Cabinet Ministers of India Announced, Budget 2019 to be Presented on July 5, Fiat Chrysler Renault Merger Plan, US Ends Preferential Status for India under GSP and Other Top Business News of the Week

Nirmala Sitharaman appointed as the next Finance Minister under Narendra Modi Govt 2.0. India GDP growth slows to five-year low at 5.8%. Unemployment rate at 45-year high. Union Budget to be presented on July 5. Fiat Chrysler proposes merger plan with Renault. Lenskart in talks with SoftBank to raise $350m, set to join the unicorn club. Oyo enters strategic partnership with China’s CTrip. US removes India from its currency monitoring watchlist. US President Donald Trump terminates preferential trade status for India under GSP. US begins collecting higher tariffs on Chinese goods arriving by sea. Yield on the benchmark 10yr government bond dips to a near 18-month low. Global markets shrink after Donald Trump’s Mexico tariff threat.

 

Moving on to the top Business news of the week.

 

 MODI 2.0 

Nirmala Sitharaman appointed as the next Finance Minister under Narendra Modi Govt 2.0. India GDP growth slows to five-year low at 5.8%. Unemployment rate at 45-year high. Union Budget to be presented on July 5.

Former Defence Minister in the Modi administration, Nirmala Sitharaman has been appointed as the Finance Minister under the re-elected Prime Minister Narendra Modi’s Cabinet.

Sitharaman had also served as the Commerce and Industry Minister before she took up the Defence portfolio. Sitharaman will also hold the Ministry of Corporate Affairs. 

 

What You Need to Know: Arun Jaitley, who held the Finance and Corporate Affairs portfolios in the previous NDA government, had earlier this week opted out of formal responsibilities owing to health conditions.
 

A Rocky Road Ahead: As she takes charge, the immediate challenge before Sitharaman is to revitalize the slowing down economic growth rate and shape the full-year budget for FY20 amid concerns of slowing down revenue collection and surging welfare spending needs.
 

Here are some other challenges the new Finance Minister is likely to be tackling during her tenure. 
 

Who’s Who: The Narendra Modi government on Friday announced the allocation of the Cabinet portfolios. Here’s a look at who got what.

 

Strike One: India’s GDP rate slowed to five-year low of 5.8% in Q4 FY2018-19, due to poor performance in agriculture and manufacturing sectors.

 

The Central Statistics Office also revealed that GDP growth during FY2018-19 stood at 6.8% vs 7.2% in the previous fiscal.

 

This slump in growth raises the question whether the RBI will provide a monetary stimulus to the slowing economy in its monetary policy review on 6 June, ahead of the budget to be presented on 5 July.

 

Strike Two: Unemployment rate in India rose to 6.1% during FY2018-19. As per data released by the Ministry of Labour and Employment, 7.8% of all employable urban youth in India are jobless, while the percentage for the rural was 5.3%. 

 

In Other News..: Union Budget will be presented by the newly-appointed Finance Minister Nirmala Sitharaman on July 5. The Economic Survey will be released on July 4.

 

The Interim Budget for the year 2019-20 was presented by then Finance Minister Piyush Goyal on February 1, 2019.

 

A Champion for Sputtering Causes: The allotment of the Ministry of Micro and Small Enterprises in Prime Minister Narendra Modi’s new Council of ministers to Nitin Jairam Gadkari, in addition to the road transport and shipping portfolio, is not surprising. Read this article to understand why giving Gadkari the MSME ministry may be a most inspired decision by the re-elected Modi government.

 

 COMPANIES 

 
Fiat Chrysler proposes merger plan with Renault. Uber reports loss of $1bn in Q1. Reports 4% fall in commission Y-o-Y. Edtech company Byju’s triples revenue in FY 18-19.
 
 
The Mega Merger Plan: Fiat Chrysler Automobiles has proposed a merger with French rival Renault.

 
The deal, if it goes through, would create the third-largest auto maker, only behind Volkswagen and Toyota Motor with a combined value of about $37bn and annual vehicle production of almost nine million passenger cars and light trucks.

 
As per the plan, the combined business would be 50% owned by its shareholders and 50% by Renault shareholders with a “balanced governance structure.”

 
Crystal Clear: Fiat Chrysler said that its proposal came after an initial period of discussions with Renault to identify products and markets where they could collaborate to better meet the expensive challenge of electric vehicles, self-driving cars and in-car connectivity. Following the discussions, it became rather clear that a full merger was the most efficient option.

 
More on the proposed merger here
 
 
Disappointing Performance: Uber announced its Q1 results on Thursday and reported a loss of $1bn on a $ 3.1bn revenue
 
 
Shares initially fell about 1% on the news, but were up more than 3% in after-hours trading. 
 
 
The quarterly loss came despite a 20% rise in revenues to $3.1bn and increase in monthly active users to 93 million.
 
 
The news comes at a time when some analysts have expressed unease about the company ever making a profit post its IPO on May 10.
 
