Business and Finance News Highlights of the week transcript on 19 March 2023

Let’s begin with the economy. The finance ministry will come out with the guidelines on the proposed angel tax next month to clarify how the tax will be levied and will also provide valuation guidelines. However, there will be no rethink on the Budget proposal to make the levy applicable to non-residents as well. A person familiar with the development said that genuine startups registered with the department for the promotion of industry and internal trade will not be impacted. Valuation rules on how the investment will be calculated will also be issued. The objective is not to hurt genuine businesses but only to ensure that those people who are trying to evade taxes come under the tax net. Valuation guidelines are necessary as the Income Tax Act and the Foreign Exchange Management Act value such investments using different methodologies.

In some more economic news, As the Reserve Bank of India gears up for its next Monetary Policy Committee meeting in April, experts weigh in if the central bank will announce another interest rate hike following February’s CPI inflation print of 6.4% – the second straight month of retail inflation persisting way above RBI’s tolerance zone. The core inflation number came in at 6.3%, remaining concerningly sticky, while both numbers are above the RBI’s upper tolerance of 6%. According to Rajani Sinha, Chief Economist, CareEdge, the possibility of another 25-bps rate hike by RBI in the April meeting cannot be ruled out due to elevated core inflation, which has remained sticky at 6.3%. She added that it may take time before the moderation in core inflation in response to the monetary tightening so far and fizzling out of pent-up demand.

On to banking matters. With no hope of revival or privatisation, the government will likely close the 75-year-old non-banking finance company IFCI Ltd after addressing its asset-liability mismatch. The government has been infusing equity for the last several years into the loss-making NBFC. After infusing Rs 100 crore in September 2022, it has again put another Rs 400 crore in IFCI last week to help it meet capital adequacy norms and prepay some of the subordinate bonds. An official told FE that an assessment is being done on how much government support is required to cover the asset-liability mismatch. The bondholders have to be paid back prematurely. The Board of Directors of IFCI would meet on March 28 to consider premature redemption of subordinate bonds worth Rs 95 crore maturing by 2026-2032 subject to the consent of the bondholders.

In another development, The Central government has appointed Deepak Mohanty, a former whole-time member of the Pension Fund Regulatory & Development Authority, as the new Chairperson of the PFRDA. It also appointed Mamta Shankar, an Indian Economic Service Officer (1993) to the post of Whole-Time Member (Economics) in PFRDA. PFRDA regulates the National Pension System which is mandatory for the Central government staff joining service since 2004. Most state governments have also made it mandatory for their staff to join the service since 2004 or 2005. Later, corporates and the general public were allowed to subscribe to NPS. Mohanty, also a former executive director of the Reserve Bank of India, will hold the top PFRDA post till attaining the age of 65 years or until further orders, whichever is earlier.

Next up, Industry. Life Insurance Corporation this week said it has sold 2 per cent of its equity stake in state-owned NMDC, taking its total shareholding in the public sector unit to 11.69 per cent as of March 14, a PTI report said. In a regulatory filing, LIC said its holding in NMDC has decreased from 13.69 per cent to 11.69 per cent during the period between December 29, 2022, and March 14, 2023, at an average price of Rs 119.37 a share. The sale of a 2 per cent stake or a little over 5.88 crore shares in the open market has fetched over Rs 700 crore to LIC. LIC said, quote, “Corporation’s shareholding in NMDC Ltd has diluted from 40,14,72,157 to 34,25,97,574 equity shares decreasing its shareholding from 13.699 per cent to 11.690 per cent of the paid-up capital of the said company,” unquote.

Lastly, Coal India Ltd., which accounts for about four-fifths of the nation’s output fuel, is aiming to boost supplies to power plants this summer as unusually hot weather drives electricity demand, reported Bloomberg. The state-run miner is increasing coal output and building stockpiles at its mines this month to meet supply commitments, the company said in a Tuesday statement. Electricity consumption is set to jump with India’s weather officials predicting another round of scorching heat waves, which could put the power system under severe strain and threaten food supplies. The country experienced its hottest February in more than a century last month, pushing electricity demand to near-record levels. Peak power demand is forecast to hit a new high in April.