The Signal (weekly highlights)

1. India’s First Bad Bank

Today, Finance Minister Nirmala Sitharaman announced the formation of India’s first ever ‘Bad Bank’. The minister also announced that the cabinet has cleared the proposal for government guarantee of INR 30,600 Cr. for security receipts to be issued by the National Asset Reconstruction Company Ltd (NARCL)

The GoI guarantee is expected to be a solid catalyst in fast-tracking of NPA resolution processes with more banks proactively seeking the NARCL route. Once the overhang of heavy bad debt in the form of NPAs is wiped off the balance sheets, banks can be expected to revisit their core function of lending.

2. 100% FDI in Telecom

 The Union Cabinet approved a relief package for the telecom sector that includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100 per cent foreign investment through the automatic route.

These measures are expected to ease the cash flow issues being faced by some players in the industry. The players can focus more on penetration of broadband and telecom connectivity.

3. Cabinet clears auto PLI scheme for EVs, hydrogen fuel cell vehicles

 The Union Cabinet approved a Rs 26,058 crore production linked incentive (PLI) scheme for auto, auto-components and drone industries to enhance India’s manufacturing capabilities

The incentive structure will encourage industry to make fresh investments for the indigenous global supply chain of Advanced Automotive Technology products.

4. High fuel prices push up August WPI inflation to 11.39%

 Wholesale inflation rose marginally to 11.39 per cent in August from 11.16 per cent in July as prices of non-food articles such as oil seeds, fuel, minerals remained elevated.

Marginal increase in WPI can be attributed to the high prices of global commodities and supply side constraints

5. India’s retail inflation eases further to 5.3% in August

 India’s retail inflation in August marginally eased to 5.3%, staying within Reserve Bank of India’s comfort zone for a second month. The CPI recorded is the lowest in FY22. The dip in food prices and a huge base are the artists behind the soothing number.

Core Inflation (excluding food & fuel) remained sticky and surpassed CPI for the eighth month straight. Further fall in food prices, improving supply dynamics and a high base effect can be expected to result in sustained softening.