This is a roundup of the day’s top stories in brief.
1. India Is Looking To Spend Its Way Out Of The Crisis
Expenditure Secretary TV Somanathan said the central government will keep up its spending and increase it, if needed, even as tax collections collapsed because of the coronavirus pandemic-driven economic contraction.
“The central government expenditure will be sustained, and we will certainly hit our budget targets regardless of the crunch in revenue,” Somanathan told BloombergQuint in an interview on Tuesday.
The government has constraints and these need to be managed, he said.
A reprioritisation of spending has been done by the government, and there’s been a “huge” increase in allocation for food, rural development, health and transfer to states, he said.
Spending will be increased as the need arises, he said. “How much expenditure will be increased, we will have to see as and when it comes.”
Here are the key highlights from the exclusive interview on the state of government finances.
2. Exclusive: A New Type Of Government Borrowing
The central government’s proposal to states to finance a shortfall in compensation cess for the current financial year may bring to the markets a new kind of government security. This security, if states accept the proposal, would in some ways be a hybrid of central government and state government bonds.
In a conversation with BloombergQuint, the government’s Expenditure Secretary TV Somanathan clarified that the plan doesn’t include any direct purchase of state government bonds, also known as state development loans, by the Reserve Bank of India.
Instead, what the government is suggesting is a special issue of state bonds, which, for all practical purposes, would be backstopped by the centre.
Such a structure would ensure that there is a very specific revenue stream which can be earmarked for the payment of this debt.
3. Crude Slides 6%; Nasdaq Extends Drop
U.S. shares tumbled, though major indices cut the worst of their losses by half, as volatility continued to grip financial markets.
The Nasdaq 100 fell as much as 4.3% before paring the drop to 2.2% mid-morning. It’s down almost 9% in three days of selling after its surge from March lows stretched valuations toward levels last seen in the dot-com era.
Tesla Inc. tumbled 13% after being snubbed for inclusion in the S&P 500 and is now down more than 20% in September.
All 11 S&P 500 groups retreated.
West Texas Intermediate crude fell toward $36 a barrel in New York.
Get your daily fix of global markets.
Sensex Edges Lower
Indian equity markets ended lower after trading in a narrow range for most parts of the trading day.
The S&P BSE Sensex ended 0.14% lower at 38,365 while the NSE Nifty 50 ended 0.33% lower at 11,317.
Only 13 out of the 50 Nifty constituents ended the session with gains.
Follow the day’s trading action here.
Strong Retail Demand For Happiest Minds IPO
The initial public offering of Happiest Minds Ltd. was oversubscribed on the second day of bidding with strong interest from retail investors.
The IPO was subscribed 8.4 times on day 2.
Institutional subscription at 0.47 times.
Non-institutional investor subscription at 3.96 times.
Retail subscription at 38.85 times.
More details here.
4. India-China Border Tensions Flare Up Again
India and China accused each other of firing warning shots in the air along their disputed Himalayan border for the first time in more than four decades in a new sign of friction days after top officials on both sides agreed to defuse tensions.
Indian troops late Monday “illegally crossed the Line of Actual Control on the southern bank of Pangong Tso and fired warning shots against patrolling Chinese forces,” Senior Colonel Zhang Shuili, a spokesman for the Western Theater Command of the People’s Liberation Army, said in a statement Tuesday.
Chinese troops were “forced to take countermeasures to stabilise the situation,” Zhang said, without elaborating.
The Indian Army denied its soldiers crossed the disputed border “or resorted to use of any aggressive means, including firing.”
“It is the PLA that has been blatantly violating agreements and carrying out aggressive manoeuvers, while engagement at military, diplomatic and political level is in progress,” an Indian army statement said, adding that when “dissuaded” Chinese troops “fired a few rounds in the air in an attempt to intimidate.”
The last time Indian and Chinese troops opened fire was along their disputed border in Arunachal Pradesh in 1975.
5. Goldman Sachs Paints A Bleak Picture For India
After the lockdown to contain the coronavirus pandemic led to a steeper-than-expected contraction in India’s economy in the quarter ended June, economists further cut their growth estimates for the ongoing financial year.
Goldman Sachs expects India’s economy to contract 14.8% in the fiscal ending March 2021, the lowest forecast so far, compared with 11.8% predicted earlier, according to a statement.
The economy is estimated to contract 13.7% and 9% in the second and third quarters, respectively.
