dfa-2-dec

Daily Financial News Analysis – 2nd Dec’20 – Free PDF Download

 

Making India a Great Investment Destination

  • FDI receipts of more than $250 billion in the last five years
  • India needs to become an excellent place for doing business.
  • This would mean working on enhancing the investor experience.
  • Not just at the beginning of the project but at each subsequent step.
  • We need to focus on industries where India’s manufacturing and exports are weak.
  • Electronics, computers, telecom, precision equipment, factory machinery products
  • These constitute 70% of global trade, but India’s share is a low 0.7%.
  • A sector may generate a large turnover, but net earnings may remain small because of large import dependence.
  • Assembling an EV battery from imported lithium cells or making mobile phones from imported subassemblies fall in the same low value add category.
  • A better model may be inviting an anchor firm along with component suppliers and do most manufacturing in the country.
  • Invite top global firms to become anchor manufacturers in priority sectors.
  • Their use of innovation and technology will result in gains for all firms in the entire sector.
  • In less than 20 years, the sector’s productivity, and not just Maruti-Suzuki’s productivity, went up by 250%.
  • Today the automobile sector contributes to half the manufacturing GDP.
  • Develop effective coordination with lead investors.
  • One to one discussion at the senior level thrashes out knotty issues and builds confidence.
  • Nominating an officer to coordinate with government on the firm’s behalf for the entire project cycle is a good idea.
  • Provide ready to manufacture space.
  • Delay in buying land and approvals drives away investors.
  • Each zone should have necessary permissions for all future units.
  • Industrial corridors being developed across 32 places in India under the National Master Plan may adopt this model.
  • Ensure quick factory to ship movement.
  • Slow factory to ship movement hinders India from becoming a part of the production supply chain.
  • Locating industrial zones near the sea is another option.
  • Port and customs procedures must be done in the industrial zone to avoid crowding at the port and ensuring just in time arrivals.
  • Review the import duty structure.
  • For example, most electronic products are assemblies of thousands of components manufactured across many countries.
  • Our 90% of imports by value take place in less than 10% product tariff lines.
  • For this reason, most countries charge no import duty on parts or electronics products.
  • Ensure predictability, reduce arbitrariness in policy regime.
  • Avoid backdated policy changes.
  • Reduce scope for interpretation in tax laws by use of clear, unambiguous language.
  • For example, both India and Nokia interpreted the royalty provisions of the double tax avoidance treaty in different ways a few years back.
  • Set up systems for quick resolution of disputes.
  • Long delays at the Indian courts compromise India’s attractiveness.
  • Quick improvement is a must for improving investor confidence.
  • Samsung started small in Vietnam 10 years back but, lured by good experience, expanded its operations to export more than $50 billion of products now.
  • Its success also pulled others

Petrol Prices

  • Petrol prices are at a 25-month high following successive rate increases by state oil companies in the last 10 days.
  • Since November 19, petrol prices have risen by ₹1.28 per litre while diesel prices are up by ₹1.96 per litre.
  • On Monday, petrol was available for ₹82.34 per litre in Delhi, the highest since October 19, 2018. Diesel was selling for ₹72.42 a litre, the highest since September 6 this year.

Loans

  • Bank loans to most segments, including retail and housing, continued to be tepid in October.
  • But loans for wholesale trade, MSMEs, loan against shares and vehicle loans were recorded at levels higher than last year.
  • But loans to industry continued to contract. In October 2020, it contracted by1.7%, mainly on the back of contraction in credit to large industries by2.9%.
  • Retail loans in October 2020 decelerated to 9.3%. They had logged 17.2% growth in October 2019.
  • Growth in home loans fell to 8.2% compared with 19.2% growth in October 2019.
  • Vehicle loans performed well, registering an accelerated growth of 8.4% in October vis-a-vis a growth of 5% in October 2019.
  • Loan against shares and securities rose 23.5% from a 1.2% contraction ayear ago.

US China Tech War

  • The Trump administration plans to add China’s top chipmaker SMIC and oil giant CNOOC to a blacklist of alleged Chinese military companies.
  • The Department of Defense (DOD) is poised to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the total number to 35.
  • A recent executive order issued by President Donald Trump would prevent U.S. investors from buying securities of the blacklisted firms starting late next year.
  • It was not immediately clear when the new additions to the blacklist would be published in the Federal Register, making the move official.

 

 

 

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