Multiple policy flip-flops push telecom industry to a corner

Source:, Nov 13, 2019

NEW DELHI : Those who cannot remember the past are condemned to repeat it,” goes the saying. Government policy for India’s telecom sector over the past 25 years has left much to be desired. Not only have mistakes been repeated, but the industry has also had to grapple with various flip-flops in policy.

The upshot: exactly two decades after the government’s relief package for the industry through the New Telecom Policy of 1999, the present government is considering another relief package for the industry. Besides, from the looks of it, Indian telecom seems headed towards a duopoly market again, which is ironic given that this is how it all began for the industry.


Back in 1994, when the P.V. Narasimha Rao government opened the doors for private companies to offer cellular mobile services, it restricted licences to two in each service area.

The market, as was envisaged then, was duopoly by design. The companies who won the initial licences were selected through a Beauty Parade, which evaluated aspiring telecom companies on technical and financial parameters. But those who came out shining through this process soon found that subscriber numbers, as well as usage by customers, were nowhere near what they had anticipated.

As a result, the fixed licence fee they had agreed to pay the government was found to be excessively high in hindsight. Representations were made through the Cellular Operators 20191113-11Association of India (COAI) for a relief package, not unlike the situation at present. Besides, the government was taken to court by a number of licence holders because of unrealistic calculations of the revenue potential of a licence. Read the rest of this entry »

Government to decide on fate of digital media companies with FDI higher than 26 per cent

Source: The Hindu Business Line, Nov 11, 2019

New Delhi: Flooded with concerns from media companies on the recent imposition of a 26 per cent limit on foreign direct investment (FDI) through the government route in the digital media sector, the Centre is looking at coming up with a clear decision on how such companies that already have a foreign share holding above 26 per cent should be treated.

“The DPIIT has received numerous queries on the implications of the FDI limit of 26 per cent in digital media. It is closely examining its options regarding the fate of the companies that already have FDI greater than 26 per cent. Most other concerns need only some clarifications and explanations,” an official told BusinessLine.

The Information and Broadcasting Ministry has sent its comments on the matter to the DPIIT which is now being examined by it. “A decision could be taken based on a common understanding of the matter and in consultation with other key Ministries such as Finance,” the official said.

In August this year, the DPIIT came up with a Press Note permitting 26 per cent FDI under government route for uploading/streaming of news and current affairs through digital media. This came as a jolt for media companies as prior to that FDI caps existed only for the Indian print media at 26 per cent and news broadcast television companies at 49 per cent and there was no such cap on digital media.

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Uber gives another push to its India plans with Rs 1,767-cr investment

Source: Business Standard, Nov 13, 2019

Bengaluru: Ride-hailing major Uber has infused Rs 1,767 crore in fresh capital into its Indian entity, Uber India Systems Private Limited.20191113-10

According to the company’s regulatory filings sourced from business intelligence platform, Uber India has allotted 11.12 million equity shares, valuing Rs 10 each at a premium of Rs 1,578.20 to the Netherlands-based entities Uber International Holding BV and Uber International BV.

The board of directors of Uber India passed this resolution at a meeting held on October 29, 2019, the company filing says. This was around the time Uber Technologies’ Chief Executive Officer Dara Khosrowshahi was on a visit to India.

Uber has already transferred its Indian ride sharing and Uber Eats business to Indian entity Uber India System from the Netherlands entity. The capital infusion is expected to bolster its presence in the country by funding its key businesses to take on Indian rival Ola.

“This is the single-largest foreign direct investment by Uber into its Indian operations and follows the transfer of its India business from a Dutch entity to an Indian entity,” said Vivek Durai, founder of

In its board meeting held on October 1, Uber India board had passed a resolution to allot close to 15.99 million shares to Uber BV with a face value of Rs 10 and premium of Rs 1578.20 each, to raise Rs 2,539 crore, according to data sourced from business intelligence platform Tofler. “We estimate that a large part of this allocation would go towards to (Uber) Eats business, therefore posing a direct challenge to other food delivery companies such as Swiggy and Zomato,” said Durai of

Last month, Khosrowshahi was in Delhi to announce a partnership with Delhi Metro Rail Corporation (DMRC) under which the Uber app would get integrated with the city’s Metro and public bus service to provide commuters a seamless experience while travelling from one point to another.

The company is planning to double the headcount of its Hyderabad and Bengaluru research and development (R&D) centres to 1,000.

It has already developed key products like Uber Lite for the India market, which is now being used globally.

