1.

Government may revisit overseas sovereign borrowing idea in 2021

Budget:

India's GDP (Gross domestic product (GDP) sovereign external debt is the
overall monetary or market value of all finished products and services
generated within the boundaries of a nation for a particular period of time. It
serves as a detailed scorecard of the economic health of a given country as a
large measure of total domestic production) is at less than 5 percent, among
the lowest worldwide, and therefore, proponents of the plan argue, servicing
the borrowing will be simple for the government.
According to two sources familiar with the growth, a plan to go for
sovereign borrowing overseas, which was first listed in the 2019 budget, is
back on the table at the finance ministry and may again appear in the
government's annual statement of accounts next year. The concept is
resurrected by tapping cheaper overseas capital to lower government
borrowing costs to ensure that the high government debt rise does not harden
the prices here.
The Indian government borrows heavily in the domestic market, largely to
fund its social sector and infrastructure schemes. The heavy borrowing
crowds out private sector which then is forced to raise at higher rates.

“It’s still in the initial stages. The proposal just doesn’t have economic but
political aspects too. Hence, it will undergo close scrutiny before a decision
to include it again in the budget is taken,” an official familiar with the
development told Mint.

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 India’s sovereign external debt to GDP is at less than 5%, among the lowest
globally and thus, supporters of the plan argue, it would be easy for the
government to service the borrowing.

The government’s present liabilities extend to debt that matures in 2055 and
several of the long-term borrowings are at high interest rates. A reduction in
the cost of this debt would significantly lower the interest burden.

India’s external debt at the end of March this year was $558.5 billion,
dominated by long-term borrowings and short-term to finance imports,
according to a 16 September status report issued by the finance ministry.

The country’s foreign exchange reserves came at a life’s high of $555.12

billion as of 16 October, according to RBI ( The Reserve Bank of India
(RBI) is the central bank of India that formulates, implements and monitors
the monetary policy. It was established on April 1, 1935 in accordance with
the provisions of the Reserve Bank of India Act, 1934. The role of RBI is to
regulate money supply and maintain the price stability in the country. The
RBI also monitors the functioning of commercial banks and non-banking
finance companies in India) Data. The draft argues that this is large enough
to easily service a foreign borrowing of any modest size the government
may have in mind.
The government plans to borrow ₹1.2 trillion in FY21 and this number
could be significantly higher next year as it rolls out a massive immunization
programme to contain coronavirus among its 1.3 billion people.

The government’s 2019 had first talked about “raising a part of its gross
borrowing programme in external markets in external currencies”. This will
also have beneficial impact on demand situation for the government
securities in domestic market, the budget paper had then said.

While no number was frozen in the 2019-20 Budget, the idea then was to do
a sovereign borrowing worth 10 billion in USD. The idea was quickly buried
after the proposal got mired in controversy including questions over the need
to do such a borrowing and expose the country to exchange risks when it did
not have the systems to manage it. The issue had also got caught in the

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 Swadeshi debate as sections of the ruling party were unhappy with the idea
of borrowing in foreign money.

Learning Outcomes:

External Debt:
External debt is the portion of a country's debt that is borrowed from
foreign lenders, including commercial banks, governments, or international
financial institutions. These loans, including interest, must usually be paid in
the currency in which the loan was made. To earn the needed currency, the
borrowing country may sell and export goods to the lending country.

Budget:
A budget is a financial plan for a defined period, often one year. It may also
include planned sales volumes and revenues, resource quantities, costs and
expenses, assets, liabilities and cash flows.
Domestic market: A domestic market, also referred to as an internal market
or domestic trading, is the supply and demand of goods, services, and
securities within a single country.

Private Sector:
The private sector is the part of the economy, sometimes referred to as the
citizen sector, which is owned by private groups, usually as a means of
enterprise for profit, rather than being owned by the state.

Long term debt:

Long Term Debt (LTD) is any amount of outstanding debt a company holds
that has a maturity of 12 months or longer. It is classified as a non-current
liability on the company's balance sheet. These statements are key to both
financial modeling and accounting.

