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RBI Governor Urjit Patel Resigns, Shaktikanta Das Takes Charge as New Chief, Reliance Jio to Hive Off Fibre, Tower Businesses et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Dec 16, 2018 8:00 AM 4 min read
Editorial

Good evening reader,

 

It has been an eventful and news-heavy week- both on the domestic as well as the international front. 

 

The week began on a rather disruptive note with the resignation of former RBI Governor Urjit Patel. Without much delay, Shaktikanta Das dubbed an "economic bureaucrat" took charge. In this week's Podcast we talk about how the appointment of a bureaucrat, and not a technocract at the helm of the Central Bank will play itself out. 

 

Arrest of Huawei's CFO has been a moving piece of narrative on the international front with some major geo-political and economic ramifications. We discuss this in this week's LongShorts as well as the Podcast.  

 

Now, moving on to the Top 6 Business Stories of the week through our End Of Week Wrap Up:

 

Urjit Patel resigns as RBI Governor. Former Economic Affairs Secretary Shaktikanta Das appointed new RBI governor. Economist Surjit Bhalla announces resignation from PM's Economic Advisory Council.

 

The What: Urijit Patel's resignation came after the recent spat between the government and the RBI on issues including lending norms for Micro, Small and Medium Enterprises (MSME) sector, RBI surplus reserves and more.

 

Zoom Out: Patel is the first governor since 1990 to step down before the end of his term. Read his resignation statement here.

 

Up Close: According to a Livemint report, former Economic Affairs Secretary Shaktikanta Das has been appointed the new RBI governor after Urjit Patel resigned yesterday.

 

Also, this: Economist Surjit Bhalla announced his resignation from PM's Economic Advisory Council citing other work commitments - consultancy with CNN IBN and work on a book about Indian elections since 1952.

 

RBI Board meets. No material decision on PCA norm or liquidity taken yet. WPI-based inflation down to 4.64% in Nov from 5.28% previous month.

 

The What: As per an Economic Times report, the RBI Board met on Friday, as scheduled, to discuss liquidity issues and what actions should be taken to improve balance sheet of lenders. It also deliberated on issues related to currency management and capital infusion required for the system. However, no major decisions relating to PCA and liquidity measures were taken during the meeting.  As such, this Board meeting was fairly well-anticipated by industry-wide participants as it marked the first such meeting under the new RBI Governor Shaktikanta Das.

 

Perspective: This Board meet was a follow up to RBI's meeting held last month where the Central Bank discussed topics ranging from its own capital policy, relaxation of the Prompt Corrective Action (PCA) framework for ailing banks, a special liquidity window for Non-Banking Financial Companies (NBFCs), to lending norms for MSME sector.

 

Also, this: India's wholesale inflation fell to a three-month low of 4.64 % in November, on back of declining prices of food articles and crude oil. Inflation numbers are expected to be closely watched given that a new Governor is in-charge and that the RBI has maintained an "inflation-targeting" approach towards Monetary Policy in recent times.

 

Modi Govt may announce farm loan waivers worth INR4L crore. India set to increase its public health spending to 2.5% of its GDP by 2025, announces PM Modi. 

 

The What: The news comes ahead of the 2019 General Elections and a day after the opposition won in three states where agriculture is core.

 

The Big Picture: Economists however caution that increased farm loans waivers could further widen the fiscal deficit that the government has aimed to cap at 3.3% of the GDP.

 

What You Need to Know: PM Modi addressing the 2018 Partners' Forum announced that the govt will be committed to increasing India’s health spending to 2.5% of GDP by 2025, reaching to more than $100bn.

 

Zoom Out: The incumbent govt has launched multiple programmes aimed at enhancing primary and secondary healthcare including schemes such as Ujwala, Indradhanush and Ayushman Bharat.

 

Reliance Jio to hive off fibre, tower businesses into separate companies.

 

Expert Opinion: The latest move would give the company leeway to lease out infrastructure in the fast-growing telecom market and help raise funds before the ambitious Gigafibre launch.

 

Zoom Out: The development comes as RIL recently acquired majority stakes in two of India's largest cable TV and broadband companies - Hathway Cable & Datacom, and DEN Networks for a combined sum of INR5,230 crore to gain traction on its broadband service named Jio GigaFiber.

 

SC puts on hold Fortis sale to IHH. Yes Bank may appoint independent director Brahm Dutt as the bank’s non-executive interim Chairman, while suggesting that they are on track to submit a name for MD & CEO to RBI in January. 

 

Case in point: Supreme Court puts on hold Fortis sale to IHH as Japanese drugmaker Daiichi-Sankyo alleges that the Fortis promoters, Singh brothers and Indiabulls had created fresh encumbrances for nearly 1.7 million shares of the total 2.3 million shares of Fortis Healthcare, despite the court’s orders against it.

 

Yes Bank on track: As per a Livemint report, Yes Bank is likely to name independent director Brahm Dutt as the bank’s non-executive interim chairman. The development comes after former finance secretary Ashok Chawla resigned from the position last month.

 

What else?: Yes Bank also stated that it is on track to submit the recommendation for the post of the company’s Managing Director and Chief Executive to the RBI on January 9, 2019. The news comes after RBI’s directive on 17 September to restrict CEO Rana Kapoor’s term to 31 January 2019.

 

Beijing to reduce tariffs on US autos to 15%, down from 40%. Bail granted to Huawei’s CFO Meng Wanzhou.

 

The 90-day Trade Truce: As part of its 90-day trade truce, Beijing would reduce tariffs on US autos to 15%, down from 40%, in line with what other countries pay.

And this: Huawei CFO's bail which was set at $7.5m requires her to submit to a curfew, electronic monitoring and a limited range of travel in the Vancouver area.

The Big Picture: The development comes as US authorities seeking Meng’s extradition over charges that she misled US banks over the company’s business dealings with Iran.

 

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