BQuick On Aug. 28: Top 10 Stories In Under 10 Minutes

This is a roundup of the day’s top stories in brief.

1. GST Compensation Choices: Questions, Complaints And A Way Out

By asking states to borrow from the RBI, will this debt be shifted onto state balance sheets, asks Ira Dugal.

• First and foremost, the question must be asked – whose borrowing is this?
• The second question is on the mechanism.
• The third question is the liquidity impact and how the RBI will manage that.

Read more here.

‘Against The GST Spirit’

The central government should borrow and compensate states for the GST revenue shortfall, says former Union Finance Secretary Subhash Chandra Garg. “That would be in line with the commitment which was made in 2016-17,” he said.

• Such an arrangement is not in conformity with the spirit of the pact that was reached between the central government and states in 2016-17, says Garg, a veteran of past GST Council meetings.
• If states are asked to borrow, they might demand another five-year cess, he cautioned in an interview to BloombergQuint.

States that are getting disillusioned need to be kept on the GST bandwagon by a 2016-like commitment from the central government, Garg said.

Testing Times

Not only is this issue unlikely to be resolved in a hurry, but it will also test the effectiveness of the GST Council as a federal institution, writes Haseeb Drabu.

• It looks like the consensus-based approach which has been the DNA of the Council will undergo a change.
• In order to build a consensus on the compensation matter, the Finance Minister should have started with the unambiguous assurance that the Centre is bound to honour its commitment to compensate states as it has done so far.

There are only two ways out of this logjam...

2. Tips From A Veteran: Rashesh Shah’s Pandemic Advice For India Inc.

In a year of pandemic-induced lockdowns, volatile market and disrupted supply chains, Rashesh Shah said corporate India should spend the next three quarters focusing on strengthening businesses rather than worrying about earnings.

• Even for his own businesses, the chairman and chief executive officer at Edelweiss Group said he would not like to hazard a guess on earnings. Instead, the remaining of the financial year 2020-21 needs to be spent on fixing cost structures, assessing strategies and investing in technology.
• “The next two-three quarters is about getting stronger and well positioned because when growth comes and all this is not in place, you will waste valuable time,” Shah told BloombergQuint in an interview.
• Shah expects the global pandemic to stabilise by March 2021. Once that happens, earnings will again take the centre stage for companies, he said.

Watch the full interview with Shah on what India Inc. should do during the recovery cycle.

3. Why Engineering Goods Exporters Are Unhappy

While India’s steel mills have finally seen prices rise, showing recovery from the economic disruption caused by the Covid-19 lockdown, engineering exporters aren't happy.

• “Against the backdrop of restrictions on imports from China, Vietnam and South Korea, Indian steelmakers have raised the prices across different product categories, making the raw material costs for user industries sky-high and leaving the engineering exporters non-competitive in the international market,” Mahesh Desai, chairman at Engineering Export Promotion Council of India, said in a media sta
• The government, according to the statement, imposed anti-dumping duty in the range of $13.07-173.1 per tonne on imports of certain types of steel products from three countries for five years.
• Steel firms then increased the prices.

The increased protectionism is accruing to steelmakers at engineering industries’ expense. More details here.

4. When 43% Overruled The 57% At Shriram Transport

Promoters of Shriram Transport Finance Co. Ltd. have decided to reinduct on its board a director whom the public institutional shareholders had voted to remove recently.

• Puneet Bhatia, India head of TPG Capital Asia, had been on the company’s board for almost 14 years and was due to retire by rotation.
• The company proposed his reappointment, but in the voting held on Aug. 19, over 83% public institutional shareholders voted against the resolution.
• The resolution was presented during the annual general meeting of the company and the promoters voted in favour of Bhatia’s reappointment.
• Overall, 43% votes were in favour and 57% against the resolution.

Advisory firms have expressed concerns over the development.

5. Nifty’s Six Days Of Gain, U.S. Stocks Rally

Indian equity markets ended higher for the sixth straight day as benchmark indices ended at their highest level in six months.

• The S&P BSE Sensex ended 0.9% higher at 39,467 while the NSE Nifty 50 index ended below the mark of 11,650 - up 0.76% at 11,647.
• Both Sensex and Nifty posted their second straight weekly advance.
• Banks, both private and PSUs, were the outperformers in today's session.
• Broader markets were mixed in today's session.
• The midcap index (up 0.6%) ended higher for the tenth straight day, its longest winning streak since August 2018. However, the Smallcap index ended 0.2% lower, snapping a nine-day winning run.
• Rupee rose 0.6% and is up 2% for the week—it’s most since 2018. Find out why.

