NRC,BHU
Learning Outcome
To make the readers aware about the importance of Current affairs
To discuss the latest business news and examine their impact on the respective sector
To encourage the faculty and students to include current affairs as a part of their routine classes.
Introduction
Business current affairs depict a very interesting scenario. While on one side everyone agrees on their relevance but sometimes we are not able to include them in our regular classroom sessions while at times students refrain from reading the business news because they do not understand.
It is strongly recommended that the current affairs should be a part of our daily class and this would energize the students. Other than this some fortnightly sessions followed by a current affairs quiz with some prizes or certificates could be considered. In fact some institutions have special student clubs which take up the activities and panel discussion with some element of simulated role play could be carried so as to make the things interesting for the students.
1.
We as teachers may consider to announce this towards the beginning of semester or trimester that a set of activities would be organized to improve acquaintance of business current affairs among the students.
Even student assignments could be based on clubbing some recent events and expression of their views and original ideas could be encouraged.
Some of the business current affairs….
Stock market is showing bearish trend for last few weeks but witnessed an uptrend in last few sessions. Should you be worried?
The most important thing first, while the Indian stock indices fell in last few months but it did not underperform the global markets. Shanghai Composite and Hangseng have dropped by about 17% from their 2 year high, while KOSPI is down by 18%, FTSE and DAX by 8%, and SENSEX is down by just 4% from its recent high of 40000 points. Even if you exclude last session gains, still the drop was not worse than FTSE and DAX. And as on date the drop from the peak for Sensex is not as bad than what happened to the NASDAQ.
State of monsoon, global trends and slowdown in some sectors seem to be the key reasons for FII going on selling mode but our long term growth potential remains intact and the commitment for 5 trillion dollar GDP target by 2024 makes India an attractive destination.
Pursuant to the market friendly announcements by our finance minister and great response by the US crowd and the President to the visit by our Prime Minister, the markets have jumped by 8% in 3 trading sessions which is encouraging.
Corporate Tax Cut in Numbers
The effective tax rate has been slashed by up to 28% (lower for companies that opt for minimum alternate tax), which is expected to result in tax savings of Rs1.45 trillion for Indian companies
Finance minister Nirmala Sitharaman announced a cut in corporate tax rate for companies that do not avail of any tax incentive to 22%
New manufacturing companies will have to pay an even lower corporate tax rate of 15%
Before
After
% change
Profit before tax
100
100
Effective tax rate
35
25
-28
Profit after tax
65
75
15
Absolute tax outgo (Rs trillion)
'7.66
'6.21
-19
Surplus due to tax cut (Rs trillion)
'1.45
Courtesy: Livemint Newspaper
SOME OF LATEST QUARTERLY RESULTS STARTING WITH SBI
State Bank of India reported a net profit of ₹2,312 crore for the June quarter, compared to net loss of ₹4,875 crore in the year-ago quarter, largely due to lower provisions and higher other income.While SBI’s total provisions more than halved on a year-on-year basis from approximately Rs. 19,000 crore to ₹9,000 crore in the June quarter, its other income increased 20% to ₹8,000 crore and moreover, SBI’s net interest income— which means the difference between interest earned and expended— moved up by 5% to ₹22,000 crore and another good thing that the net interest margin (NIM) rose 6 basis points.
In backdrop of this news we as the teachers can teach concepts like capital adequacy, NIM, operating profit margin etc. and the students are likely to respond better.
Another quarterly result we can analyse is of the PNB, which reported a surprise profit of approximately Rs 1,000 crore for the quarter ended June 30 because of drop in provisions. The bank had reported a loss of Rs 950 crore in the corresponding quarter 2018. Interestingly, the Analysts in one of the polls had projected a loss of Rs 350 crore for PNB.
Some negatives are that, asset quality of PNB deteriorated with percentage of gross non-performing assets (NPA) rising to 16.49 per cent against 15.50 per cent on a quarterly basis. Net NPA also increased to 7.17 per cent.
In backdrop of this teachers can teach concepts of expected v/s actual results and impact of NPA. We can also tell the students to analyse results announcements and immediate impact on the stock prices from which we can link lessons in security analysis course.
Let’s take up a result from the FMCG and here we find that Marico, the popular FMCG company reported 21.6 percent jump in its Q1 consolidated net profit to Rs 315 crore against Rs 260 crore in previous corresponding quarter.Revenue for the quarter grew 7 percent to Rs 2,100 crore and now its focus is on healthy foods, premium hair nourishment and now targeting growth at 20 percent plus CAGR over the 5-7 years.
