Retail Inflation in India Eases, Automobile Sales Drop to Lowest in 20 Years, Indian Economy Await's Major Reforms

 

India’s retail inflation eases to 3.15% in July; breaking 5-month rising trend. As sales plummet and lakhs of jobs are jeopardised, auto sector faces its worst crisis in two decades. Economy awaits government’s promised reforms as slowdown gathers pace. To ensure an IL&FS or DHFL is not repeated, reforming credit rating systems is the need of the hour. Moody’s says RIL’s announced deals with Aramco and BP will reduce its debt and be credit-positive. What does Reliance’s deleveraging mean for the Indian economy? Viacom and CBS reunite after 13 years to cope with new media landscape. ViacomCBS: the road to a long-anticipated merger.

 

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

 

 INFLATION 
 
India’s retail inflation eases to 3.15% in July; breaking 5-month rising trend.
 
 
Easing Out: India’s retail inflation, calculated on the basis of Consumer Price Index (CPI), eased to 3.15%, breaking a 5-month-long rising streak, in the month of July. The fall in retail inflation comes despite higher food prices.
 
 
This is well within the RBI’s target level of 4%.

 
Previously: Consumer price inflation had touched an eight-month high of 3.18% in June 2019 on the back of delayed monsoon.
 
 
View India’s Inflation Rate trend here
 
 
 
 AUTO 
 
As sales plummet and lakhs of jobs are jeopardised, auto sector faces its worst crisis in two decades.

 
Decelerating to a Halt: The auto slump continues. Automobile sales in India have dropped by 18.71%, registering the sharpest decline in 19 years. According to SIAM, vehicle sales across categories in July stood at 18,25,148 against 22,45,223 in the same period last year. This number includes two-wheelers and passenger vehicles. The last time automobile sales fell by such a margin was in 2000, when they fell by 21.81%.
 
 
Where Are the Jobs?: Along with sales, jobs in the auto sector have also been severely hit. Around 2.3 lakh auto sector jobs have been lost even as 300 dealerships have been forced to shut shop since the slowdown commenced. Additionally, as many as ten lakh jobs are threatened in the automotive components segment.
 
 
 INTERVENTION 

Economy awaits government’s promised reforms as slowdown gathers pace. To ensure an IL&FS or DHFL is not repeated, reforming credit rating systems is the need of the hour.


All Eyes on Nirmala: Post-Budget, the stock markets embraced bearish sentiments as the government announced a slew of additional taxes and levies at a time when the economy was widely perceived to be losing steam. Then, on August 9, after meeting with FPIs and other financial representatives, Finance Minister Nirmala Sitharaman promised to ease burdens and introduce more reforms, including a positive announcement on corporate tax rates. Now, as the Indian economic slowdown gathers pace and fears that growth is well below potential spread, all eyes are on North Block.
 
 
Rating Bad: Hundreds of crores of pension and mutual fund investments sank due to the IL&FS and DHFL crises. One of the reasons why the structural anomalies remained elusive for so long before they burst – credit rating agencies, which have been accused of manipulating numbers and indulging in corrupt practices. 
 
 
Companies Don’t Unravel Overnight: To identify a malaise and fix it accordingly a spotless credit rating regime is mandatory. And for that, deep and structural regulatory reforms are needed.
 
 
 
 RELIANCE 

Moody’s says RIL’s announced deals with Aramco and BP will reduce its debt and be credit-positive. What does Reliance’s deleveraging mean for the Indian economy?


One Side: Moody’s today said that RIL’s announced sale to Aramco of a 20% stake in its oil to chemicals business, along with its deal with BP to sell 49% of its fuel marketing business, will reduce the company’s net leverage and be credit-positive. The reduction in RIL’s net debt would be $16bn in value, decreasing its adjusted net debt from 3.2x to 1.2x for FY2019.

 
Note that the RIL-Aramco deal is yet to be finalised and has to go through regulatory approvals, among others. Nonetheless, the Mukesh Ambani-led company expects the entire process to be completed before March 2020.

 
The Other Side: What if RIL rushing to cut its debt bodes a bad omen for the Indian economy? Another way of looking at recent developments is through scepticism – despite brimming with confidence about the prospects of the economy, why is Ambani suddenly eager to convert RIL into a zero-net-debt company in only 18 months? What does Reliance’s deleveraging mean for India?
 
 
 VIACOM CBS 

Viacom and CBS reunite after 13 years to cope with new media landscape. ViacomCBS: the road to a long-anticipated merger.

 
Merging Matters: In 2006, Viacom and CBS split. Yesterday, a long-anticipated and long-fought reunion was finally agreed upon in a $30bn deal. The godparents of this merger hope that ViacomCBS will be able to compete with rivals in the increasingly cluttered and brutal media market. 


But even the combined prowess of these two media giants might be insufficient to tackle the likes of Disney, WarnerMedia and Netflix. Viacom's CEO is optimistic, though, opining that the the merged entity will be "one of only a few companies with the breadth and depth of content and reach to shape the future of our industry".


13 Years Why: The deal reunites Viacom and CBS and pools assets such as Paramount Pictures, CBS, Showtime and MTV in a new entity to be called ViacomCBS Inc. after over 13 years of the two operating in largely separate media domains. But the path to the Viacom-CBS reunion was not straightforward. It was in fact very rocky. Read more about it here.
 
 
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