 
Shrinking Margins: Ride-hailing giant Uber, in its Q1 results reported that commission earned by its food delivery arm UberEats dropped 4% on a YoY basis, half of which was attributed to increased investments in its India food ordering unit where it competes with bigger rivals such as Swiggy and Zomato.
 
 
Edtech Unicorn Turns Profitable: Bengaluru-based school learning app Byju’s announced today that it has tripled its revenue to INR1,430cr in FY 18-19, on back of its expanding paid user base. The platform is estimating a revenue of over INR3,000cr this fiscal. 
 
 
In an official statement, the company attributed this growth in revenue to “deeper penetration across India and significant growth in the number of paid subscribers”.
 
 
Launched in 2015 with programs in both Hindi and English, the app currently boasts 35 million registered students and 2.4 million annual paid subscriptions.
 
 
Going Global: After a successful innings in India, it seems that Byju’s now has plans to enter the global market. It recently acquired a US-based platform for educational games for $120m and is also partnering with Walt Disney to introduce a new early learning app for kids.
 
 
 STARTUPS 

 

Lenskart in talks with SoftBank to raise $350m, set to join the unicorn club. Oyo enters strategic partnership with China’s CTrip. 

 

Unicorn Spotted: Eyewear retailer Lenskart is in talk with Softbank’s Vision Fund to receive $350m in fresh funding round, valuing the platform at $1.3bn.

 
This would be a huge jump from its previous valuation of $460-470m.

 
SoftBank’s discussions come on the back of Carlyle Group’s interest in Lenskart. However, talks with Carlyle Group fell through as the private equity firm was proposing a valuation of about $700m, much lower than the company’s expectations.
 
 
Lenskart recently entered Singapore and the plan is to open 50-60 stores over the next three years in the island-city, before expanding to markets such as the Philippines, Taiwan and the Middle East.
 
 
Building Synergies: Hospitality firm OYO has entered a strategic partnership with China’s largest online travel aggregator Ctrip in an attempt to extend its offerings to travellers.
 
 
As part of the partnership, both companies will collaborate across multiple areas of business, including demand generation by providing access to customers of both brands, online-to-offline services integration, data operation and branding.
 
 
Match Made in Heaven: Fiat Chrysler Automobiles has proposed a merger with French rival Renault.
 
 
The deal, if it goes through, would create the third-largest auto maker, only behind Volkswagen and Toyota Motor with a combined value of about $37bn and annual vehicle production of almost nine million passenger cars and light trucks.
 
 
 US 
 
 
US removes India from its currency monitoring watchlist. US President Donald Trump terminates preferential trade status for India under GSP. US begins collecting higher tariffs on Chinese goods arriving by sea. 
 
 
 
Out of Sight…Out of Mind: In its semi-annual report to US Congress on International Economic and Exchange Rate Policies, the Treasury Department on Tuesday removed India and Switzerland from the previous currency watch list of countries with potentially questionable foreign exchange policies. 
 
 
It, however, continues to keep China on its watch list.
 
 
The list currently includes China, Japan, South Korea, Germany, Italy, Ireland, Singapore, Malaysia, and Vietnam.
 
 
India, along with China, Japan, Germany, Switzerland and South Korea, was placed in the bi-annual currency watch list in October last year.
 
 
This is It!: US President Donald Trump on Friday terminated India’s designation as a beneficiary developing nation under the key Generalized System of Preference (GSP) trade programme with effect from June 5, 2019.
 
 
“I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,” Trump said in a statement on Friday.
 
 
Previously: Trump had earlier in March announced that the US may terminate India’s designation as a beneficiary of the GSP, which allows $5.6bn worth of Indian exports to enter the US duty free.
 
 
Zoom Out: US President Donald Trump imposed the tariff increase on a $200bn list of Chinese goods on May 10, but had allowed a grace period for sea-borne cargoes that departed China before that date, keeping them at the prior, 10% duty rate.
 
 
 MARKETS 

 
Yield on the benchmark 10yr government bond dips to a near 18-month low. Global markets shrink after Donald Trump’s Mexico tariff threat.
 
 
Record Low: The benchmark 10yr government bond yield dipped to a near 18-month low to close at 7.03% on Friday, the lowest level since December 7, 2017, on back of better fiscal numbers and possible sharper rate cuts in the current fiscal. 
 
 
The dip is also likely to have been driven by the declining crude oil prices and global yields on the back of rising concerns in the global economy.
 
 
Global Turmoil: Stocks and bond yields around the world fell on back of US President Donald Trump’s tariff threat to Mexico wherein he said that the US will impose a 5% tariff on all Mexican imports from June 10, and duties of up to 25% will be added in the coming months if Mexico does not take action to “reduce or eliminate the number of illegal aliens” crossing into the US.
 
 
This has also called into question US’s already fraught trade negotiations with China.
 
 
Experts are split on what this means for the stock market, and what could come next in this uncertainty-laden landscape. Here are four of their takes on the development.
 
 
 
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