Short term debt:

Short-term debt, also called current liabilities, is a firm's financial
obligations that are expected to be paid off within a year. Common types of
short-term debt include short-term bank loans, accounts payable, wages,
lease payments, and income taxes payable.

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 Foreign exchange reserves:
Foreign exchange reserves can include banknotes, deposits, bonds, treasury
bills and other government securities. These assets serve many purposes but
are most significantly held to ensure that a central government agency has
backup funds if their national currency rapidly devalues or becomes all
together insolvent.
It is a common practice in countries around the world for their central bank
to hold a significant amount of reserves in their foreign exchange. Most of
these reserves are held in the U.S. dollar since it is the most
traded currency in the world. It is not uncommon for the foreign exchange
reserves to be made up of the British pound (GBP), the euro (EUR), the
Chinese yuan (CNY) or the Japanese yen (JPY) as well.
Economists theorize that it is better to hold the foreign exchange reserves in
a currency that is not directly connected to the country’s own currency in
order to provide a barrier should there be a market shock. However, this
practice has become more difficult as currencies have become more
intertwined as global trading has become easier.
Example of Foreign Exchange Reserves
The world’s largest current foreign exchange reserve holder is China, a
country holding more than $3 trillion of its assets in a foreign currency.
Most of their reserves are held in the U.S. dollar. One of the reasons for this
is that it makes international trade easier to execute since most of the trading
takes place using the U.S. dollar.
Saudi Arabia also holds considerable foreign exchange reserves, as the
country relies mainly on the export of its vast oil reserves. If oil prices begin
to rapidly drop, their economy could suffer. They keep large amounts of
foreign funds in reserves to act as a cushion should this happen, even if it’s
only a temporary fix.
Russia’s foreign exchange reserves are held mostly in U.S. dollars, much
like the rest of the world, but the country also keeps some of its reserves in
gold. Since gold is a commodity with an underlying value, the risk in relying
on gold in the event of a Russian economic decline is that the value of gold
will not be significant enough to support the country’s needs.

Another danger of using gold as a reserve is that the asset is only worth what
someone else is willing to pay for it. During an economic crash, that would

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 put the power of determining the value of the gold reserve, and therefore
Russia’s financial fallback, into the hands of the entity willing to purchase it.

Source:
https://www.livemint.com/news/india/govt-may-revisit-overseas-sovereign-
borrowing-idea-in-2021-budget-11603597514168.html

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 2. Export markets leading sales revival: Bajaj Auto

Bajaj Auto is seeing a strong revival in various export markets, including

Africa and Latin America, as the COVID-19 pandemic has not hit them as
hard (the COVID-19 coronavirus pandemic is the defining global health
problem of our time and the biggest threat we have faced since World War
Two) and subsequent lockdowns such as the domestic market, a senior
company official said.
For the month of October 2020, Bajaj Auto reported 5,12,038 unit sales, an
11 percent rise year-on-year (YoY) from 4,63,208 sold in October 2019 , the
company informed the exchanges. The stock, however, lost nearly 2 percent
and was trading at Rs 2,833.45 per share, down 1.85% on the NSE at 10:07
am.
Domestic sales rose 1 percent to 2,81,160 units from 2,78,776 units, Bajaj
Auto said, and exports jumped 25 percent with record sales of 2,30,878 units
compared to 1,84,432 year-on-year.
Two-wheelers drove numbers, recording unit sales of 4,70,290 in October
2020 against 3,98,913 in October 2019 – an 18 percent jump and the highest
ever sales for a month. Notably, Pulsar alone sold 1,70,000 units – a record
high for the brand as well.
Of these, 2,68,631 were domestic units – up 11 percent YoY from 2,42,516;
and exports clocked record highest sales ever of 4,70,290 units – up 18
percent YoY from 3,98,913.

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 Performance of commercial vehicles (CV) was a down 35 percent, with
41,748 sales in October 2020 compared to 64,295 in the same month last
year.
Of these, 12,529 were domestic sales – a whopping 65 percent slump YoY
from 36,260 units, while exports saw some cheer with 4 percent jump YoY
to 29,219 units sold this October, from 28,035 sold in October 2019.