The mega capital infusion by Uber into its India arm comes at a time when rival Ola is coming up with a slew of new products and services.

Last month, the Bengaluru-headquartered firm unveiled ‘Ola Drive’, a self-drive car-sharing service, with a plan to host a fleet of 20,000 cars by 2020. Ola plans to invest $200 million for the new platform initially and raise the investment to up to $500 million in the next couple of years. The company is also planning to launch a portfolio of in-house food brands and take them across the country.

More time to provide feedback on draft ecomm user protection rules

Source: The Economic Times, Nov 13, 2019

BENGALURU: The Ministry of Consumer Affairs has extended the deadline to submit feedback on proposed rules aimed at curbing the sale of counterfeit goods, streamline returns and refunds, and delineate the liabilities of sellers and online marketplaces. 20191113-9

It notified on Monday that stakeholders and the public can comment on the draft rules pertaining to consumer protection on ecommerce platforms till December 2, the third extension to the deadline it has given so far.

The Consumer Protection (e-commerce) Rules, 2019, is part of eight draft rules that the ministry wants to notify under the Consumer Protection Act, 2019.

The ministry had first introduced the ‘Ecommerce Guidelines for Consumer Protection 2019’ in August. “Rules on various topics are required to be notified under the new Act. The Department now proposes to notify the following rules under the Act,” the ministry notification read.

Under the proposed rules, all ecommerce businesses will have to be registered in India, will not directly or indirectly influence the prices of products and services they sell, will have to display the terms of contract with a seller or service provider, and not engage in misleading advertising, among others.

ET reported on September 30 that that the ministry was looking to expand the scope of the rules to ensure consumer protection for services such as video streaming, online ticket booking and ride hailing.

Following feedback from industry and stakeholders, the government will come out with the final rules for consumer protection for online shoppers.

Economists say growth for FY20 may slip to around 5%

Source: The Economic Times, Nov 13, 2019

 Two of India’s leading banks see growth slowing to 5% in the current financial year, following a sharper-than-expected contraction in industrial production in September and little evidence of a meaningful recovery. GDP grew 6.8% in FY19.

Growth in the July-September period may have dropped to 4.2% from 5% in the first quarter, according to estimates compiled by ET, increasing pressure on the government to take more steps to revive sentiment and demand. Official GDP data for the second quarter will be released on November 29 and the first full-year estimate will be available in January.

“The second-quarter GDP growth rate is likely to slip to 4.2% on account of low automobile sales, deceleration in air traffic movement, flattening of core sector growth and declining investment in construction and infrastructure,” according to Ecowrap, a monthly report by the Economic Research Department of State Bank of India (SBI).

The SBI report pegged full-year growth at 5%, down from 6.1% it had estimated earlier and expects “larger rate cuts” from RBI in the December monetary policy review, although it cautioned against such a move. The economy grew 5% in the June quarter, its slowest pace in six years.

Data released on Monday showed industrial production contracted 4.3% in September, the worst performance since October 2011. For the six months to September, industrial growth was 1.3% against 5.2% in the same period last year.

The numbers triggered a raft of downgrades, even sharper than those after the first-quarter GDP estimates were announced in end-August.

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External commercial borrowings of firms jump 50% in April-September

Source:, Nov 11, 2019

External commercial borrowings (ECB) of Indian companies jumped nearly 50% in the six months ended 30 September from a year ago, thanks to cheaper overseas funds, easier overseas borrowing norms and weakened local banks.

20191113-7Corporates borrowed $24.3 billion from overseas markets in the first six months of FY20, showed data from the Reserve Bank of India (RBI) compiled by Bloomberg. This compares with $16.46 billion and $9.68 billion raised in the first six months of FY19 and FY18, respectively.

To be sure, despite this shift, banks are still the single-largest source of funds for businesses, and ECBs made up just 12% of their total borrowings in FY19.

However, bank credit growth has been subdued so far this year, with outstanding non-food credit growing 8.8% year-on-year (y-o-y) to ₹97.68 trillion in the fortnight ended 25 October.

According to a 6 November report by CARE Ratings, it needs to be seen if bank credit picks up in the rest of FY20 when economic activity generally tends to be higher, to ascertain the extent of substitution, if any, in the sources of external funds of businesses.

“The constrained and relatively high-cost lending of domestic banks and financial institutions on account of stressed asset quality, heightened risk aversion and strained liquidity conditions has, in part, been counterbalanced by the low interest rate regime in the international markets,” said Kavita Chacko, senior economist, CARE Ratings.

