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BAD CORPORATE DEBT

New Delhi: The recent arrest of Vijay Mallya highlighted the problem of bad loans in India, but analysts say the tycoon’s unpaid debts are just the tip of an iceberg that is already holding back the country’s economic growth.

The multimillionaire owner of a Formula One team and founder of the Kingfisher beer brand was arrested on Tuesday in Britain, where he fled a year ago after allegedly defaulting on loans from Indian state banks worth more than $1 billion. From the mid-2000s onwards, Mallya and much of corporate India went on a shopping spree, picking up assets both at home and overseas even as a financial crisis hit the global economy.

As a result, Indian banks are now saddled with some of the highest levels of bad debts in the emerging markets according to the International Monetary Fund. “Banks are so stretched that they’re not even lending to healthy companies, holding back growth,” Rajeswari Sengupta, an economist in Mumbai, “That’s a very big collateral damage … The biggest fallout is the lack of private sector investment – banks are stressed, private sectors are stressed, lending to corporates by banks has totally stalled.”

Banks coughed up cash for projects even when the business plans made no sense – such as a Formula One track on the outskirts of the Indian capital that was practically abandoned after three races. Regulators, eager to spur growth, allowed many industries to restructure loans rather than write them off, and also agreed to a moratorium on interest payments.

The excesses of the period remained hidden as banks sought to keepcompanies afloat by giving them enough capital to service their loans – a practice known as ever-greening – to disguise their own bad debts. By 2015, the share of companies it monitored that could not even service the interest on their loans had reached nearly 40 per cent, Credit Suisse said in a February report.

TIME IS NOT RIPE FOR AUCTION OF 5G SPECTRUM

The government believes that 5G is still a work in progress globally and this may not be the right time to sell airwaves which support the technology, said communications minister Manoj Sinha. In an interview he said the government, which hasn’t yet decided on the time frame for the next auction, needs to prepare for selling the 5G airwaves when the time is right. He said the rancour in the industry between Reliance Jio Infocomm and the incumbents was expected since a new entrant always faces resistance from existing players, but added that he expects that to settle down soon. Edited excerpts:

How do you view the entry of Reliance Jio Infocomm and its impact on the sector? There are two things. One, the consumer is benefiting. Broadly, there is debt in the sector from banks. The ministry will surely see to it that the economic/financial health of the sector keeps well and, wherever required, we do intervene. If the financial health of the sector is getting impacted, whatever rights we have under the regulatory framework, they will be used.

RULES TO ENSURE TELECOM SECTOR’S HEALTH

NEW DELHI: The entry of Reliance Jio has benefited consumers withvoice and data rates falling sharply, said telecom minister Manoj Sinha, who added that the government will use the regulatory framework to ensure the telecom sector remains healthy.

Sinha said in an interview that the ongoing consolidation benefited the telecom industry and that the call drops situation had improved significantly.

Speaking on the entry of Mukesh Ambani-owned Jio, the minister said, “There are two things. One, the consumer is benefiting. Broadly, thereis debt in the sector from banks…if the financial health of the entire sector is getting impacted, whatever rights we have under the regulatory framework, they will be used (to ensure the health of the sector).î

Without naming any company, the minister alluded to the recent move by the Telecom Regulatory Authority of India (Trai) to scrap Jio’s Summer Surprise scheme – which was offering three months of complimentary services for one recharge – as an example of regulatory intervention.

“You would have seen that for the first time in the country, someone had to change their decision. In the beginning of April, a huge advertisement was printed, which Trai called out and said it was not right. So, I think Trai gave out that direction for the health of the entire industry,” Sinha said. He added that the intent of the government is not “to kill the industry and benefit the consumer”.

BAD TIME FOR GOLD

Gold was little changed on Friday and poised for the biggest weekly fall in seven weeks as investors sought out higher returns than those from holding the non-interest bearing yellow metal by buying into riskier assets . Spot gold was up 0.1 percent at $1,264.81 per ounce, as of 0312 GMT, while U.S. gold futures were steady at $1,266.30. Gold is on track for a weekly drop of 1.5 percent, the largest weekly percentage fall since the week of March 10, but is heading towards a gain of about 1.3 percent for the month. “Technically gold has not had a great week … there seems to be some pressure as the risk-on sentiment is still on despite Trump’s tax plans disappointing and especially situation in North Korea does not seem to be inflamed,” a Hong-Kong based trader said. On Wednesday, President Donald Trump proposed deep U.S. tax cuts, mainly for businesses, that would make the federal deficit balloon if enacted, drawing a cautious welcome from fiscal conservatives and financial markets. Asian stocks inched higher on Friday and looked set to close a strong week on a positive note. “People are pulling out of gold and moving to risky assets like shares and currencies to make profits,” said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.

 

ON-LINE SECURITY BREACHES

CHERNNAI: As the risk of cyber threats looms over enterprises going digital, a Symantec study reveals that India ranks fourth when it comes to online security breaches, accounting for over 5% of global threat detections. The US and China occupy the top two slots and together make for almost 34%, followed by Brazil and then India.

The year 2016 saw a resurgence of the email as an attack channel, multi-million-dollar virtual bank heists, ransomware and new frontiers like IoT and cloud getting exposed to threats. While China has managed to bring down hacks from nearly 24% in 2015 to under 10% in 2016, India saw instances of fraud increase from 3.4% in 2015 to 5.1% in 2016.

