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India and Japan Sign Currency Swap Agreement, Govt considers complete sale of IL&FS et al

Professor of Financial Economics and Part-time Value Investor, Transfin.
Oct 30, 2018 1:21 PM 3 min read
Editorial

Good evening reader,

 

Last week we were following the story of Harish BV and Sathvik Viswanath, co-founders of cryptocurrency exchange Unocoin, who got arrested in Bengaluru for setting up a "Bitcoin ATM". Flash back an year back and you may recall the story of an IIT grad who was arrested for "illegally accessing the Aadhaar data repository".

 

We confess that we're not aware of the full facts of these cases. But today we just want to ask a simple question.

 

Why is it that entrepreneurs and professionals in our country, who unknowingly or even knowingly venture on the fringe of regulatory vacuum (e.g. in cryptocurrencies & blockchain, Aadhaar & data privacy etc.) are so easily arrested and treated as criminals? Not really the best precedent to drive innovation into new domains of business.

 

Innovation requires taking risks which often means one has to go outside existing legal frameworks. Regulators will always be a couple of steps behind to catch up with new and upcoming technologies. Should the state approach these breaches from the perspective of enquiry and improvement, or simply exert blunt force trauma, extinguishing the sector once and for all e.g. like proxy banning crypto businesses.

 

The solution to this quandary may be to consider a regulatory sandbox, rather than blanket bans and restrictions. “A regulatory sandbox is a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms without immediately incurring all the normal regulatory consequences of engaging in the activity in question.” says the Financial Conduct Authority (FCA), UK’s financial regulator and one of the pioneers of this concept.

 

The idea is to allow first movers and innovators to gain a special status with which they can test new products and innovations against a limited number of consumers. They receive transitionary regulatory protection instead of facing the inadvertent risk of falling on the wrong side of existing rules.

 

Regulatory uncertainty is reduced, and rules can be drafted in continuous dialogue with the industry. Investors gain more comfort.

 

Moving on to the Top 6 Business Stories in our End Of Day Wrap Up:

 

INDIA

 

India and Japan sign a currency swap agreement of $75bn to stabilize markets.

India and Japan signed a $75bn bilateral currency swap agreement in a bid to steady foreign exchange and financial markets of both countries. This arrangement will allow India to acquire Dollar or Yen up to $75bn in exchange for Rupee, paying interest on use of funds and vice versa.

 

Jet Airways draws in Goldman Sachs and BCG as advisors for revival plan.

Amidst financial crunch on back of spike in price of aviation fuel, Jet Airways has appointed Goldman Sachs and Boston Consulting Group (BCG) to advise on raising funds and enhance operational efficiency.

 

Government to consider complete sale of IL&FS.

The government is examining the option of an outright sale for debt-laden IL&FS. The govt-appointed IL&FS Board is set to submit a revival plan to National Company Law Tribunal (NCLT) on 31 October.

 

US/INTERNATIONAL

 

US will issue c. $1.3tr as new debt in 2018, Treasury estimates.

US Treasury Department projections reveal a 146% hike in debt issuance from last year, highest amount since 2010. GOP tax reform law and bipartisan budget deal are credited as drivers of the hike in new debt issuance.

 

China’s Car Purchase Tax to be reduced to boost sales.

World’s largest automobile market saw a slowdown on back of trade war with US. To increase new car sales, the ‘car purchase tax’ will be reduced from 10% to 5%, for cars with engines smaller than 1.6 liters.

 

GE cuts dividend to save $3.9bn/year.

Aiming to refurbish its declining Power Unit, General Electric slashed its dividend by ¢2 to ¢10/share. The share price of the company rose in New York premarket trading, finally closing at $11.16.

 

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