For the period April-October 2020, the company is yet to match last year’s
numbers, having sold a total of 2,008,478 units – down 30 percent from
2,883,973 units. Domestic sales fell 35 percent to 1,046,009 units from
1,605,009 units and exports slipped 25 percent to 962,469 units against
1,278,964 units.
The trend has continued from September 2020, where the company sold a
total of 441,306 vehicles (commercial vehicles and two-wheelers) – a 10
percent increase YoY, compared to 402,035 units sold in September 2019.
The automaker also registered its previous record highest exports ever in
September 2020, having exported 212,575 total units, compared to 186,534
in September 2019 - a 14 percent jump YoY. This was largely driven by
jump in exports of two-wheelers.
The company, which exports to around 79 countries globally, reported its
best ever dispatches to international markets last month.
“In terms of recovery, international business is doing better than domestic
because most of the countries where we export have not been impacted that
much by the pandemic and lockdowns as India,” Bajaj Auto CFO Soumen
Ray told PTI in an interview.
The demand is very robust and various markets like Africa, Latin America
Middle East and South Asia are doing very well, he added.
“We have only two areas of concern, one is ASEAN region where major
markets like the Philippines and Cambodia are witnessing lockdowns and
restrictions. Other is Sri Lanka, where the government has banned import
of vehicles,” Ray said.
Barring these two, the company is witnessing very strong revival, he added.
“It (revival in export markets) is borne out of two factors – severity of
pandemic has been less in these regions and thus, the economy is also less
impacted,” Ray said.

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 The company’s export order book is very strong for the next few months, he
said.

Bajaj Auto shipped 2.12 lakh units in September to various international

markets.
In July-September period, however, two-wheeler dispatches fell 11 per cent
to 4,14,271 units as compared with 4,62,890 units in the same period of
previous fiscal.
Commenting on the outlook for domestic market, Ray said the company is
witnessing increase in footfalls and inquiries at the dealerships.
“Jury is still out regarding the festive season this year. Looking at the
response in the first few days of the festive season, our sense is that it is
going to be similar or marginally better than last year,” he noted.

On three-wheeler sales, Ray said the revival in the segment depends on pick
up in economic activity involving small commercial vehicles.
”Certain economic activity is required for demand to come back. Economic
activity here pertains to movement of people from one place to another,
relatively short distances, in both urban and rural landscapes,” he noted.
“Till that doesn’’t happen, like opening of schools, entertainment areas, why
would anybody like to buy a commercial two-wheeler or a three-wheeler,”
he added.

He, however, said that situation is improving in the three-wheeler segment

and September quarter was much better than first quarter of the current
fiscal.

Learning Outcomes:

About the Company:

Bajaj Auto Ltd (BAL) is one of the leading two & three wheeler
manufacturers in India. The company is well known for its R&D product
development process engineering and low-cost manufacturing skills. The
company is the largest exporter of two and three-wheelers in the country.
The company has two subsidiaries namely Bajaj Auto International
Holdings BV and PT Bajaj Indonesia.

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 Export market:
Export market an overseas country to which a firm based in one particular
country Export its products.

What is international trade?

International trade allows countries to expand their markets and access
goods and services that otherwise may not have been available domestically.
As a result of international trade, the market is more competitive. This
ultimately results in more competitive pricing and brings a cheaper product
home to the consumer. INTERNATIONAL TRADE provides an opportunity
for a firm to increase its sales potential by marketing its products in a
number of foreign markets rather than relying solely on sales in its own
domestic market.

International business:
International business relates to any situation where the production or
distribution of goods or services crosses country borders. Globalization—the
shift toward a more interdependent and integrated global economy—creates
greater opportunities for international business. Such globalization can take
place in terms of markets, where trade barriers are falling and buyer
preferences are changing. It can also be seen in terms of production, where a
company can source goods and services easily from other countries. Some
managers consider the definition of international business to relate purely to
“business,” as suggested in the Google case. However, a broader definition
of international business may serve you better both personally and
professionally in a world that has moved beyond simple industrial
production. International business encompasses a full range of cross-border
exchanges of goods, services, or resources between two or more nations.
These exchanges can go beyond the exchange of money for physical goods
to include international transfers of other resources, such as people,
intellectual property (e.g., patents, copyrights, brand trademarks, and data),
and contractual assets or liabilities (e.g., the right to use some foreign asset,
provide some future service to foreign customers, or execute a complex
financial instrument). The entities involved in international business range
from large multinational firms with thousands of employees doing business
in many countries around the world to a small one-person company acting as
an importer or exporter. This broader definition of international business

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 also encompasses for-profit border-crossing transactions as well as
transactions motivated by nonfinancial gains (e.g., triple bottom line,
corporate social responsibility, and political favor) that affect a business’s
future.

