Today’s Latest Business News at 9:30 am on 7th November 2022
“You are listening to the Expresso Business Update. Here is the latest news from the world of Indian and International business brought to you by The Indian Express and The Financial Express.
“Midway into the second quarter of the Financial Year 22-23 reporting season, several companies are staring at earnings downgrades. While banks and information technology firms have posted good results, players in sectors like cement, consumer goods, metals, retail, real estate, infrastructure and oil marketing have struggled to meet estimates. Aggregate numbers so far are poor. For a sample of 638 companies, net profits are down 26% year-on-year even though sales are up 31%. While the fall in the operating profit is just about 8%, higher expenses on interest – up 25% – and depreciation charges have hurt the bottom-line. The outperformance of 32 Nifty companies vis-a-vis expectations is just about 0.7% at the net profit level while for 25 Sensex companies, it is 2.3%.
“Meanwhile, In a judgment that will give boost to the loan recovery process of banks, the Supreme Court has restrained high courts from directing financial institutions/banks to grant benefits of one-time settlement schemes to borrowers, saying its not permissible as it would amount to rewriting the contract or the terms of the OTS. A bench led by Justice MR Shah said, “The borrower as a matter of right cannot claim that though it has not made the payment as per the sanctioned OTS scheme, still it be granted further extension as a matter of right. There cannot be any negative discrimination claimed. The borrower has to establish any right in its favour to claim the extension as a matter of right.” However, it added that the banks mutually can agree to extend the time of OTS scheme, which is permissible under Section 62 of the Indian Contract Act.
“Moving on. Google is understood to have told the government that its plans of shifting a part of manufacturing of Pixel phones to India from China will have to be put on hold till the entire judicial process with regard to the recent Competition Commission of India’s order, putting restrictions on its Android ecosystem, is through. The reason for the same is that the phones are manufactured for exports as well as domestic market and needs to be of standard format. The company has conveyed to the government that it’s not possible to manufacture one set of phones for the domestic market and another for export markets, which it will have to do as per CCI’s order. While imposing a fine of Rs 1,338 crore on Google for abusing its dominant position in multiple categories related to Android mobile device ecosystem, the CCI recently ordered that the original equipment makers shall not be forced to pre-install a bouquet of Google’s applications. It also said that the licensing of Google apps, including Play Store should not come with a clause of mandatorily pre-installing the apps in phones.
On to the economy sector. The state governments have slowed down their capital expenditure in the first six months of the current fiscal to accommodate higher revenue spending even as they continue to curb borrowings. The combined capex of nineteen states whose finances were reviewed by FE was up just 2% on year at Rs 1.67 trillion in April-September of the current fiscal. The growth was 80% in the year-ago period albiet on a favourable base. These states had budgeted a capex of Rs 6.58 trillion for FY23, an increase of 40% over the FY22 level. States have regulated capital spending amid concerns over tax revenues after the cessation of the Goods and Services Tax compensation on June 30. Despite the Centre adjusting a portion of states’ off-budget borrowings of FY22 in FY23, it has permitted all states to borrow over Rs 6.8 trillion in the first nine months of the current fiscal.
“In some more economy news, Amid a raging debate over the need for a pause in interest rate hikes, C Rangarajan, renowned economist and former governor of the Reserve Bank of India, believes the central bank should first try and bring down retail inflation to 6% – the upper band of its medium-term target – before altering the pace of its rate increases. In an interview with FE, Rangarajan also said while the central bank doesn’t target a particular level of the rupee, “the point really is we can’t, for that reason, let the rupee go wherever it goes”. “Then the terms of trade will turn against us. We should really act in order to be able to contain any sharp depreciation of the rupee,” he said. Raising the interest rate at this juncture, Rangarajan suggested, will not just help curb inflation but also prevent a sharp fall in the rupee against the dollar, given that the US Federal Reserve has resorted to aggressive tightening.
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