dfa-16-nov

Daily Financial News Analysis – 16th Nov’20 – Free PDF Download

Eight GoM Reports

  • China looms large in reports submitted by all eight groups of ministers (GoMs) formed amid the Covid-19 pandemic.
  • GoM on employment – balance between supporting the gig economy and geopolitics
  • GoM on manufacturing – suggested formulating a model ‘Time-Bound Clearances Actfor permissions to set up investment projects in a state, besides speedier land acquisition, titling and registration processes for businesses looking to relocate from China.
  • It has recommended that states must “acquire sizeable areas of non-inhabited land and carve out investment zones under the protection of Article 234q(c) and (they) should be notified as an industrial township”.
  • The GoM on manufacturing chaired by textile minister Smriti Irani has done a detailed comparison between India and China.
  • It has pointed out that while Chinese exports to India reduced after imposition of anti-dumping duties, there was a spike in goods through Hong Kong and Singapore to evade import duties.
  • To counter the same, the GoM has recommended an industry wise HSN Code analysis to map local capabilities of production, and facilitate indigenisation of inputs. It has also sought “strict interventions to identify mis-declared goods in import”.
  • The GoM has also underlined the need for simplification of dispute resolution through arbitration and mediation.
  • “It takes nearly 1,445 days and 30% cost of claim value to resolve a commercial dispute in India as compared to 216 days and 27.2% of claim value in New Zealand, 290 days and 12.7% of claim value in South Korea, and 437 days and 45.7% of claim value in UK.”
  • It has recommended a waiver of the dividend distribution tax out of current and accumulated profits for companies relocating from China.
  • Active support to MNCs to build capacity in the home country just like Sinosure, China’s premier export and credit agency, supported GE to build manufacturing capacity for exports from China.
  • The GoM on health headed by AYUSH minister SY Naik has strongly advocated that spending on health be increased to 4% of GDP. China, it has noted, spends 5% of GDP on health.
  • “It notes how while developed nations such as the US (16.9%), Germany (11.2%), France (11.2%) and Japan (10.9%) spend considerably on their health setup, India spends the least even among BRICS countries: Brazil spends the most (9.2%), followed by South Africa (8.1%) and Russia (5.3%).”
  • It also recommends that India may take the lead along with Asian, African and Middle Eastern countries to create an equivalent alternative to USFDA for all medical products to increase the market size for products made in India.
  • The GoM has called for classifying pharmaceutical industry as a priority sector for lending with interest subsidy or at a concessional interest rate along with tax breaks for R&D.
  • The GoM on agriculture and rural economy notes that in furniture, India has become a net importer from China, Malaysia, Italy and Germany. It has recommended that import duty may be raised to 50% to encourage domestic value addition and exports.
  • It also suggested that the import duty on wood and wood products may be increased to 10% to encourage domestic producers and the ministry of housing and urban affairs be asked to empanel and promote only Indian manufacturers of bamboo wood to dissuade growing imports of Chinese products.
  • The GoM on export promotion chaired by parliamentary affairs minister Pralhad Joshi noted how packaging manufacturers in India are currently constrained to import certain key input materials from China and other countries in South East Asia towards meeting export commitments.
  • It notes how “in comparison to China, logistics transportation takes 70% longer from factory to final destination”.
  • The GoM also pointed to China Post’s ‘e-packet’ as an example that India Post could consider to ensure level playing field for Indian exporters and ensure faster delivery to customers.

Electronics Cos, Phone Brands On a New High

  • India’s largest consumer electronics and smartphone brands Samsung, Xiaomi, LG, Bosch, Siemens, Realme and Vivo reported their best festive season sale.
  • Marketers attributed this to a significant improvement in consumer sentiment and people purchasing the latest gadgets to improve their lives or get a boost with few other avenues to spend on.
  • Five industry executives said these companies increased sales by up to 30% during the entire festive season — covering Onam, Navratri, Durga Puja, Dussehra, Karva Chauth, Dhanteras, Diwali and Bhai Dooj — over the same period last year.
  • That’s come from a surge in ecommerce led by marketplaces Amazon and Walmart owned Flipkart as well as footfalls in retail stores improving to pre-Covid levels, they said.

Code on Social Security 2020

  • The labour ministry published draft rules on Sunday for operationalising provisions in the Code on Social Security, 2020, passed by Parliament in September.
  • The code envisages a social security fund for unorganised, gig and platform workers, among other measures.
  • Aggregators such as Ola, Uber, Swiggy and UrbanClap will need to deposit 1-2% of their annual turnover or 5% of the payment to workers on their platforms, whichever is lower, to the proposed fund to provide social security benefits to such staff.
  • The government is in favour of setting the contribution at the lower end of the band.
  • The scheme can provide disability cover, accident insurance, health and maternity benefits and old age protection among other measures.
  • The schemes will be funded by contributions to the social security fund.
  • The central and state governments can also contribute to it, apart from the platforms.
  • Currently, unorganised gig and platform workers are not eligible for any social security benefits and most in the unorganised sector aren’t assured of minimum wages.
  • China and 14 other countries agreed on Sunday to set up the world’s largest trading bloc, encompassing nearly a third of all economic activity.
  • Many in Asia are hoping that RCEP will help hasten a recovery from the shocks of the pandemic.
  • The Regional Comprehensive Economic Partnership, or RCEP, was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations.
  • Tough India surprised participants late last year by abandoning the agreement, the partners have made it clear New Delhi is welcome to rejoin the pact.
  • The pact will which cover 2.2 billion people with a combined GDP of $26.2 trillion.
  • It is expected to give a fillip to the partner economies by reducing tariffs, strengthening supply chains with defined rules of origin, and framing of new e-commerce rules.
  • Among the benefits of the agreement include a tariff elimination of at least 92% on traded goods among participating countries, as well as stronger provisions to address non-tariff measures, and enhancements in areas such as online consumer and personal information protection, transparency and paperless trading, according to a statement issued on Sunday by Singapore’s Ministry of Trade and Industry.
  • It also includes simplified customs procedures while at least 65% of services sectors will be fully open with increased foreign shareholding limits.
  • (The bloc) is not expected to go as far as the European Union in integrating member economies but does build on existing free trade arrangements.

 

 

 

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