Source:
https://www.outlookindia.com/newsscroll/amp/export-markets-leading-
sales-revival-bajaj-auto/1963854#aoh=16036089881147&referrer=https
%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s

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 3. Valuation gaps: Growth stock rally leaves more room for
disappointment

As Netflix Inc. shareholders learned to their dismay this week, when a

company’s outlook is not optimistic enough to back them up, lofty global
growth stock valuations will come back to bite.
The MSCI AC World Growth Index has approximately doubled its value
counterpart ‘s return since 2002, but its relative earnings expectations have
failed to rise at a comparable pace. That implies that between the two types
of stocks, one that is not inherently justified by higher relative earnings
growth, a large valuation gap has developed.
Should investors become frustrated, this leaves growth stocks vulnerable to
a sharp valuation correction. After missing Wall Street’s estimates for
subscribers, Netflix dropped around 7 per cent on Wednesday, renewing
doubts about its ability to sustain growth.

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 About 15 per cent of the companies in the Bloomberg World Index have
reported so far this season, according to data compiled by Bloomberg. More
than 80 per cent of firms in the traditional growth sector – technology – have
beaten earnings estimates, it showed.

But traders have been unimpressed despite the positive reporting. The
average one-day price move for tech companies that have reported was -0.4
per cent, the data showed.

And for those that disappointed, the share price reaction has been more
severe. International Business Machines Corp. shares slumped 6.5 per cent
on Tuesday, the most in four months, after failing to provide an earnings
outlook. Citrix Systems Inc. fell more than 7 per cent Thursday, to the
lowest since March, after cloud growth lagged investor expectations.“

Optimism is fraying at the edges with recent disappointing earnings results

beginning to undermine the growth qualities of US IT,” Societe Generale SA
strategist Albert Edwards said in a note. “Woe betide any stock that profit-

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 warns, making the market realize it has been fooled, having wrongly valued
it as a growth stock.”

Learning Outcomes:

About the Company:

Netflix, in full Netflix, Inc., media-streaming and video-rental company
founded in 1997 by American entrepreneurs Reed Hastings and Marc
Randolph. It is also involved in the creation of original programming.
Corporate headquarters are in Los Gatos, California.

MSCI World Growth Index:

The MSCI World Growth Index captures large and mid cap securities
exhibiting overall growth style characteristics across 23 Developed Markets
(DM) countries*. The growth investment style characteristics for index
construction are defined using five

Variables: long-term forward EPS growth rate, short-term forward EPS

growth rate, current internal growth rate and long-term

Historical EPS growth trend and long-term historical sales per share growth
trend.

What is a Valuation Gap?

A valuation gap arises when an individual wants to sell his company for
more money than the buyer is willing to pay. Any individual who has had
his firm appraised probably has an estimate of how much it is worth. It can,
therefore, be frustrating when the person tries to sell his business only to
realize that potential buyers are offering a much lower figure. The difference
in Valuation between the seller and the buyer is the Valuation Gap. Some
valuation gaps are brought about by timing issues between the seller’s and
buyer’s market. If the market is in favor of the buyer, then he will want to
pay a pretty low amount than what the company owner wants. And, if it’s a
seller’s market, the company owner will be asking for a much higher figure
than what most buyers are offering.

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 Why Valuation Gaps Exist?
According to a report published by the Business Enterprise Institute, one of
the main causes of this problem arises from the fact that firm owners are in
denial of the existence of a valuation gap. As such, the company owner he
won’t make any effort or invest any resources in bridging the gap. Professor
Howard Stevenson from Harvard Business School believes that the
misperception arises because of a lack of knowledge and inherent optimism
on the part of the seller.

