QBiz: FDI Revamped, Rajan Defends RBI’s Legacy, Coal India & More
All the top business stories that you need to know.
1. NDA Government Revamps FDI Rules: Livemint
On Monday, the NDA government decided to expand Foreign Direct Investment (FDI) in seven sectors, ranging from civil aviation and defence to food products and pharmaceuticals. According to Livemint, the action was directed at creating more jobs and seeking more overseas money to boost the economy.
It’s the second major overhaul of FDI rules in seven months. In November, the government eased norms for overseas investment in 15 sectors.
The announcement came on a day the equity and currency markets battled investor concerns over Reserve Bank of India (RBI) governor Raghuram Rajan’s announcement on Saturday that he will return to academics at the end of his tenure in September and will not seek an extension of his term.
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2. Raghuram Rajan Defends RBI Legacy: Livemint
The Reserve Bank of India governor Raghuram Rajan on Monday urged his successor to continue the fight against inflation. According to a Livemint report, Rajan said that even thought the period of adjusting inflation could be painful, it would be wrong to change the course on which the RBI is set.
Rajan, who on Saturday said he would not seek a second term as RBI governor when his tenure ends in September, said India had benefited tremendously from its focus on inflation and the attempt to put an institutional framework focused on inflation in place.
As he leaves the office, Rajan said these reforms should be taken to their logical conclusion. Rajan noted that one of the reasons the Indian rupee has been stable is because investors have gained confidence in the country’s monetary policy goals. This confidence will improve as the country meets its inflation targets.
3. JLR India Searches for Smaller Engine to Evade Diesel Ban: Livemint
Jaguar Land Rover Automotive Plc (JLR), a subsidiary of Tata Motors Ltd, is seeking a smaller engine that can be launched in India, according to a Livemint report. The development is a result of a ban imposed on selling of vehicles in the NCR region with diesel engines of capacities exceeding two litres.
With NCR accounting for 7% of India’s auto sales, auto makers have responded in various ways to limit the damage from the court order by introducing smaller diesel engines, launching compressed natural gas, hybrid and electric variants, finding newer export markets for diesel engines and sharpening focus on petrol models.
4. Air Pegasus, FlyEasy Eye Overseas Partners for Stake Sale: The Hindu
The relaxation of the FDI cap in the aviation sector has come as a shot in the arm for regional carriers Air Pegasus and FlyEasy, which have been aiming to sell a stake to foreign airlines.
According to The Hindu Business Line, Air Arabia and two other carriers are in negotiations with FlyEasy to pick up a substantial stake. Meanwhile, Air Pegasus is learnt to be in discussions with Emirates and another Gulf carrier.
The FlyEasy official said the airline has completed three out of four AOP (air operator permit) requirements to launch an airline.
5. RBI Fights Rexit Fire in Rupee Market: The Hindu
Reserve Bank of India is having a tough time in maintaining the stability of rupee in currency market since Raghuram Rajan has announced to step down as RBI governor in September. According to The Hindu Business Line, RBI intervened to stabilise the rupee against the US dollar during trade on Monday, after the currency opened on shaky ground, losing 61 paise intra-day.
Fears of the currency crashing on Monday were held in check with the RBI encouraging the sale of dollars to keep the rupee steady. The unit recovered to close at 67.31 against the dollar, just 23 paise lower than Friday.
Indian markets took their cue from their Asian counterparts, which were all in the green on Monday morning. Broadly, the markets acknowledged that the economy was on the path to recovery, and the RBI Governor’s unexpected exit would, at worst, be a short-term shock.
6. SEBI Proposes REITs to Invest up to 20 Percent in Under-Construction Projects: ET
Securities and Exchange Board of India (SEBI) on Monday proposed a relaxation in investment norms for Real Estate Investment Trusts (REITs). The proposal is likely to boost retail investors’ returns even as it increases their risk too, according to Economic Times report.
In a bid to attract realty developers to list their portfolios and with a view to smoothen the REIT registration process, SEBI has now proposed allowing REITs invest up to 20 percent in under-construction projects. Earlier, investments into under-construction projects were capped at 10 percent.
It has also proposed change in the number of sponsors and removing the restriction on the special purpose vehicles (SPVs), when the REIT’s holding company is to invest in other SPVs holding the assets.
7. Government Begins Mapping Region-Specific Exports for Global Trade: ET
The government wants to capture greater market share in global trade and has kick-started an exercise for mapping region-specific exports to achieve this aim.
According to a The Economic Times report, it has identified the pharmaceutical sector as an “export commodity with high potential” to garner higher market share in Europe and auto components to drive exports growth in South America.
The government has set a target of increasing exports to $900 billion by 2018-19 and expanding the country’s share of global exports to more than 3 percent. The exercise is in line with Foreign Trade Policy of 2015-20 which seeks to support 852 tariff lines that were not supported earlier. These include fruit, vegetables, dairy products, oil meals, Ayush and herbal products, paper and paper board products.
8. SoftBank’s Probe Gives Clean-Chit to Nikesh Arora: ET
A special committee of independent board members created by SoftBank gave a clean-chit to Nikesh Arora, the president of the company. According to a The Economic Times report, the committee members finished the review of allegations against the former Google executive and found them of no merit.
The Special Committee has concluded that the claims concerning the conduct of Arora during his tenure at SBG are without merit.Statement by SoftBank
It said that the committee, which was formed in February, conducted the review with the assistance of independent counsel at Shearman & Sterling and Anderson Mori & Tomotsune.
The development comes five months after New York-based law firm Boies Schiller & Flexner, representing unnamed SoftBank shareholders or the stock owned by them, charged SoftBank with not exercising due care in appointing Arora, who they alleged was guilty of a “series of questionable transactions, poor investment performance and conflict of interest.”
9. Coal India’s Cash Pile Under Pressure as Share Buyback Looms: The Hindu
Coal India Ltd (CIL) is hopeful of completing the government-dictated estimated Rs 6,000 crore share buyback by September.
Earlier on Saturday, the CIL board approved buyback offers from four cash mining subsidiaries – Mahanadi Coalfields, Western Coalfields, South Eastern Coalfields and Northern Coalfields.
According to The Hindu Business Line report, while offers from Ranchi-based Central Coalfields are yet to be approved, the subsidiaries have agreed to pay a total of ₹5,400 crore to buy back shares from the parent. The buyback will not change the ownership pattern, as the share will be extinguished.
The share buyback plan is a continuation of the erstwhile UPA government’s policy of extracting CIL to bridge the budgetary gap. The process was initiated by the previous UPA government in 2013-14, and about Rs 16,485 crore went to the Central coffers.
The net result is that the CIL cash reserve, which was nearly ₹60,000 crore, was down to ₹38,000 crore in just three years. It will be slashed further after the buyback.
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