Weekly Round Up – Week 25

 

  • Britain wakes up to the news of ‘Brexit’ with a narrow 51.9 – 48.1% vote..! The exit, specially in the backdrop of polarized election campaign in the US, seems to indicate growing isolationism the world around, shrugging off the economic costs. Even though the Brits leave with an awareness of certain pain of departure, the pain could be more severe and last longer than being assumed. Markets across the world including India react with shock. Pound falls by more than 10% before recovering partially. British Prime Minister, a supporter of staying-in, says he would not be the right person to lead the country through this transition and would step down by October. The unsettling questions now is – Can this trigger further exits within EU. (More on this – https://indiaeconomyandbusiness.com/2016/06/22/brexit/)

  • Back home, it had been a week of several key decision on policy front. The government clears considerable relaxation in Foreign Direct Investment (FDI) norms. Among the major sectors to benefit are Aviation, Defense manufacturing and Pharma. 100% FDI permitted in Aviation, Defense manufacturing and Food trading subject to government approval. However, for foreign airlines, the limit remains at 49%. Pharma gets 74% limit for brownfield as well as greenfield projects under automatic route and up to 100% through government approval. Other sectors to benefit are Single Brand Retail Trading, DTH, cable etc, animal husbandry and Private security agencies. The move, coming close to RBI governor’s decision to not seek second term, seems also an attempt to reduce the impact of his exit.
  • Government clears the proposal for next round of spectrum auction likely to happen in September. The auction could be a bonanza for the government with expected revenue generation of more than Rs 5 lakh crore against the revenue of Rs 1.1 lakh in last round of auction. (More on this – https://indiaeconomyandbusiness.com/2016/06/23/telecom-spectrum-auction/)
  • In another development, the government clears a spacial package for Textiles sector, the largest provider of employment in the organised sector. The importance of the package is that it also relaxes norms relating to labour engagement providing more flexibility in hiring and wages payment. If successful, these norms can form the basis of future regulations covering the whole industrial sector.
  • It appears to be a season of exits..! After Dr Raghuram Rajan, Nikesh Arora, Softbank and LIC Chairman, SK Roy announce sudden resignation. LIC, an insurance behemoth, is considered an apolitical entity and has actually acted as a mitigating force against the market volatility on several occasions, which makes his departure more surprising.
  • After a delayed arrival, monsoon has picked up and has covered most parts of the nation. After two successive years of deficient rainfall, all eyes are on the rain Gods to provide much needed fillip to the economy…

(Image courtesy of ddpavumba at FreeDigitalPhotos.net)

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