1.

5G reserve price is just too high for telecom companies, say experts (17 June 2019)
India is ready for its ambitious 5G spectrum auctions, but the industry thinks that it’s priced
exorbitantly high, and the analysts think that the return on the investment by telecom
companies will be low(7 per cent).
The Digital Communications Commission (DCC) sought a review on the reserve price to avoid
having unsold spectrum. But it seems as if the debt-ridden telecoms are much interested;
Bharti Airtel finds the price to be too high, whereas, Vodafone Idea wans the auctions to
take place next year. Laying 5G’s fibers (fiberisation) is expensive and on top of that, the sky-
high spectrum costs.
%G’s fiberisation is likely to cost ₹1 trillion for just one player over the next two to three
years. Penetration of Airtel, Vodafone Idea in 4G is just about 25-30%, and, since, 5G is in
nascent stage, its usage are also limited. These reasons don’t justify the cost, so, it should be
lower if the government wants better participation in the auctions.

2. MCA moves NCLT for 5-yr ban on IFIN’s auditors (16 June 2019)
The ministry of Corporate Affairs (MCA) has asked National Company Law Tribunal to bar
auditors of IL&FS Financial Services (IFIN) – Deloitte Haskins & Sells and BSR & Associates –
from business for 5 years after an alleged collusion with IFIN management was found along
with a failure to report it.
The application was files against Deloitte, BSR and individuals; this was after an investigation
by Serious Fraud Investigation Office (SFIO), which found out that the auditors concealed
information about wrongdoings of the management despite knowing of the sorry state by
conniving with the IFIN’s former director. Other than this, financial statements were
falsified, auditing standards were not followed, bank finances were not identified,
engineering loans were allowed to defaulting borrowers.
The application to bar IFIN was moved under Section 140(%) of Companies Act, which says
that if the tribunal is satisfied of the fraudulent act committed by an auditor of a company, it
can ask for a change in the auditor of that company.

3. Stronger rupee in Q1 to strain IT margins further (16 June 2019)

A stronger rupee as compared to the US dollar is likely to dampen the margin profile of IT
services companies. These companies are suffering from the burden of rising visa prices and
high prices of outsourcing contracts. It could lead to around 30 basis points impact on their
operating margins. 1 per cent change is likely to have an impact of 30-40 bps impact on the
operating margins; but it would also depend on how to the treasury management
approaches the situation for each company.
Domestic companies are the most effected one as they are facing margin headwinds due to
competition in outsourcing contracts. This also will affect onsite hiring by the companies in
the US. While these reasons are responsible for a low margin profile, wage hike for
employees in offsite locations will also have some impact. But it is yet to be seen if a bit of it
could be mitigated by automation and other operational efficiency measures.

4. India retaliates, hikes tariffs on 29 US products (15 June 2019)

Finally after a year, the Indian government has decided to increase tariffs on 29 high value
US agricultural and industrial imports by up to 50 per cent, with effect from June 16. The
Indian government had been stalling the retaliation since August 4, 2018 and had deferred it
eight times. This comes after India was removed from the status of GSP and imposed tariffs
on steel imports by 25 per cent and aluminum imports by 10 per cent by the US. The
 respective ministries have been informed and the official notification will be out on
Saturday. This move is likely to bring in %235 million as tariffs.
The Commerce Department predicts the earnings to be equivalent to the losses suffered by
steel and aluminum industry because of the US tariffs. India is in trade surplus with the US
with the gap being $16.86 bn in 2018-19, $21.26 bn in 2017-18 and $19.90 bn in the year
2016-17.

5. Trade deficit at 6-month high (15 June 2019)

High crude prices and gold imports have widened the trade deficit to a 6 month high of
$15.36 bn in May. This is despite export growth recovering from 0.64 per cent in April to
3.93 per cent in May. The Indian export stood at $29.99 bn for the month of May.
Cumulative exports in FY20 stood at $56.07 bn. Export growth has reached double digit for
the first time in 5 months.
Of total 30 major product groups, 17 have shown a growth in May. Engineering goods rose
by 4.4 per cent and has shown a sign of recovery. Similarly, readymade garments, drugs and
pharmaceuticals exports have shown positives too. Gems and jewelry continue to fall.
Imports, on the other hand, continue to stay strong. There has been a 4.4 per cent growth.
Crude oil saw an import rise of 8.23 per cent, gold saw a sharp rise of 37 per cent increase in
import, and metal imports has risen by 31.2 per cent, a cause of concern for India.