“Symantec uncovered evidence linking North Korea to attacks on banks in Bangladesh, Vietnam, Ecuador and Poland. This was an incredibly audacious hack and the first time we observed strong indications of nation state involvement in financial cyber crime,” said Tarun Kaura, director (solution product management -Asian-Pacific & Japan), Symantec. “While their sights were set even higher, the attackers stole at least $94 million.”

Yahoo’s data breaches grabbed maximum eyeballs in 2016, after the company said in September that 500 million of its user accounts were compromised in 2014. Within a few months, the company came out with the shocker that over a billion user accounts were compromised making it the largest data breach ever been reported.

Symantec data reveals that in the last eight years, more than 7 billion online identities have been stolen in data breaches. In 2016, more than 1.1 billion identities were stolen in data breaches, almost double the number stolen in 2015 (563 million stolen identities).

TWO WHEELERS MORE POLLUTERS

Chennai: The stringency of emission norms is different for different categories even within the same mandated emission level. The Supreme Court’s decision disallowing sale of BS3 stock after March 31 hit many two-wheeler and commercial vehicles companies hard as they were stranded with unsold BS3 vehicles.

According to auto industry sources, BS4 emission norms are stricter for four wheelers as compared to three-wheelers and two-wheelers. Indeed, emission data shows that under the new BS4 rules, petrol two-wheelers are allowed nearly 5 times the NOX (nitrogen oxides) levels as compared to petrol cars.

“What I am talking about is factual – BS4 norms are different for different categories. The four- wheeler norms are more stringent than three-wheelers and two-wheelers. Rajiv Bajaj is a friend. But since he was saying we should stop selling BS3 stock in the spirit of the law, why don’t the two-wheeler companies upgrade to four-wheeler emission levels now that all of us are BS4 compliant?” said Vinod K Dasari, MD, Ashok Leyland.

INDIA TO END IMPORT OF FERTILIZER

NEW DELHI: The government has rolled out a plan to make the country self-sufficient in fertilizers in the next 3-4 years and has roped in cash-rich public sector energy companies to revive five fertilizer plants at an investment of Rs 30,000 crore.

“We have taken a two-pronged strategy to end dependence on (fertilizer) imports. One is to raise efficiency of urea through neem-coating, which is expected to reduce consumption by 10%, or 32 lakh tonne per year. Two, we are restarting closed fertilizer plants, which will add 75 lakh tonne per year production,” chemicals and fertilizers minister Ananth Kumar said.

Kumar made the statement after reviewing with power minister Piyush Goyal and oil minister Dharmendra Pradhan the progress of the plan to restart the fertiliser plants at Barauni in Bihar, Sindri in Jharkhand, Talcher in Odisha, Ramagundam in Telengana and Gorakhpur in UP.

NO PLAN TO TAX FARM INCOME

NEW DELHI: A day after Niti Aayog member Bibek Debroy backed the idea of taxing farm incomes beyond a threshold, finance minister Arun Jaitley said on Wednesday that the Centre had no plan to impose any tax on agriculture income.

The Niti Aayog also distanced itself from Debroy’s comment, saying it was his personal opinion and not its view as it didn’t make any recommendation of any such tax.

“I have read the paragraph in Niti Aayog report entitled ‘income tax on agriculture income’. To obviate any confusion on the subject, I categorically state that the central government has no plan to impose any tax on agriculture income,” Jaitley said in a statement.

“As per the constitutional allocation of powers, the central government has no jurisdiction to impose tax on agricultural income.” In the draft three-year action agenda presented to the states and PM Narendra Modi on Sunday, Niti Aayog had pointed out that exemption on farm income was being misused by several people to evade tax and suggested that the loophole be plugged.

Taxing agriculture has been a controversial issue in the country. The recommendations by the Economic Survey last year met with stiff opposition with political parties.

INDIA WORRIED OVER SIGN OF ECONOMIC PROTECTIONISM

NEW DELHI: Signs of economic protectionism and new barriers to migration are major global concerns, FM Arun Jaitley said in Moscow, days after raising the issue in Washington.

Speaking on global security challenges at an international security conference on Wednesday, Jaitley listed economic protectionism as a top concern, right after talking about unpredictability in ties between major powers.

“There are… worrying signs of economic protectionism. New barriers to migration and the closing of borders are other elements of such an approach. However, such efforts are unlikely to be able to address the complex issues involved,” said Jaitley, who is also the country’s defence minister. The minister had raised the issue of H-1B visa curbs in a meeting with US counterpart Steven Mnuchin in Washington on the weekend, pointing out that rising protectionism would hurt the global economy.

Speaking in Moscow, he identified Asia as the stage for global competition and said economies in the region will be critical for global growth. “For the foreseeable future, Asian economies will continue to be the drivers of global growth. Asia could also be emerging as the stage for competition between large and rising powers,” he said. Jaitley also listed territorial disputes in the maritime domain as a reason for worry.

“India believes that the rights of freedom of navigation and over-flight as well as unimpeded commerce should be ensured. These are vital to India’s own economic engagement with the Indo-Pacific region,” he said in an oblique reference to China.

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