Follow the day’s trading action here.

U.S. stocks gained for a seventh day and the dollar weakened to a more than two-year low as the Federal Reserve’s new inflation approach rippled through global markets.

• The S&P 500 Index increased 0.2% to 3,491.28 as of 9:33 a.m. New York time, its seventh consecutive advance.
• The Dow Jones Industrial Average climbed 0.2% to 28,536.85, the highest in about six months.
• The Bloomberg Dollar Spot Index sank 0.7% to 1,163.02, the lowest in more than two years.

Get your fix of global markets update here.

6. Shutdown And Restart: Q1 GDP Preview

What happens when an entire economy is forced to shut down and restart? The GDP figures scheduled to be released on Monday will confirm the extent of the damage inflicted on the Indian economy by the pandemic and the consequent lockdown in the quarter ended June.

• The supply and demand of all non-essential goods and services was at a near halt during the lockdown in April and parts of May.
• As a result, gross domestic product is expected to contract by 19.2% in April-June 2020, according to the median estimate of 15 economists polled by Bloomberg.
• Gross value added growth is expected to see an even sharper contraction of 19.8%, according to a poll of 13 economists.

Find out what economists have to say about India’s GDP growth plunge.

7. BQ Explains: How National Health ID Will Work

A UPI-like platform that allows electronic health records to be shared across patients, doctors and healthcare providers. That’s the simple illustration Dr. Praveen Gedam offered in an effort to explain the government’s national Health ID programme.

• “This account will contain your details of every test, every disease, the doctors you visited, the medicines you took and the diagnosis,” Gadam said of the health ID that was part of Prime Minister Narendra Modi rollout of the National Digital Health Mission.
• Over the past decade, several countries have adopted different versions of national electronic health record systems.
• The Indian national health ID programme is being first tested in six union territories: Puducherry, Chandigarh, Dadra and Nagar Haveli, Ladakh, Andaman & Nicobar Islands, Daman and Diu, and Lakshadweep.

Here’s how the ID will work.

8. How A Recent Supreme Court Ruling Affects Builders And Homebuyers

Homebuyers won some and lost some against two builders at the Supreme Court this week.

• While homebuyers got enhanced compensation on account of delays, the apex court dismissed their claim that it’s only the builders that need to foot the tax bill.
• The ruling is likely to impact provisions relating to payment of taxes in builder-buyer agreements, experts pointed out.

Read more about the particular case and how it may impact builder-buyer agreements.

9. Reviving Private Investment In India, With Clues From EM Peers

Why do a few emerging economies enjoy a virtuous cycle of higher investment returns driving increasing global capital allocation; while others like India get stuck in a quagmire, ask Abhishek Bhattacharya and Arindam Som.

• Is it a question of having a ‘scarcity’ versus ‘abundance’ mindset?
• The tale of India’s investment cycle is a paradox in itself.
• Despite the constant comparison, India’s case appears to be different from its EM peers.

So, as we restart our recovery planning in the aftermath of the Covid-19 pandemic, what would it take to change the mindset?

10. Covid-19: India Records Highest Daily New Cases In The World

Covid-19 cases continue to mount with India reporting the highest number of new cases any country has reported in a day yet.

• Over 77,266 people have tested positive in a matter of 24 hours taking the total tally to over 33.8 lakh.
• This includes over 61,000 deaths and over 25.8 lakh patients who have recovered.
• Before today, U.S. had reported the biggest single day spike on July 16 with 77,255 new cases.
• Deaths spiked again with more than a 1,000 people who succumbed to the disease within 24 hours.
• Indian authorities have ramped up testing with over 3.9 crore samples tested so far, according to ICMR data Friday morning. More than 9 lakh of these were tested on Aug. 27.

Track all Covid-19 related news and updates in India, here.

Globally, cases topped 24.4 million while deaths passed 8,31,000.

• Cases continued to rise across Europe and German Chancellor Angela Merkel warned that the situation would get tougher as the summer draws to a close.
• In Russia, more than half the people polled in a survey said they didn’t want the domestic vaccine, even for free.

Follow the global spread of the virus here.