One more plus point is that in the International business, the Company expects to have a good growth while maintaining the Operating margin level of 19 percent. So in this backdrop we as the teachers can teach concepts of CAGR and impact of operating margin. Friends we may also throw some challenge to the students like what are the key variables that would drive the Q2 results of Marico. Give a few days to students to come up with their thoughts in the classroom.
US-CHINA TRADE ISSUES AND THE IMPACT
US President Donald Trump has abruptly triggered trade war with China, announcing that he would impose a 10% tariff of about $300 billion on the Chinese imports which are currently not subject to import duties. And now thee new tariff will be applicable from the month of September. As you may be aware that another $250 billion in Chinese goods are already subject to a 25% U.S. tariff. So it is high tension time and Shanghai composite index has fallen by about 17% from its peak level of 2018 and this evidences that China has lost lot of money due to the US actions. Now the question is how these changes will impact India.
India’s share of world exports rose to 1.71 percent in the first quarter of 2019 from 1.58 percent in the fourth quarter of 2017, as per data compiled by Bloomberg. The share of every other economy among Asia’s 10 biggest exporting nations fell in the same period.
Trade tensions between the U.S. and China have given India an opportunity to ramp up exports to both countries, according to Ajay Sahai, director general and chief executive officer of the Federation of Indian Export Organisations.
India’s exports to the U.S. grew at the fastest pace in six years in the year ended March 2018, while exports to China surged 31 percent, the second highest annual pace of growth in more than a decade, shows data from Commerce Ministry.
Council for Leather Exports Chairman P R Aqeel Ahmed said the trade war will help India increase footwear exports to the US. "India's footwear exports to the US currently are about USD 300 million and Chinese exports to the US are USD 11 billion. Even if we get 10 per cent of this, our exports to the US can grow four times," All in all our corporate need to look for ways in which we can benefit from the current turmoil but having said this, it is not so easy.
In this backdrop teachers can introduce tariff and non-tariff barriers and opportunities for Indian exporters. They may also encourage students to find ways in which India can benefit from US-China Trade war.
THE RECENT BUDGET
In the Union Budget, the government has focused on incentivizing MSMEs, infrastructure development and boosting rural and agrarian economy which will fuel growth in manufacturing sector going forward. Tax proposal to lower 25% corporate tax rate applicable to companies with turnover up to INR 400 crores and increasing import duty on select products augurs well for Government’s Make in India initiative.
Sambitosh Mohapatra, PwC has mentioned that the aspirations and support of manufacturing new-age technologies – solar PV, electric vehicles, storage batteries and charging infrastructure will go a long way in making the energy sector fit for future. It can be transformational for attracting private investments to the sector as well.
Anita Rastogi, PwC has viewed that the key theme of this Budget has been a focus on ease of doing business as far as GST is concerned. The proposals include single monthly returns, free accounting software for small businesses, fully automated refund mechanisms and more. The focus on GST has also been on technology where E-invoicing will be rolled out from January 2020. In customs, the main theme has been Make in India and less imports. This means that customs duty on many raw materials have been reduced so that goods are manufactured in India. On the other hand, customs duties on final products have been hiked to reduce imports.
Corporate tax will be reduced to 25% from 30% for companies that have an annual turnover of up to Rs. 400 crores. This, the finance minister said, would include 99.3% of firms in India. She added that this would boost profits for a large number of companies, but she and experts also say it is an important step to stimulate investments.
While there was no change in the income tax structure for most brackets, Ms Sitharaman announced a 3% increase in taxation for some of the highest earners in Indian society, with Rs. 2 crores plus income.
In this backdrop, concepts like fiscal deficit, role of Government, features of Indian Economy, role of budget for progression of economy can be debated. And ofcourse the recent liberal announcements by the finance minister like reducing corporate income tax further, which were welcomed by the stock markets also could be brought to notice of our students.
Since we are talking about the corporate income tax, let me refresh your memory that the tax rate for all corporates is reduced from 30 per cent earlier to 22 per cent now. Inclusive of surcharge and education cess, the effective tax rate is down from 34.94 per cent to 25.17 per cent. But this is subject to the condition that they will not avail of any exemption/ incentive. Hence, the extent of impact for companies will depend on specific sectors and exemptions that companies currently enjoy.
