Daily Financia l News 2nd October 2019

Daily Financial News Analysis – 2nd Oct’19 | PDF Download

Incentivise recycling, don’t just ban

  • India prepares to counter the menace of plastic
  • Greater stress should be on recycling plastic
  •  If we recyle plastic properly, then ban is not required
  •  Fiscal incentives can play a big role.
  • It is far cheaper to produce virgin plastic than to recycle used plastic.
  • The cost of what discarded plastic does to the environment is not captured in the cost of fresh plastic.
  • The cost of sorting, collecting, cleaning and recycling plastic is captured in the cost of recycled material.
  • The tax on fresh plastic should reflect the environmental cost of plastic.
  •  The tax rate on recycled plastic should factor in the benefit to the environment recycling brings about.
  •  The challenge is to get people to dispose of plastic in a way that makes it amenable for recycling.
  • Sorting will have to start at the household.

Rate cut by MPC?

  •  Monetary Policy Committee (MPC) MPC will not really be on the horns of a dilemma this week as it deliberates on whether or not to cut the repo.
  • Consensus suggests a 25 basis points cut, to 5.15%.
  • Inflation is expected to stay benign Pace of food inflation could be higher
  •  Prices of crude oil: do spike every now and then, for various reasons. Fuel will be steady due to slowing global growth.
  • The central bank is expected to bat for growth.
  • A big pick-up in demand is required
  • Leave no stone unturned
  •  The central bank will also ensure there is adequate liquidity support to support to aid transmission.
  • The markets will listen carefully to gauge how much RBI is likely to cut in the future.

GST collection falls

  • Gross GST collections plunged to 19- month low Rs 91,916 crore in September (for primarily August transactions) declined by 2.67% from the year-ago month
  1. Nominal GDP growth
  2. Inability of the system to check evasion
  • The collections in August (for July) had come in at Rs 98,202 crore and that was the lowest in the first five months of the current fiscal.
  • The gross GST collections in the first half of the current fiscal have been on target and slightly more than half of the estimate for the full year.
  • The average monthly collections in H1 stood at Rs 1,01,049 crore, higher than Rs 99,111 crore required to meet the Centre’s target and ensure 14% revenue growth for the states.
  •  Festival season is expected to improve collections.
  • The drop in GST collections reflect the slowing of economic activities.

WTO trade growth forecast

  •  World Trade Organization trimmed its 2019 global trade growth forecast to just 1.2%.
  • This is the lowest in a decade.
  •  The WTO had in April projected a 2.6% rise in volume of merchandise trade for 2019.
  • It also cut its global economic growth forecast from 2.6% to 2.3%.
  • It blamed the downgrades on
  • slower growth in major economies,
  • trade wars
  • ongoing uncertainty over Brexit
  • Meanwhile US President Donald Trump has also clashed with the EU over trade, while a new trade agreement between the US, Mexico and Canada has yet to be approved in Washington.

 India USA Trade

  • External Affairs Minister S Jaishankar + Mike Pompeo: It is important for the larger India-US relationship to have some early results to address concerns on the trade issues between the two countries.
  • Trade tensions between India and the US have been rising.
  • USA: tariffs imposed by New Delhi on American products were “no longer acceptable” .
  • President Trump, championing his ‘America First’ policy has described India as a “tariff king”
  • Commerce Minister Piyush Goyal and US Trade Representatives Robert Lighthizer are talking to each other and discussing the details on how to address some of the trade issues between the two countries.
  • The top Indian diplomat will interact with over half a dozen top think-tanks in addition to the members of the corporate world at two different sessions being hosted by US India Business Council and US India Strategic and Partnership Forum.



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