Daily Financial News Analysis – 5th Nov’20 – Free PDF Download

Services Sector Grows

  • The IHS Markit India Services Purchasing Managers’ Index (PMI) touched 54.1 last month from 49.8 in September.
  • India’s services sector grew in October for the first time since the lockdown as business activity and new work were buoyed by relaxations in Covid-19 restrictions.
  • The composite PMI including manufacturing and services rose to 58 in October from 54.6 a month earlier, signalling the strongest increase in private sector output in almost nine years.
  • The data indicated the domestic market was the main source of new business gains as new orders from abroad declined further.

Starbucks Fined

  • The National Anti-Profiteering Authority has fined Starbucks ₹1.04 crore plus 18% interest for not passing on benefit of a reduction in goods and services tax rate from 18% to 5% to consumers between November 2017 and June 2018.
  • Starbucks was also directed to reduce the prices of its products.

Input Tax Credits

  • The tax department has blocked input tax credits of many companies suspecting that they were fraudulently availing the benefits, either by creating a fake trail of shell companies or through invoices that didn’t exist.
  • Input tax credits are essentially part of the tax paid by a company that can be used to set off future tax liability.
  • The tax department has triggered a particular section — section 86A — to block the credit for a year under the Goods and Services Tax (GST) framework.
  • Many companies are claiming that their credit is blocked only because of some minor mismatch in invoices.

Covid restructuring scheme

  • RBI set up the committee to draw up norms for the debt relief plan.
  • It has been mandated to vet business loan proposals above ₹1,500 crore, while retail debt resolution will be taken care of by bank boards.
  • Bankers have told members of the KV Kamath committee that they don’t expect more than seven to eight large-value cases with debt of more than ₹1,500 crore each to be recast under the Covid restructuring scheme.
  • There were approximately 387 accounts with an exposure of more than ₹1,500 crore that were standard at the end of March.
  • Some of them availed of the six-month moratorium, which ended August 31, out of caution to preserve liquidity and may not need restructuring, said people with knowledge of the matter.
  • The Supreme Court has been hearing petitions of borrowers seeking the waiver of interest on loans during the moratorium period.
  • The Kamath committee defined recast thresholds for 26 stressed sectors after the Reserve Bank of India (RBI) had announced relief measures to borrowers hit by Covid-related stress.
  • Banks are required to make 10% provisioning on all loans recast.
  • As per an assessment by India Ratings, at least ₹2.1 lakh crore (1.9% of banking credit) of retail loans, which could turn into nonperforming assets, may undergo restructuring.
  • On an overall basis, about ₹ 8.4 lakh crore of total bank credit could be restructured, it had said.

Boosting Indian Tourism

  • Covid-19 pandemic – travel and tourism (T&T) sector is among those expected to suffer the most prolonged impact.
  • Tourism ecosystem employs 300 million people globally
  • Tourism is also an important metric of SOFT POWER
  • The pandemic provides an opportunity for India to take the lead in promoting regional tourism.
  • In last decade – TT was one of the fastest growing sectors
  • It registered double digit growth
  • Contributed – $234 billion or 6.6% of the region’s Gross Domestic Product (GDP) in 2019
  • World Bank – South Asia’s T&T sector has lost more than 10 million jobs and is further expected to incur losses of over $50 billion in GDP
  • This makes the countries most economically dependent on tourism, such as Bhutan, Maldives, and Sri Lanka, particularly vulnerable.
  • 2015-18: approximately one-third of all foreign tourist arrivals in India were from South Asia.
  • Travel South Asia: India’s Tourism Connectivity with the Region
  • The top four tourism export countries for India in the region included Bangladesh, Sri Lanka, Nepal, and Afghanistan.
  • The total number of Chinese tourist arrivals in the region has increased by almost ten-fold in the last decade, with a 2,486% rise in Sri Lanka, 687% in the Maldives and 462% in Nepal.
  • Post-pandemic, inter-regional mobility will remain limited due to reduced air connectivity, high costs, and a lack of willingness to travel long distances.
  • Governments are thus adopting a phased recovery approach.
  • For instance, on June 15, the European Union launched the Re-open EU platform to provide a stimulus to tourism within Europe.
  • India must take similar steps to build a resilient tourism sector within South Asia.
  • Visa barriers remain an obstacle to regional tourism, and India needs to revisit its rules to enhance openness.
  • Bhutan, Maldives, and Sri Lanka have the most liberal tourist visa policies towards citizens of the other South Asian countries.
  • India ranks fifth in travel openness towards South Asia, with only Nepal, Bhutan, and Maldives eligible for visa-free travel to India.
  • Other measures such as liberalisation of travel agreements have also been successful in increasing tourism connectivity.
  • For instance, India liberalised the Revised Travel Arrangement (RTA) with Bangladesh in 2013 and 2018.
  • This led to an 80% increase in tourist arrivals from Bangladesh in 2014.
  • By 2018, one in every four tourists from South Asia arriving in India was from Bangladesh.
  • Further research suggests that as a result of this liberalisation, a number of informal movements across the India-Bangladesh border were converted to formal crossings.
  • This can be replicated in the neighbourhood.
  • Investing in digitisation of various services will be crucial for revival of the industry.
  • Similarly, enhancement of digital infrastructure at the borders will be of prime importance.
  • Registering all cross-border movements, particularly from Nepal and Bhutan, via land will be important to keep track of tourists.
  • India should also leverage the region’s enormous cultural assets and religious heritage to revive intra-regional tourism flows.




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