The second move by the FM is to boost fresh investment in manufacturing. For new companies incorporated on or after October 1, 2019, making fresh investment in manufacturing, the tax rate has been cut to 15 per cent from 25 per cent currently. Inclusive of surcharge and cess, the tax rate comes to 17 per cent. These companies will also not have to pay Minimum Alternate Tax (MAT).
BANKING WHICH IS GETTING TECH DRIVEN DAY BY DAY. HDFC BANK IS NOW ON WHATSAPP AND GIVING CASHBACKS ON APPS, CARDS TO ATTRACT MILLENNIALS
HDFC Bank, India’s largest private sector lender, is now focusing on Whatsapp, for targeting the millennials. Now not only its customers may check their account and credit card details using the app but they will also be in position to enquire about pre-approved offers and the bank’s promotions while any questions could also be answered on the app.
Taking technology seriously HDFC bank is offering attractive discounts and cashback schemes on its various online platforms and credit and debit cards to attract customers and would you believe that it has gone for full front-page advertisements about this initiative.
Now 5% cashback on shopping via HDFC wallet PayZapp and its payment gateway SmartBUY is available. To clarify, SmartBuy is actually a platform only for display of offers provided by the merchants to customers of the bank and as we know that the bank is not in business of selling any of such products. These issues can be discussed with the students about tech changes and response by banks and emphasize that only by such consistent initiatives the HDFC bank has witnessed steady 25% profit rise every year.
IF ONE FEELS THAT PSU BANKS ARE LAGGING BEHIND IN TECHNOLOGY, WAIT, LOOK AT SBI.
Today SBI account holder can withdraw money from ATM without using a debit card. SBI savings account customer can withdraw cash at the select ATMs of the bank without possessing the debit card and there comes SBI's Yono app. As some may know it already, that Yono is a digital banking platform of SBI and the bank customers can use it on their smartphones for undertaking any of the digital transactions including making the online payments.
Customer can log into Yono app using the bank's internet log-in and password and ofcoursethe account holder can set a 6-digit MPIN for doing easier log-in anytime in the future. Once one clicks on the Yono Cash, reach the ATM section and enter the amount to be withdrawn at the ATM subject to the maximum limit of Rs. 10,000.Once done, SBI will then send its customer, a Yono Cash transaction number on registered mobile. The number and the PIN set by customercould be used for withdrawal of cash anytime within four hours. What’s more, the Yono app also gives the convenience to SBI account holders to locate the nearest Yono Cash Points.
After discussing this, we can ask students to compare PSU and Private banks and their experiences as a customer or project trainee or employee. Thus in this module we came across some business news, their impact and linking them with students’ learning. I trust you would find this useful. We would appreciate if you write to us on prime@banasthali.in.
BUSINESS CURRENT AFFAIRS-II
Welcome to the part 2 of the business current affairs. Surely it is comprehensive to all of you that including the business current affairs in the classroom teaching not only is perceived as beneficial by the students but linking it with the theory brings more respect for the classroom sessions.
INDIA HAS JUMPED NICELY IN GLOBAL INNOVATION INDEX?
COURTESY: LIVEMINT NEWSPAPER
India has infact moved up five places to rank 52 in the Global Innovation Index 2019, that is up from the 57 it had in last year’s rankings and 81 in 2015, courtesy the report by the World Intellectual Property Organisation.
Now the encouraging point is that India is consistently among the top in the world in major innovation drivers that are ICT services exports, graduates in science and engineering, the quality of universities, gross capital and creative goods exports. WIPOmentions that India is doing very well in science and technology clusters, and the places like Bengaluru, Mumbai, and New Delhi are now listed among the top 100 global clusters.
But there are some concerns. Some aspects where India has lost relative strength is in logistics performance where our position has dropped by 9 spots while for women employed with advanced degrees our position has dropped by 10 spots and furthermore when it comes to Printing and other media our position has dropped by 12 spots.
We can emphasize on merits of innovation and ask students to google and bring 1-2 innovative initiatives by India be it startups or government and discuss in classroom. This assignment can be carried by students in a group of 4 to 5 also.
THE CHANGES IN CSR RULES
CSR EXPENDITURE: THE TOPPERS
COURTESY: LIVEMINT NEWSPAPER
Indian Parliament has recently passed amendments to the Companies Act to strengthen laws governing corporate social responsibility and few of Indian companies may feel face higher compliance and management costs due to this.