Unfounded optimism and a lack of diligence are sure recipes for disaster,
especially when an owner is asked to estimate:

 The present worth of his business and expected growth rate

 The anticipated performance of the company’s non-current assets
 The amount of money the owner is likely to spend following an exit
from the company

Another aspect that causes valuation gaps is the owner’s tendency to focus
on how much he put into the business when creating it. In doing so, such an
individual is assuming that the benefits he has reaped from the venture so far
are the same benefits the new company owner will get. Unfortunately, it is
not the case. The new company executive may adopt new policies and
practices, which will lead to entirely different results.

Growth stocks:
Growth stocks are those companies expected to grow sales and earnings at a
faster rate than the market average. Growth stocks often look expensive,
trading at a high P/E ratio, but such valuations could actually be cheap if the
company continues to grow rapidly which will drive the share price up.

What Is Wall Street?

Wall Street is a street located in the lower Manhattan section of New York
City and is the home of the New York Stock Exchange or NYSE. Wall
Street has also been the historic headquarters of some of the largest U.S.
brokerages and investment banks.
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 Wall Street is often thought of as both the symbol and geographic center of
American capitalism. Symbolically, Wall Street refers to all the banks,
hedge funds, and securities traders that drive the stock market and the whole
American financial system. Geographically, Wall Street is the center of
Manhattan’s Financial District. It runs east/west for eight blocks from
Broadway to South Street.

Source:
https://www.business-standard.com/article/international/valuation-gaps-
growth-stock-rally-leaves-more-room-for-disappointment-
120102301525_1.html

4. Bit coin leaps to highest since July 2019 after PayPal opens service to
crypto currencies

Bitcoin surged past $13,000 for the first time since July 2019 after PayPal
Holdings Inc. announced it will allow customers to use cryptocurrencies.

During conventional trading hours in New York, the largest digital coin rose
$950, or 8 percent. In early Asian trade, it climbed another 2 percent to
$13,119. On Wednesday, gains were even greater among so-called alt coins,
with Litecoin rising more than 13 percent and Bitcoin Cash soaring more
than 9 percent.

Customers of PayPal can purchase, sell and hold cryptocurrencies from

digital wallets, including Bitcoin, Ether, Bitcoin Cash and Litecoin, as well
as use the virtual money to shop at its network's 26 million merchants.
PayPal 's stock soared 5.5 percent to $213.07, the biggest gain since May.

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 On Twitter, Mike Novogratz, who manages Galaxy Investment Partners,
called it "the best crypto news of the year," adding that banks are going to
embark on a race to service digital currencies. He said, "We have crossed the
Rubicon."

The news sparked an exuberant response from crypto fans who pointed to a
string of recent announcements that suggest wider acceptance by old-school
financial mainstays. Two public companies — Square Inc. and
MicroStrategy Inc. — said recently that they invested in Bitcoin. And
Fidelity Investments announced in August that it’s launching its first Bitcoin
fund, adding its establishment name and star power to the often-maligned
asset class.
PayPal said it plans to make the features available as a funding source for
purchases at its merchants worldwide and plans to expand it to Venmo soon.
Merchants will be paid in traditional currencies such as the dollar rather than
in cryptocurrencies when PayPal customers make purchases.

Dan Schulman, the firm’s president and chief executive officer, said in a
statement that “the shift to digital forms of currencies is inevitable, bringing
with it clear advantages in terms of financial inclusion and access;
efficiency, speed and resilience of the payments system; and the ability for
governments to disburse funds to citizens quickly.”

Users do face some limitations on PayPal. They can’t transfer coins in and
out of accounts and can only hold cryptocurencies that they bought on
PayPal. Any crypto coins held in an account can’t be transferred to other
accounts, PayPal said.
PayPal is stepping into crypto only a year after pulling out of the Libra
Association, an effort started by Facebook Inc. to develop a digital currency.
David Marcus, who leads the initiative for Facebook, used to be president of
PayPal.

