IIP falls in July. Retail inflation rises in August. US budget deficit crosses $1tr for the first time since 2012. ECB announces stimulus package to boost Eurozone economy. Govt considers capping Ola, Uber surge pricing to 3x Base Fare. WeWork to list on Nasdaq.
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Down and Down: As per a government data released, industrial production growth slowed to 4.3% in July vs 1.2% in June and 4.6% in May this year and 6.5% last year, weighed down by a slump in manufacturing. Manufacturing sector grew at 4.2% in July 2019 compared to 7% a year ago.
What Else: Retail inflation rate rose to 3.21% on back of higher food prices.
No End in Sight: India’s economic growth is “much weaker than expected”, opined IMF spokesperson Gerry Rice.
The dip in growth can be qualified to “corporate and environmental regulatory uncertainty and lingering weakness in some non-bank financial companies (NBFCs)”, he noted.
Red Flag: Altico Capital, a non-banking finance company that focuses on lending to the real-estate sector has defaulted on interest payments worth INR19.9cr due to Mashreq Bank of Dubai.
The news comes shortly after India Ratings downgraded the financier’s debt to A+ from AA- on Sept 3, with a negative outlook. That same day, Altico’s Chairman Naina Lal Kidwai stepped down.
According to its latest filing, Altico Capital has INR43.62bn of loans outstanding from banks and financial institutions as of Sept. 12.
The default brings to limelight India’s retail sector, which has been one of the main recipients of funding from shadow lenders, who have been facing severe funding crunch following the IL&FS crisis.
The Chosen One: Shared workspace provider WeWork’s parent has chosen to list its shares on Nasdaq.
In addition to this, it plans to introduce sweeping changes in its governance amidst tepid interest from investors.
Surge Slicing: The government is reportedly considering capping surge pricing by cab-hailing services like Uber and Ola at three times the base fare. Surge pricing – when ride-hailing services greatly increase ride fares during peak hours – has drawn opposition from customers, the judiciary and the government for a long time.
The new norms are expected to be in alignment with the recently passed Motor Vehicles Act and will likely include provisions on women’s safety, among other issues.
Californication: Meanwhile in California, ride-hailing companies and their peers in the gig economy have received a rude setback. State lawmakers have passed a bill that mandates gig economy workers to be treated like regular workers including in terms of health benefits, paid time offs etc. Proponents argue that companies are exploiting their scale to exploit workers. Opponents say it will hurt businesses, estimating costs for firms to rise by 30%.
Who Wants to Be A Trillionaire?: The US budget deficit has crossed the $1tr mark for the first time since 2012, according to the Treasury Department. Increased government spending on several sectors including Social Security and defence led to the deficit to climb by $169bn in the first 11 months of the current budget year. A surplus in September is probable according to experts, meaning the total deficit for the entire budget year could end up below the $1tr mark.
The last time the US budget deficit was this high was between 2009 and 2012, when federal spending surged in order to address the 2008-09 financial crisis.
I Have Bought You For a Hundred Years: The longest-dated US Treasury bonds are 30-year ones. Now, Treasury Secretary Steven Mnuchin has said 50-year bonds would be issued if there is “proper demand” and, if they’re successful, even 100-year bonds could be considered.
Lost in Stimulation: The European Central Bank has announced a new stimulus package, hoping that it will boost the faltering Eurozone economy. The plan includes an interest rate cut and proposals to pump €20bn a month into financial markets.
All Merk and No Pay: The ECB’s outgoing President Mario Draghi – who will be replaced by IMF’s Christine Lagarde in November – called for fiscal policy to take charge of the situation. Furthermore, in what has been seen as a criticism of Germany, he said nations with solid finances need to loosen their purse strings so that the region’s growth is reinvigorated.
Excelling Under Duress: China has often been accused of a clone factory, of aping foreign tech and innovation (IPR violations are, after all, one of the main contentions of the ongoing trade war). But of late, an ironic trend is taking shape: the trade war is pushing China’s entrepreneurs and innovators into overdrive, inspiring them to perfect design and invention. An analysis of the Middle Kingdom’s transformation into a research and innovation behemoth can be read here.
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