The laws governing CSR were notified under the Companies Act, 2013, and became effective from 2014 and they state that companies that have a net worth of Rs. 500 crore or revenue of Rs.1,000 crore or net profit of Rs. 5 crore during the immediately preceding fiscal year are needed to spend 2% of their average net profit in the last three years on certain predefined activities related to sanitation, education, conservation of heritage, art and culture etc.
As of now Reliance, ONGC, NTPC, TCS Infosys are big CSR spenders and at time spend over 2% also. Spending on CSR has gone up from Rs. 10,066 crore in 2014-15 to Rs.13,327 crore in 2017-18. Of the over 21,300 companies obliged to report their CSR activities in 2017-18, over 10,800 have complied. CSR spending between 2014-15 and 2017-18 was the highest in education, health, fight against poverty and malnutrition, access to clean drinking water, livelihood and for the differently-abled.
Now if a company was unable to fully spend the prescribed CSR amount, it was permitted to carry this amount forward and spend it in the next 12 months. But as per the new laws, any unspent amount will have to be deposited into an escrow account within one month or 30 days of the end of that fiscal year. Such amount needs to be spent within three years else will be put into a fund, which could even the Prime Minister’s Relief Fund. Companies who do not follow CSR norms will be required to pay fines ranging from Rs. 50,000 to Rs. 25 lakh, and furthermore the officers concerned may be liable for imprisonment of up to three years. After this move the Govt. has expanded scope of CSR spending and companies were allowed to provide CSR funds to technology incubators located within Centre-approved academic institutions.
Now the companies can contribute towards research across various fields for instance science, medicine etc. and money can be spent on incubators funded by the Centre or state or any state-owned companies also. In light of this Jaivir Singh, Vice Chairman and President PwC India Foundation has said that the thrust towards research-based innovation is a much needed step in the right direction. Integration with established private enterprise in key sectors will provide the required impetus for a future ready economy. Additional focus to drive social enterprise to drive localised enterprise and employment opportunities, especially around key social services should be encouraged,"
CSR violations not be treated as criminal offence and will be civil liability as declared by the finance minister few days back. This should come as a respite for the companies.
After discussing this students can be asked to visit corporate websites to find pattern of CSR spending and some of them who are interested to make career in social sector may benefit from this. There are also some portals and organizations that are conducting events on CSR which can be attended by such students to initiate networking. It is suggested to visit the portal indiacsr.in on which you can find what corporate are doing, and all latest news about CSR and also you should know that the BSE has started registering NGOs and Corporate on bsesammaan.com and here there is a listing fee after which NGOs and Corporate can join hands.
TIME TO TALK ABOUT THE BITCOINS
Bitcoin price was about 2000 dollar each in 2015 which has now jumped to about 9500 dollars each in Sept 2019 and some months before the price reached 11000 dollars also. Today on 25 September a bitcoin equals about 7 lakh Indian Rupees. One of the Draft bills in India proposes 10-years prison term for dealing in crypto currency.
A crypto currency is a digital or virtual currency applying cryptography for the purpose of security and is generally based on block chain technology, which is a distributed ledger normally enforced by a certain network of computer system. Bitcoin is considered as the most popular crypto currency in the entire world.
As youth are interested to make quick money but do they know that holding, or selling or dealing in crypto currencies such as Bitcoin could soon land them in jail for 10 years.
The "Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019" draft has proposed that a 10-year prison sentence should be applicable for persons who "mine, generate, hold, sell, transfer, dispose, issue or even deal in cryptocurrencies.
Besides making it completely illegal, the bill makes holding of crypto currency a non-bailable offence. Students should be informed about that owing to the high chances of cryptocurrencies being misused for money laundering, governments across the world or their bodies such as the Income Tax Department are in favor of banning of cryptocurrencies like Bitcoin.
IN THE TIME TO COME, THE GOVERNMENT IN INDIA MAY LAUNCH A DIGITAL RUPEE
Friends after the demonetization of 500 and 1000 rupee currency notes we all started realizing that cash is unreliable. But some youth turned to Bitcoin. In fact many are already using Bitcoin. Bitcoin enables people to make financial transactions quickly and securely without a bank account.Over 500 merchants in India and five large corporate including Dell accepted payments in cryptocurrency. This number was fast growing. In the month of August, Market intelligence from Goldman Sachs suggested the investors to take advantage of the price dip and buy bitcoin.
