Daily Financial News Analysis – 8th Oct’20 – Free PDF Download


Reliance Retail Future Group Deal

  • Amazon has sent a legal notice to Kishore Biyani’s Future Coupons, a promoter holding company in which the US retail giant has a stake, claiming that its deal with Reliance Industries breaches the contract under which the US online giant took an indirect stake in Future Group last year.
  • As per Amazon, the contract stipulated that Future cannot sell any shares to Reliance or any other competitor and that Amazon had the right of first refusal.
  • Amazon has raised objections to Future Coupons not seeking approval from it even when the US company had the first right for any stake sale that Future Retail might initiate.
  • A global investor who understands Amazon’s thinking said there were a lot of correspondence sent to Future Group but they were not “responsive or constructive”.
  • “No foreign investor would want to invest in India if there are such clear violations of contraction obligation,” said the person.
  • However, some senior industry executives said Future Group had approached several companies, including Amazon, to salvage the situation after it was saddled with ₹13,000 crore debt and rising interest.
  • “The first right of offer can only happen after November 2022 as per the deal. Also, Future Retail held several rounds of discussions with Amazon seeking fresh funding to salvage the company, but they were non-committal,” said an industry official dealing with Future Group.

Equalisation Levy

  • Google has paid the 2% additional equalisation levy on digital transactions after holding it back initially.
  • Netflix and Adobe have also paid up.
  • This is expected to put pressure on the others such as Facebook, LinkedIn, Ebay and Uber that haven’t paid the levy, citing lack of clarity.
  • The government had imposed a 2% tax in the budget for FY21 on the sale of goods or delivery of services through a non-resident ecommerce operator and the first instalment of the levy became due on July 7 for the April-June quarter.
  • The government is learnt to have received over ₹400 crore from the equalisation levy for FY21 so far.
  • The deadline for paying the second instalment was October 7.
  • The penal interest for non-payment at 1% per month will weigh heavy on the mind of any assessee.
  • Experts said companies are still seeking clarity from the government on implementation, applicability and computation of the levy.
  • The US launched a probe in June to determine whether the levy on digital transactions discriminated against American ecommerce firms.

EU Trade Pact

  • Piyush Goyal: India is giving “high priority” to the proposed Broad-based Trade and Investment Agreement (BTIA) with the European Union.
  • Goyal: India is hopeful of working with the EU towards a free trade agreement (FTA), possibly starting with a preferential trade agreement (PTA).
  • The proposed BTIA is stalled since May 2013 and the two sides are yet to iron out their differences.
  • India exported goods worth about $54 billion to the EU in 2019-20, while it imported merchandise worth $52 billion from the block.
  • EU is India’s largest trading partner block.
  • It is also the second largest destination for Indian exports.

Rajan on Atmanirbhar Bharat

  • India should not create a “tariff wall” in its drive towards an Atmanirbhar Bharat, because that will not help the country in becoming part of the global supply chains.
  • Rajan said he “can’t quite tell” what it was. It could either be a “rebranding” of Make in India or a move towards protectionism, he said, citing recent decisions by the country to impose import tariffs.
  • Rajan said India needed to have world-class manufacturing and manufacturers here should have access to cheap inputs as they were the basis for strong imports.

Antitrust Case

  • Google is facing a new antitrust case in India in which the US tech giant is alleged to have abused its android operating system’s position in the smart television market.
  • The case is Google’s 4th major antitrust challenge in India, a key market where it is currently facing public criticism from local startups for enforcing certain policies they contend hurt their growth.
  • It also comes as Google faces new antitrust challenges in the US, and a potential antitrust probe in China that is set to look into how it allegedly uses its dominance of its Android mobile operating system to stifle competition. Google has denied any wrongdoing.
  • The Competition Commission of India (CCI) has since June been looking into allegations that Google engages in anti-competitive practices by creating barriers for firms wanting to use or develop modified versions of android for smart TVs.




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