India Q1 GDP Growth Falls to 5%, Mega Merger Plans for PSBs, iPhone 11 Release Date

Professor S

Professor of Financial Economics and Part-time Value Investor, Transfin.

Aug 30, 2019 12:42 PM 4 min read

Professor S

Professor of Financial Economics and Part-time Value Investor, Transfin.

4 min read221 views

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Explained

India’s GDP growth falls to 5% in Q1. Govt announces mega merger plan for PSBs. Fiscal deficit crosses 77% of budgeted target in first four months.

Moving on to the top Business news of the day:

INDIA

India’s GDP growth slumps to 6.5yr low to 5% in Q1. 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.

ECONOMY

RBI’s contingency funds have fallen by 15%. PMO asks NHAI to stop constructing highways.

Constricted Contingency: The RBI’s contingency fund has fallen by 15% following the excess payout to the government. The rainy day fund was INR2.32L crore in June 2018. Al year later, it stands at INR.96L crore. At the same time, in its annual report – released yesterday – the RBI affirmed that it "stands as a central bank with one of the highest levels of financial resilience globally”.

Highway to Hell: The PMO has asked the National Highways Authority of India to stop constructing highways. The reason? The road builder’s debt has exploded seven-fold in the past five years. Saying road infrastructure has become financially unviable, the PMO proposed transforming the NHAI to a road-asset management company.

TELECOM

India’s telecom companies hold almost INR4 lakh crore in debt. Reliance Jio could command 45% of market by 2022.

Death by Debt: As per a report by India Ratings, the total debt of the Big Three of Indian telecom – Vodafone Idea, Reliance Jio and Bharti Airtel – is a jaw-dropping INR3.9 lakh crore. That’s half of India’s fiscal deficit and twice the amount the RBI gave the government recently.

Furthermore, as the telecom wars show no sign of slowing down, the burden of investments and deep discounting will continue to mount, further weakening the liquidity profiles of these telecom operators.

Jio-h My God!: The same report also stated that Jio is slated to continue eating into the subscriber base of its rivals Vodafone Idea and Bharti Airtel. It could command almost half the market by March 2022.

India’s telecom sector was severely disrupted in September 2016 since the arrival of Jio, whose dirt-cheap data rates attracted millions of customers and forced competitors to slash their own rates in turn. Today, as it adds on average 10mn users each month, the operator is poised to control 45% of the market within the next three years.

APPLE

The iPhone 11 is a-coming. Apple to allow independent repair shops to fix defects in its products. India tries to capitalise on trade war by wooing foreign firms.

The 11th Avatar: The new iPhone is a-coming. Apple has sent invites to the launch event at its Cupertino office on September 10. The iPhone 11 is rumoured to be in three versions – a standard 11 and two 11 Pros. These will replace the XR, XS and XS Max respectively. In terms of features, some possible firsts could be a triple-camera, wireless power sharing and a new A13 chip. And a lower-priced flagship could be aimed at offsetting declining smartphone sales and increasing presence in emerging markets like India.

iDecentralise: Apple is also selling its tools and parts to independent phone repair shops in the US to dilute its grip on how customers fix defects in its products. It could expand the same policy to other countries. These repairs, however, will be limited to iPhones out of warranty.

India Blinks: India is targeting foreign firms like Apple, Foxconn and Wistrop in a bid to capitalise on the US-China trade war, which has forced companies to rethink supply chains and shift manufacturing bases from China. While India is more than a little late to launch this charm offensive – Vietnam has been wooing foreign firms away from China for a long time now – it may not be too late, given India’s size and opportunities.

GLOBAL

US economic expansion reaches 10th anniversary. Q2 numbers are strong, but threats remain. Saudi Aramco eyeing Tokyo for its international listing.

Trumpian Rhapsody: The White House has likely scheduled celebratory parties all day long today. The US economic expansion has reached its 10thanniversary and growth yet again offset slowdown and recession fears. US GDP rose at a seasonally adjusted annual rate of 2% in Q2. Consumer spending and corporate profits experienced an uptick and an improving labour market has continued to bring good news for economic growth.

To be fair, however, while 2% is a solid number for a developed country, it is still down from Q1’s 3.1% and 2018’s 2.9%. Dim global growth, a slump in employment and continued trade frictions could impact US growth adversely in coming quarters.

Oil Be Right Here Waiting For You: Saudi Armaco is reportedly zeroing in on Tokyo to list its shares. London and Hong Kong were previously considered for the international listing but political uncertainties in these cities put them out of the running.

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