It also said that, based on its Elliott Wave analysis, Bitcoin would find support around dollar 11,000, and that there’s scope for a move higher to $12,000, then $13,000. One of the popular financial advisors Ms. Monika Halan has also suggested investors to stay away from Bitcoin.
So the students are suggested to avoid Bitcoins and look to other ways of making steady returns. In this backdrop one may analyze how different investments have yielded the return. Different avenues have generated different return. Here one may compare investment avenues based on return, risk, marketability, tax shelter, convenience, and values and ethics. We may ask the students to compare return on bank FD, stocks, gold etc adjusted for transaction cost, convenience, income tax etc and see the short term and long term perspectives. Remember that building a portfolio is a complex exercise.
THE SOVEREIGN GOLD BONDS WHICH ARE BETTER COMPARED TO INVESTING IN GOLD IN FORM OF COINS OR JEWELLERY.
The weak global economic outlook and the US-China trade war tensions, and stock market position has pushed up gold prices. Analysts believe that gold as an asset class should have 5-15 per cent composition of the total investment portfolio. The SGB scheme launched in November 2015 is getting popular and its objective to reduce the demand for physical gold and shift a part of the domestic savings into financial assets.
Some interesting aspects about the SGB scheme are that
The government, in consultation with the Reserve Bank of India, has decided to offer a discount of Rs 50 per gram less than the nominal value to investors applying online. .
These bonds will be sold through Scheduled Commercial banks Stock Holding Corporation of India Limited (SHCIL) etc.
The gold bonds are issued in denominations of one gram and in multiples.
The maximum limit of subscription is 4 kg for individuals and Hindu Undivided Family (HUF) per fiscal year, while that for trusts and similar entities is 20 kg.
Investors in gold bonds not only earn the appreciated value of gold but also 2.5 per cent interest rate per annum. Interest is paid semi-annually.
However there is a lock-in period of five years on gold bonds - post which premature redemption is permitted - while the maturity period is eight years. Sovereign gold bonds are also traded on stock exchanges (if held in demat form), offering an early exit option to investors.
On maturity, the redemption price will be based on simple average of closing price of gold of 999 purity of previous three business days from the date of repayment as published by India Bullion &Jewelers’ Association.
However the Interest earned on SGB is taxable as per the subscriber's tax bracket. But the capital gains tax arising on redemption of SGB to an individual on maturity has been exempted. Indexation benefits will be provided to long terms capital gains arising to any person on transfer of bond.
These securities can be used as collateral for loans.
So the SGB seem good but so as the Gold ETF, but the only issue for the later is requirement of the demat account and favorable tax exemption as in case of SGB does not exist. We can encourage the students to ask their parents to invest via SGB or gold ETF if they wish to look at gold as an investment.
India plans to raise $10 billion from First Foreign Bond Sale
The idea of a sovereign bond has been discussed by Indian governments in the past, but was never taken up. Some former central bankers have also opposed the plan, owing to perceived risks from currency fluctuations.
Typically, the more financially strong a country, the more well respected is its sovereign bond and this is true with the US and Britain. But if we can ensure a stable currency such move may be of benefit to the nation. This is turn would depend on controlling the macro-economic indicators which is not so easy.
THE MUTUAL FUND INVESTORS ARE GETTING SMARTER.
As per news reports the driving force for mutual fund investments are SIP flows, which have averaged ₹8,000 cr for the 12 months till Aug. and the Investors are also moving out of the riskier segments of credit risk funds and moving into others such as corporate bond funds.
The awareness about mutual funds has gone up significantly after investor awareness campaigns and disappointment from other asset classes and now people know more about them and have become smart with their pattern of investment, choice and selection criteria. This is good for the market and therefore for the economy as well.
Mutual Funds now offer much more variety and seem attractive but generally students consider them as quick ways of making money. The question is what we can tell them, so in our sessions let us tell them the right way to choose a mutual fund. We should also explain them the merit of regular investing.
Summary
After reading this module it is expected that our readers definitely encourage your students to read business current affairs and suggest them to read between the lines because lots of news are sponsored in nature and therefore they are not a kind of writing on the wall. But one thing is clear that the inclusion of current affairs would certainly make the learning much better.
