cabinet approved the suspension, which came into effect from March 25 and was brought in through the ordinance route.

Section 7 of the IBC allows initiation of corporate insolvency resolution process by financial creditor, while Section 9 allows operational creditors to file application for initiation of insolvency process by operational creditor.

Further, a corporate debtor who has committed a default, can file for initiation of a corporate insolvency resolution process under Section 10 of IBC.

Although the decision to extend the suspension has brought much-needed relief for business stressed in the midst of the pandemic, sector experts, however, have raised concerns regarding the financial stress it may create once the suspension is revoked.

Sumit Batra, Partner at India Law Alliance, said: “Another extension of three months beyond 25.09.2020 for initiation of bankruptcy against defaulting corporate entities will further aggravate the situation and lead to an unprecedented rise in fresh filing once the suspension is revoked.”

Noting that while the logic of suspension for not being able to initiate proceedings under Section 7 and 9 of IBC, seems justified to an extent that lockdown triggered due to widespread outbreak of Covid-19 affected the paying capacity of the corporate debtors, but “why such a suspension is being imposed for applications under section 10 seems illogical”.

The intent and extent of section 10 petition is to enable the corporate debtor to initiate insolvency against themselves in order to resolve the financial stress in a time-bound manner, Batra said, adding that, therefore, Section 10 petitions should have been excluded from being covered under this suspension.

In a recent debate in the Parliament, Finance Minister Nirmala Sitharaman had defended the decision to suspend Section 10 saying that in view of the economic situation, the companies filing for bankruptcy would not have achieved high valuations and bidding amounts would have been low, thereby not achieving the desired goal.

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Oil Ministry yet to recover $510 mn from contractors under PSC: CAG

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Dharmendra Pradhan

New Delhi, Sep 23 : The Comptroller and Auditor General (CAG) has said that the Ministry of Petroleum and Natural Gas has not recovered $510 million as cost of unfinished minimum work programme (CoUMWP) from contractors in respect of 45 blocks.

The CAG report on Union Government (Economic & Service Ministries-Civil) – Compliance Audit Observations, which includes important audit findings, was presented in the Parliament on Wednesday.

It noted that the government awarded 254 blocks during the New Exploration and Licensing Policy’s (NELP) I to IX rounds for exploration of oil and gas. As per the terms and conditions of Production Sharing Contracts (PSC), contractors are required to pay the cost of unfinished minimum work programme, if the block is relinquished or terminated by government.

However, contractors of 54 relinquished blocks failed to pay the CoUMWP as specified in the PSCs.

“An amount of $510.79 million (Rs 3,652.64 crore), which was 77 per cent of the Ministry of Petroleum and Natural Gas’s (MoPNG) approved amount of $664.67 million (Rs 4,753.03 crore) on account of CoUMWP in respect of 45 blocks still remained unrecovered (September 2019),” the report said.

It added that the CoUMWP for nine blocks is yet to be worked out by Directorate General of Hydrocarbons (DGH) or yet to be approved by the ministry.

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