On a seasonally adjusted annualised basis, Goldman Sachs said GDP contracted 69% in the April-June 2020 period against a growth of 19% in the preceding three months.
India Ratings and Fitch too have revised their GDP forecasts. But Goldman’s remains the lowest of the lot.
6. SBI Doesn’t See Large Corporates Opting For Loan Restructuring
State Bank of India isn’t expecting any of its large corporate borrowers to apply for a restructuring scheme owing to the Covid-19 crisis, at least for now.
That’s according to Arijit Basu, managing director of India’s largest lender, who said that quality of SBI’s corporate loan book had significantly improved in March and the Covid-19 pandemic hasn’t affected it much.
“I can confirm to you that there are no large companies for SBI, which would be looking for restructuring at this point in time. The Covid-19 impact is still going on and we’ll need to see what happens in the future,” he told BloombergQuint in an interview.
But right now, there are not too many accounts and certainly no large accounts which would need this.Arijit Basu, MD, SBI
Watch the full interview where Basu talks about the Covid-19 hit and the sectoral thresholds for restructuring loans.
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7. SBI Challenges Order To Stay Insolvency Case Against Anil Ambani
State Bank of India has approached the Supreme Court challenging the stay granted by Delhi High Court on the personal insolvency case against Anil Ambani.
India’s largest lender has argued in its appeal that the former billionaire can’t be allowed to wriggle out of his contractual obligations by filing a writ challenging the personal insolvency provisions of Insolvency and Bankruptcy Code.
The bank has claimed that as on March 2020, more than Rs 1,700 crore was due and payable by Ambani by virtue of him being the personal guarantor for loans extended to Reliance Communications Ltd. and Reliance Infratel Ltd.
SBI has also questioned the choice of forum by Ambani saying the case has so far proceeded in Mumbai.
8. India’s Imports From China Rebound
Imports from China into India rebounded faster than overall shipments into the country in July, shows the fine print of trade data available until the month of July.
The pickup took the of inbound shipments back to pre-Covid levels, the data shows.
This, just as India announced one-off measures to restrict and monitor inbound imports from the neighboring nation amid military skirmishes.
Merchandise imports from China contracted by 9.8% in July, compared to a contraction of 43.7% in June, according to data released by the Department of Commerce.
Here's why trade with China has recovered quicker than trade with other economies.
9. Covid-19: India’s New Cases Drop To Lowest In A Week
Daily coronavirus infections in India fell to the lowest in a week even as the country's total tally continued to head higher.
India added over 75,800 fresh cases—lowest in a week—taking the total tally to over 42.8 lakh, according to the health ministry's update.
This includes over 33.23 lakh people who've been discharged and 72,775 who've died.
India is only behind U.S.’ 63 lakh cases which is likely to be eclipsed if the virus continues to spread at the current rate.
The country has reported more than 1,000 casualties due to the highly contagious pathogen for seven straight days.
Track all Covid-19 related news and updates in India, here.
No Shortcuts To A Vaccine
Drugmakers racing to produce Covid-19 vaccines pledged to avoid shortcuts on science as they face pressure to rush a shot to market.
In an unusual public letter, the companies agreed to submit the vaccines for clearance only when they’re shown to be safe and effective in large clinical studies. 4
The chief executive officers of nine frontrunners in the push for a coronavirus inoculation signed the pledge: AstraZeneca Plc, BioNTech SE, GlaxoSmithKline Plc, Johnson & Johnson, Merck & Co., Moderna Inc., Novavax Inc., Pfizer Inc. and Sanofi.
“In the interest of public health, we pledge to always make the safety and well-being of vaccinated individuals our top priority,” the executives wrote.
The document is intended to counter perceptions of political pressure to deliver a shot as soon as possible.
10. Byju’s Secures Another $500 Million Fundraise
Private equity giant Silver Lake led a $500 million funding round for Byju’s that d the Indian online education platform at around $10.8 billion, a person familiar with the matter said.
Existing backers Tiger Global, General Atlantic and Owl Ventures also took part in the latest funding round, according to the person, who asked not to be named discussing a private deal.
The startup remains locked in negotiations over several other rounds of financing.
Byju’s is close to getting about $400 million from Yuri Milner’s DST Global though that funding has yet to be completed, the person added.
The frenetic deal activity signals huge investor appetite for India’s edtech startups.
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