While domestic economy & business witnessed subdued activity, International economy saw significant movement. Most notable of these were UK’s struggle to achieve an orderly “Brexit”, thaw in US China trade war and signs of tightening oil market. Monthly GST collection continues to show significant variation on monthly basis falling to Rs 97,200 crore in February. (February collection relates to goods produced during January). The collection was Rs 1.02 crore in January, nearly Rs 5,000 crore higher. While the decline may look worrying, it was largely expected as the GST council had reduced tax rates substantially in its Dec’18 meeting. February collection is the first month after the rate changes became effective. Further, the last month of a quarter usually shows higher collection (reflected in January figures). Even though GST figures have been lower than target, collection has shown an upward trend despite substantial reduction in tax rates since its implementation in July’17. It has moved up from around Rs 90,000 crore average mark during FY18 to about Rs 98,000 crore in FY19 signifying widening of tax base and higher compliance.
In an important policy move to unlock value in Central Public Sector enterprises (PSEs), government has asked NITI Aayog to prepare a report on non-core assets of PSEs which can be monetized. This is a marked departure from the current practice of divesting stake at the company level and not going granular. The move is also important since most of these PSEs were created decades ago and hence have huge land parcels and other properties on their balance sheet. Most of these properties are unused and undervalued and the report would help recover proper value without affecting company’s operations.
Enforcement Directorate (ED) continued its questioning of former ICICI Bank Chief Executive Officer and Managing Director Chanda Kochhar during the week. This is in connection with the loans given by the bank to Videocon group which became NPA subsequently. The allegation of ‘quid pro quo’ gained weight as Deepak Kochar, husband of Chanda Kochar has a business relationship with Videocon group. This, along with the developments at IL&FS, Sun Pharma and Fortis over last about a year, has been a setback and has raised question mark over the governance standard of Corporate India.
While developments in the domestic economy were largely subdued, international business was abuzz with activity. The foremost of these is UK’s continued struggle to ensure an orderly “Brexit”. The British Parliament is going to vote on the proposal entered between the British government and the EU a second time next week. It had rejected the proposal by a huge margin of 432 votes to 202 in January. Not much has changed in the deal structure since then and it would not be surprising if the proposal is rejected again. The choice for UK, then, would be to exit without any agreement or request EU for an extension. The point of contention is cross border movement across Northern Ireland which is a part of UK and Republic of Ireland which remains with EU. While both EU and UK want that this should continue without any check post as it exists currently, the challenge is to operationalize this. Both agreed on proposals which imply a loose integration of Northern Ireland with Republic of Ireland. However, it also means lesser UK control over the affairs of Northern Ireland, reason for British Parliament’s objection. While both parties have agreed to a transition period during which status quo on rules and regulations would be maintained, a disorderly exit on 29th March is a huge possibility.
In a major boost to US China trade relationship, US deferred its declared plan to increase tariffs on another set of Chinese goods scheduled from 2nd March’19. This comes on the back of substantial progress in negotiations on measures to reduce the trade deficit US suffers. The Trump administration had been strongly vocal about the trade imbalance and eventually, increased tariff on Chinese goods in July-Aug last year as a punitive measure. China has reportedly agreed to reduce tariffs on US goods which would help reduce the trade surplus of close to $400 bn that it enjoys over US.
In yet another important international development, Russia has reduced its oil output in February to honor the agreement signed in December’18 among OPEC+ countries. OPEC+ is an association of OPEC and other oil producing countries to regulate global oil production and ensure higher prices. Prices have moved over 30% since the lows in December and can move further up with higher curtailment of production.
(Image courtesy of ddpavumba at FreeDigitalPhotos.net)