1. Inflation declines, IIP contracts
Consumer price inflation registered a sharp fall of almost one percentage point in August, coming down from the psychological level of 6%, which was breached in July. On the other hand, industrial activity seems to be shrinking with the Index of Industrial Production falling by 2.4% in July, the lowest in eight months. The slack in industrial activity is also confirmed by a shrinking of imports, reflected in the August trade figures. A low inflationary environment accompanied by slow industrial activity has heightened expectation of a rate cut by the RBI in its monetary policy review slated for 4 October.
2. Recovery in US household income
Just before US President Barack Obama completes his tenure, the American Census Bureau has delivered some good news. Median household incomes in 2015 registered the biggest growth since the 2008 economic crisis. The report also shows that poverty has come down for all segments of the population, and the number of people without health insurance is at an all-time low. The findings are in line with indicators such reducing unemployment rate, and could have an influence on the interest rate decision by the Federal Reserve. The Democratic Party is also using these figures to mount an attack on Donald Trump, who has promised more tax cuts to the rich, whereas the current recovery has been based on high levels of social security spending.
3. RBI’s status check on projects
The number of projects that received institutional backing was higher in 2015-16 than it was in 2014-15. Data from the RBI’s annual study on project financed by banks and financial institutions was released last Saturday. There were 352 such projects this fiscal year compared to 326 last fiscal year. The increase was largely driven by new projects. A total of 266 of 2015-16 projects were new ones. The corresponding figure for the previous year was 203. Expansion and modernization projects numbered 64, compared to the previous year’s 92. Others included 29 compared to 19 this year. However, the total cost of projects through banks and financial institutions as well as external commercial borrowings/foreign currency convertible bonds (FCCBs) or initial public offerings was lower. The total cost of such projects was Rs1.39 trillion in 2015-16 compared to Rs1.46 trillion the previous year.
4. Fund managers wary of current valuations
More fund managers believe that stocks and bonds are overvalued than at any time since May 2000. A net 54% of global fund managers share the sentiment, according to Tuesday’s Bank of America Merrill Lynch (BofA ML) survey of global fund managers. This comes even as allocations to emerging markets have hit their highest point in three-and-a-half years. Nearly a quarter of fund managers surveyed were already overweight on emerging market countries, which include India. Fears or outflows come at a time when foreign investment in Indian stock markets is among its highest ever. They currently own more than 20% of the total value of all listed companies.
5. Bayer bags Monsanto
German agro-chemicals company Bayer AG announced its takeover of American agricultural company Monsanto Co. on Wednesday. The deal is valued at around $66 billion. This would make it the biggest M&A (mergers and acquisitions) deal of 2016.China National Chemical Corp.’s announced deal with Syngenta AG for $46.31 billion came in second, showed Bloomberg data. Third was pipeline company Enbridge Inc.’s takeover of natural gas company Spectra Energy Corp. for $42.82 billion. The deal will create the world’s largest supplier of seeds and pesticides. It was four months in the making. The final deal price is at a premium of over 20% to Monsanto’s Tuesday closing price. The deal is expected to close by 2017. The combined entity will have $26 billion in annual agricultural revenues.
6. Coal India’s fall in profits
Coal India on Tuesday said that its profits had fallen more than 14% for the quarter ending June, compared to the same period last year. Net profit for the latest quarter was Rs3,065.26 crore, compared to Rs3,596.92 crore in June 2015. Coal production was 125.67 million tonnes compared to 121.35 million tonnes. It is up 3.56% over the previous year. Consolidated revenue was down 5.62% to Rs18,422 crore in the April-June period. Falling coal prices led to the dip in performance, according to analysts.
7. Water riots in Bengaluru
A dispute over the sharing of river water from the Cauvery river left many injured and at least two dead in protests that took place in both Tamil Nadu and Karnataka. The issue gathered steam after the Supreme Court asked Karnataka to release water to Tamil Nadu earlier in the month. Farmer and pro-Karnataka groups called for protests which continued to escalate even as the apex court set 20 September as the next date to hear the matter. Two people died in violent protests in Karnataka, which also saw buses being burnt and vandals setting fire to vehicles with Tamil Nadu registration numbers.
8. Monsoon rains fall short by 5%
Rainfall for the year was less than expected. A weak La Nina, a weather phenomenon that causes heavy rains, reportedly led to the shortfall, according to a report in Mint on Thursday. Rains fell 5% short of normal for the country as a whole. The India Meteorological Department had predicted in June that rainfall would be 106% of the 50-year average. A deficit was seen in all parts except the central region. Poor rains have an impact on the crop that has already been sown, and on sowing for the winter crop. A weather department official quoted in the Mint story said that there are no worries over crop production so far.
9. The rupee devaluation that wasn’t
The rupee on Thursday fell to its lowest level against the dollar in two weeks after reports of the government considering a possible devaluation. The government denied any such discussions. Commerce minister Nirmala Sitharaman clarified that she did not tell a reporter of any such plan. The rupee closed down 0.19% at Rs67.03 against the dollar. An expert said that devaluation is not possible for the rupee since it does not follow a fixed rate system. Indian exporters have said that a lower rupee would help the case for higher exports.
10. Debt restructuring failures near Rs1 tn
The corporate debt restructuring (CDR) cell recorded a failure rate of nearly 43%, showed June numbers. This is higher than the 36% seen last year, indicating worsening conditions, noted a Mint report on Thursday. The cell has approved CDR in 530 instances since its inception in 2001. A total of 228 had failed. Most cases of failure are said to be from the infrastructure space. A total of Rs97,242 crore worth of debt for which restructuring was attempted has failed. The CDR mechanism was introduced as a means of restructuring the debt of companies that faced financial difficulties. This could include giving them more time to pay back the money they borrowed and reducing interest payments. The June numbers show that a significant number have not managed to pay back the borrowed money even after such measures.
Graphics by Ajay Negi/Mint.
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