The CARE report said companies from the financial services sector continue to dominate external borrowings, accounting for nearly 47% of the value of ECB in the first six months of the current fiscal, up from 35% a year ago.

Recent instances include HDB Financial Services Ltd ($300 million), L&T Housing Finance Ltd ($60 million), Bajaj Finance Ltd ($575 million) and Home Credit India Finance Pvt. Ltd ($112 million) in September 2019.

Another interesting trend is that companies are mostly using this route for their working capital requirements. In September alone, of the 117 entities that raised money, 45 needed working capital.

“The primary reason for corporates to seek funding from ECB is the better pricing they are getting. With the currency becoming slightly strong and the hedging costs becoming cheaper, the all-inclusive cost is still lower than raising money in India,” said Ajay Manglunia, managing director and head of institutional fixed income at JM Financial.

The CARE report said that of the total ECBs raised during April-September 2019, nearly 65% fell in the 3-5 years maturity bracket and less than 10% of borrowings were for tenures of over 10 years, indicating ECBs are not relied upon for financing longer duration projects.

Others believe that an RBI regulation that aims to de-risk the banking sector for concentrated corporate exposure could be limiting banks’ ability to fund large businesses.

According to Soumya Kanti Ghosh, group chief economic adviser, State Bank of India (SBI), the large exposure framework may be acting as a constraining factor in bank lending to such entities and hence they are tapping the ECB route. The RBI regulations, which came into effect on 1 April, mandate that banks limit their exposure to 25% of their capital for connected parties.

“As far as the non-banking financial companies (NBFC) sector is concerned, though the banks expanded their lending in the first half of FY20, the markets seemed to have lost appetite in funding of NBFCs, even the commercial papers (CPs). Subsequently, a large part of NBFCs are tapping the ECB route mostly for onlending,” Ghosh wrote in a report on 16 October.

Q2 GDP growth could fall below 5%

Source:, Nov 11, 2019

New Delhi: With industrial output in the September quarter contracting 0.4% from a 3% expansion in the preceding three months, economic growth is likely to slow to less than 5% in the quarter ended September, data for which is to be released on 29 November.

The weaker-than-expected economic data emerging from India points to a deepening slowdown in Asia’s third-largest economy, where private consumption, investments and exports have all taken a hit. Economic growth rate had cooled to a six-year-low of 5% in the June quarter.

“GVA (Gross Value Added) and IIP measure two different data points and industrial GVA growth has generally been in excess of IIP growth. However, in Q2 of FY20, industrial GVA growth is likely to be lower than 2.7% achieved in Q1 of FY20,” said Devendra Kumar Pant, chief economist at India Ratings.

Nomura has projected September quarter GDP growth to decelerate to 4.2% from 5% in the June quarter of FY20. The brokerage last week cut its overall GDP growth forecast for FY20 to 4.9% from 5.7% estimated earlier, the lowest so far among forecasting agencies.

SBI in its Ecowrap report released last week said it is less hopeful of a growth pick-up in Q2 FY20. “Out of 26 indicators, only 5 indicators were showing acceleration in September. This indicates the demand slowdown in the economy is still significant and would take longer time to recover. If we map the leading indicators showing acceleration, there is a distinct possibility that growth in GDP in Q2 will be lower than 5%,” the report said.

The Narendra Modi administration has taken a series of steps to reverse the slowdown, including a cut in the corporate tax rate in September. The Cabinet cleared a proposal last week to set up a 25,000 crore debt fund to finish incomplete housing projects, a move that is expected to boost cement and steel sectors in the coming months.

Sachchidanand Shukla, chief economist at Mahindra Group, said the government has tried to address sectoral pain points through specific measures. Most of these measures are addressing supply-side concerns and not those on the demand side, barring RBI’s rate cuts, he added. “We will see from Q3 onwards a slight recovery and may end Q4 probably with a growth rate of close to 7%. The factors that will support this recovery are a favourable base, some favourable lagged effect of RBI’s policy rate cuts meant to infuse liquidity and government spending. This recovery will be clearly visible from Q4. Please bear in mind, large part of it will be statistical,” he added.

The country needs to create employment and livelihood so that income levels go up which will help resolve the weakness in the economy rather than resorting to patchwork aimed at boosting investor sentiment, said Arun Maira, former member of Planning Commission of India. “We need a broader policy for improving incomes and livelihood. Short term measures will not help recover the economy in a sustainable way. We need an industrial policy that focuses on the bottom of the economy, that is, small enterprises in various sectors, which will create more employment and income for people. From this, we can derive the solutions for other facets of the economy,” Maira added.