Bitcoin’s been on a hot streak this month, rising about 19% in October. Still,
the use case for the cryptocurrency remains limited. Data from blockchain
researcher Chainalysis Inc. last year showed hardly anyone used Bitcoin for
anything beyond speculation.

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 Partly it’s due to its wild price swings. The coin is up about 75% this year
but is still around $7,000 away from its all-time high of about $20,000 set in
December 2017. In March, during a coronavirus-induced selloff, it fell 31%.

Learning Outcomes:

About the Company:

PayPal has been in the mobile payments business for well over a decade.
It’s is an online financial service that allows you to pay for items using a
secure internet account. You simply add your bank account, credit card or
debit card details and whenever you pay using PayPal, you can choose
which of your cards or accounts it pays with. You can also set one to be the
default payment method and that will be used unless you choose otherwise.

In addition to paying for items using PayPal, you can also receive money
through the service. Any money received sits in your PayPal account and
can be used when paying for something, with the balance topped up by your
assigned cards or bank account.

Alternatively, you can transfer the money to one of your assigned bank
accounts or cards.There can be a fee applied when you receive money to
your PayPal account. For example, if you sell an item on eBay.

Payment giant, PayPal has set alight the bit coin and crypto currency
community by the news that will allow its 346 million users to buy and
spend bit coin and a handful of other major crypto currencies. The
announcement, coming from a traditional financial industry giant and
perceived enemy of bit coin, has been taken as vindication for long-time bit
coin believers.

What is Bitcoin?
Bitcoin, often described as a cryptocurrency, a virtual currency or a digital
currency – is a type of money that is completely virtual.
It’s like an online version of cash. You can use it to buy products and
services, but not many shops accept Bitcoin yet and some countries have
banned it altogether.

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 The physical Bitcoins you see in photos are a novelty. They would be
worthless without the private codes printed inside them.

How does Bitcoin work?

Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’
app on a smartphone or computer.
People can send Bitcoins (or part of one) to your digital wallet, and you can
send Bitcoins to other people.
Every single transaction is recorded in a public list called the blockchain.
This makes it possible to trace the history of Bitcoins to stop people from
spending coins they do not own, making copies or undo-ing transactions.

References:
https://www.newsbreak.com/news/2086941059095/bitcoin-leaps-to-highest-
since-july-2019-after-paypal-opens-service-to-cryptocurrencies.
https://edition.cnn.com/2020/10/21/investing/paypal-bitcoin-
cryptocurrencies/index.html.

5. No merit in relaxing 10% cap on single stock investment: Sebi chief

The Indian Securities and Exchange Board (Sebi) sees no value in loosening
the 10% single-stock investment limit for actively managed mutual fund
(MF) schemes, its chief said on Wednesday.
The limit of 10 per cent is intended for diversification. It doesn't mean that
you lift the ceiling just because some scrip is outperforming. That's going to

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 be self-enforcing that a script has gone up and in the same script you're
allowing higher investment. The 10 percent limit is something that remains
for the sake of diversification, said Ajay Tyagi, Sebi 's chairman, while
addressing the media at a business summit hosted by the Confederation of
Indian Industry (CII) industry body.
As the weighting of India's most valuable firm, Reliance Industries, has
approached 15 percent on the benchmarks, the MF industry has highlighted
the challenges it faces in matching the returns produced by the benchmark
Sensex and Nifty indices.
“Undoubtedly there are challenges in performance measurement as indices
do not have a cap on stock, whereas mutual fund schemes have a cap of 10
per cent on a stock,” industry body Amfi said recently.
When asked about the operational challenges highlighted by foreign
portfolio investors (FPIs) to reduce the trade settlement cycle to T+1, Tyagi
said, “To have an early settlement is in everyone’s interest. It will help
increase liquidity and reduce margins. It cannot be anyone’s argument that
we want to settle it late. But there are some operational issues with regard to
FPIs and custodians because of time differences and other factors. We will
take everyone’s view and suggestions before finalising anything.”
On rising instances of brokers’ defaults, Tyagi said Sebi will take corrective
measures soon. He said there is reason to increase the amount lying in the
investor protection fund (IPF).
“I agree that IPF is woefully insufficient. We have examined this and will
soon take action in consultation with stock exchanges to increase the IPF.
We will not allow that to be criteria to delay payment in case of broker
default,” Tyagi said.
Tyagi also said there was merit in the proposal of some industry players of
introducing capital adequacy for the broking industry. “There are all types of
brokers in the system. The net worth requirement was set almost a decade
back. So that area needs reform. We will examine this. Capital adequacy
should be the first level of consideration.”

