India Q1 GDP Growth Slumps to 5%, Mega Merger Plan for PSBs, Govt Relaxes FDI Rules

India’s GDP growth slumps to 6.5yr low in Q1 to 5%. Govt announces mega merger plan for PSBs. Fiscal deficit crosses 77% of budgeted target in first four months. RBI will release INR1.76L crore to the Union Government. The government could use it to reduce fiscal deficit or provide stimulus to slowing economy. Saudi Aramco eyeing Tokyo for its international listing; considers conducting its IPO in two stages. Purdue Pharma, the company blamed for fueling US opioid crisis, offers to settle lawsuits for $10bn-$12bn. 15% tariffs on $112bn in Chinese imports to go into effect on Sept 1. PM Boris Johnson gets Queen’s assent to prorogue Parliament till 14 October. 
 
 

Moving on to the top Business news stories of the week:

 
 
 INDIA 
 
India’s GDP growth slumps to 6.5yr low in Q1 to 5%. Govt announces mega merger plan for PSBs. Fiscal deficit crosses 77% of budgeted target in first four months. 
 
 
Free Fall: As per the data released by the Central Statistics Office, India’s GDP growth fell 5% in Q1 vs 5.8% in the previous quarter. This is the slowest pace of GDP growth in six and half years, also below the RBI estimate of 5.5%
 
 
The fall in GDP number has largely been influenced by the deceleration in private consumption.

 
Coming Together: Finance Minister Nirmala Sitharaman today announced a mega merger plan for Public Sector Banks (PSBs) wherein10 PSBs will be merged into four. 
 
 
Under the plan:
  • Indian Bank will be merged with Allahabad Bank
  • OBC and United Bank to be merged with PNB
  • Union Bank of India, Andhra Bank and Corporate Bank to be merged
  • Canara Bank and Syndicate Bank to be merged 
 
The government also announced capital infusion totaling over INR55,000cr into PSBs.  
 
 
In Other News: India's fiscal deficit in the four months through July stood at INR5.48tr ($76.65bn), or 77.8% of the budgeted target for the current fiscal year, reported a government data. 

 

 RBI 
 
RBI will release INR1.76L crore to the Union Government. The government could use it to reduce fiscal deficit or provide stimulus to slowing economy.  
 

Reserve Thanks of India: The RBI has accepted the recommendation of the Bimal Jalan Panel to transfer INR1.76L crore to the Union Government. The decision could also be implemented immediately: this sum could be transferred to the government’s books as early as today itself.

 
The sum of INR1,76,051cr comprises INR1,23,414cr of surplus for 2018-19 and INR52,637cr of excess provisions identified as per the revised Economic Capital Framework.
 
 
Bridge the Gap: The decision could provide a significant breather for the Government, which could use the money to curb the fiscal deficit by 0.3ppor provide a stimulus package to reinvigorate the slowing economy.
 
 
 FDI 
 
Govt eases FDI rules; relaxes sourcing norms for single-brand retailers, allows 100% foreign direct investment in contract manufacturing. Apple to directly sell iPhones in India online soon. 
 
 
All’s Well That Ends Well: In a bid to attract overseas players and provide the slowing Indian economy with the much-needed fillip, the government announced a slew of reforms in Foreign Direct Investment (FDI).
 
 
As part of the reforms, the government has permitted 100% foreign investment in coal mining and contract manufacturing, eased sourcing norms for single-brand retailers and approved 26% overseas investment in digital media. 
 
 
More on this here
 
 
A Bigger Bite for Apple: The government also eased rules that forced companies such as Apple to source 30% of their production locally. Following this, the tech giant will start selling iPhones directly to Indian consumers through its own online store.
 
 
Currently, Apple has online sales partnerships with Amazon, Flipkart and Paytm Mall. 
 
 
In addition to this, Apple has also decided to set up its iconic brick-and-mortar Apple Store in Mumbai over the next 12-18 months.
 
 
 
 COMPANIES 
 
 
Saudi Aramco eyeing Tokyo for its international listing; considers conducting its IPO in two stages. Purdue Pharma, the company blamed for fueling US opioid crisis, offers to settle lawsuits for $10bn-$12bn.
 
 
Oil Split: Saudi Aramco is considering conducting its initial public offering (IPO) in two stages.
 
The two stages would include:
  • Debuting a portion of its shares on the Saudi stock exchange later this year
  • This would be followed by an international offering in 2020 or 2021
 
Tokyo Stock Exchange has emerged as the international frontrunner, particularly following the political uncertainty in the UK and China, which has reduced the appeal of London and Hong Kong’s markets.

 
A Tokyo listing by the world’s largest oil firm would boost Japan’s effort to re-establish itself as a global financial center. But it could also highlight areas in which the country has laxer disclosure standards.
 
 

Crisis Update: Purdue Pharma, the company blamed for fueling the opioid crisis in the US, has offered to settle 2,000+ lawsuits for $10bn-$12bn. The company, owned by the multi-billionaire Sackler family, has been blamed for enabling the opioid crisis, which has cost 400,000+ lives in the US in the last two decades.
 
 
 
 WORLD 
 
15% tariffs on $112bn in Chinese imports to go into effect on Sept 1. PM Boris Johnson gets Queen’s assent to prorogue Parliament till 14 October. 
  
 
No Turning Back: President Donald Trump on Friday said that 15% tariffs on $112bn in Chinese imports are still set to go into effect Sunday. 
 
 
The news comes despite severe backlash from a number of companies and over 160 industry groups having written a letter to the President, asking him to postpone the tariff increase.
 
 
Brexit’s Hit the Fan: Boris Johnson can’t wait to get Britain out of the EU. MPs are scheduled to meet in Parliament on Tuesday. But they’ll work for less than a week. Because yesterday, the Queen consented to Johnson’s request to prorogue Parliament for 23 days from 10 September to 14 October.
 
 
BRBrexit: While Johnson downplayed his request – proroguing Parliament is not unheard of – the timing is telling. Brexit is due on October 31, which means MPs would have a little more than two weeks to deliberate on any deal Johnson’s government could negotiate with the EU. And if the UK heads for a no-deal exit (something Johnson’s a fan of), MPs now have even less time to block such an occurrence.
 
 
It’s A Special Relationship: As Britain prepares to (finally) leave the EU, its government prepares to amp up efforts to secure fruitful bilateral trade deals with other countries. In special focus is a possible deal with the US, the UK’s largest trading partner. Trump and Johnson said they’re very “gung-ho” about a “very big trade deal” at the recently concluded G7 summit in France. Indeed, a high-quality post-Brexit deal would be transformative.
 
 
 
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