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 The Sebi chief said delivery-based trading needs to be encouraged. He said
the regulator has introduced norms to increase upfront margins for intra-day
trades, which will kick in from December. “This will further reduce
speculation.”
Tyagi expressed concern over independent directors’ resignations. “I must
admit, the independent director (issue) is a puzzle which we are still trying
to deal with.
They are the voice of minority shareholders. To what extent they have to be
responsible, how they fit in into the board structure, which kinds of people
need to be appointed… these are the issues that are troubling us,” he said.
Tyagi said Sebi would urge resigning directors to state their reasons clearly
to the public and not give “cryptic reasons”.
He also called on the industry to help finalise norms on reclassification of
promoters as ordinary shareholders. Tyagi said it remains a contentious
issue.
In his speech, the Sebi chairman highlighted the positive takeaways from the
market. “While one repeatedly hears that liquidity and low interest rates are
the only prime factors driving up the markets, and that there is a disconnect
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 between the market and the real economy, I would like to place before you
certain positive aspects of the market recovery.”
Tyagi said contrary to popular perception, the post-Covid gains in the
market have been broad-based. He said investor participation and trading
turnover had increased substantially over the past year, and 6.3 million
demat accounts have been added in the first half of the current fiscal,
compared to just 2.74 million during the same period of last fiscal.

Learning Outcomes:

What is SEBI?
Securities and Exchange Board of India (SEBI) is a statutory regulatory
body entrusted with the responsibility to regulate the Indian capital markets.
It monitors and regulates the securities market and protects the interests of
the investors by enforcing certain rules and regulations.

SEBI was founded on April 12, 1992, under the SEBI Act, 1992.
Headquartered in Mumbai, India, SEBI has regional offices in New Delhi,
Chennai, Kolkata and Ahmedabad along with other local regional offices
across prominent cities in India.

The objective of SEBI is to ensure that the Indian capital market works in a
systematic manner and provide investors with a transparent environment for
their investment. To put it simply, the primary reason for setting up SEBI
was to prevent malpractices in the capital market of India and promote the
development of the capital markets.

What is Market Capitalization?

Market capitalization refers to the total dollar market value of a company’s
outstanding shares of stock. Commonly referred to as “market cap,” it is
calculated by multiplying the total number of a company’s outstanding
shares by the current market price of one share. As an example, a company
with 10 million shares selling for $100 each would have a market cap of $1
billion. The investment community uses this figure to determine a
company’s size, as opposed to using sales or total asset figures. In an
acquisition, the market cap is used to determine whether a takeover
candidate represents a good value or not to the acquirer.

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 What Is a Portfolio?
A portfolio is a collection of financial investments like stocks, bonds,
commodities, cash, and cash equivalents, including closed-end funds and
exchange-traded funds (ETFs). People generally believe that stocks, bonds,
and cash comprise the core of a portfolio. Though this is often the case, it
does not need to be the rule. A portfolio may contain a wide range of assets
including real estate, art, and private investments.

CII:
The Confederation of Indian Industry (CII), based in New Delhi, India, is a
non-government, not-for-profit organisation, founded in 1895.
CII engages business, political, academic, and other leaders of society to
shape global, regional, and industry agendas. It is a membership-based
organisation.

IPF:
Investor Protection Fund is the fund set up by the Stock Exchanges to meet
the legitimate investment claims of the clients of the defaulting members
that are not of speculative nature. SEBI has prescribed guidelines for
utilisation of IPF at the Stock Exchanges.
The Stock Exchanges have been permitted to fix suitable compensation
limits, in consultation with the IPF/CPF Trust. It has been provided that the
amount of compensation available against a single claim of an investor
arising out of default by a member broker of a Stock Exchange shall not be
less than Rs. 1 lakh in case of major Stock Exchanges viz., BSE and NSE,
and Rs. 50,000/- in case of other Stock Exchanges.

Source:
https://wap.business-standard.com/article-amp/markets/no-merit-in-relaxing-
10-cap-on-single-stock-investment-sebi-chief-120102100691_1.html

22 | P a g e
 6. What is in the India-US defense deals?

India and the US are planning for the third 2 + 2 ministerial meeting in New
Delhi on 26-27 October between Minister of Foreign Affairs S Jaishankar
and Minister of Defence Rajnath Singh and US Secretary of State Michael
Pompeo and Secretary of Defense Mark T Esper.

23 | P a g e
 Last week, Deputy State Secretary Stephen E Biegun visited India to lay the
groundwork for 2 + 2 high-level visits in 2018. The Basic Exchange and
Cooperation Agreement (BECA), a pact with profound military
consequences, will be one of the things on the agenda. Agreements known
as LEMOA and COMCASA were signed in the last two meetings; these
have now been called the troika of foundational pacts with BECA,
effectively setting the ground for deeper military cooperation.

Learning Outcomes:

What is BECA?
The Basic Exchange and Cooperation Agreement largely pertains to
geospatial intelligence, and sharing information on maps and satellite images
for defence. According to officials, anyone who sails a ship, flies an aircraft,
fights wars, locates targets, responds to natural disasters, or even navigates
with a cellphone relies on geospatial intelligence.

Signing BECA will allow India to use the US’s advanced geospatial
intelligence and enhance the accuracy of automated systems and weapons

24 | P a g e
 like missiles and armed drones. It will give access to topographical and
aeronautical data and products that will aid navigation and targeting.
To use an everyday example, just like an Uber cab needs a good GPS to
reach its destination quickly and efficiently, BECA will provide Indian
military systems with a high-quality GPS to navigate and missiles with real-
time intelligence to precisely target the adversary.

This could be key for Air Force-to-Air Force cooperation. India and the US
have stepped up efforts to sign the pact during the upcoming 2+2. This flows
from the commitment in the joint statement during US President Donald
Trump’s visit in February this year, when the two sides had said they looked
forward to an “early conclusion” of BECA.

What are the other two agreements about?

The Logistics Exchange Memorandum of Agreement was signed between
India and the US in August 2016. It allows the military of each country to
replenish from the other’s bases: access supplies, spare parts and services
from the other country’s land facilities, air bases, and ports, which can then
be reimbursed. This is extremely useful for Navy-to-Navy cooperation, since
the US and India are cooperating closely in the Indo-Pacific.

Again, to put this simply, it is like going to a friend’s garage and workshop
to refuel one’s car and getting repairs done. But, by doing this, one is also
exposing one’s car and technology to the friend, and that requires trust. In
military terms, one’s naval ships are strategic assets and use of another
country’s base would expose one’s military asset to the host.

If signing LEMOA needed trust, its application enhances the trust. It took
almost a decade to negotiate LEMOA. This, in a sense, has bridged the trust
deficit and paved the way for the remaining “foundational pacts”.

Former diplomats say that while India had provided logistics support ad hoc
in the past — refuelling of American aircraft in Bombay during the first Gulf
War in 1991, visits by US ships to Indian ports during the war against
terrorism after 9/11— the signing of LEMOA has made it a smoother
process.

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 The Communications Compatibility and Security Agreement was signed in
September 2018, after the first 2+2 dialogue in which then External Affairs
Minister Sushma Swaraj and Defence Minister Nirmala Sitharaman met
visiting US Secretary of State Michael R Pompeo and then Secretary of
Defence James Mattis. It allows the US to provide India with its encrypted
communications equipment and systems so that Indian and US military
commanders, aircraft and ships can communicate through secure networks
in peace and war.

To explain in lay terms again, it is like WhatsApp or Telegram for the two
militaries, which is safe and real-time communication is possible hassle-free.

COMCASA paved the way for transfer of communication security

equipment from the US to India to facilitate “interoperability” between their
forces — and potentially with other militaries that use US-origin systems for
secure data links.

So, what do these three pacts put together mean?

While LEMOA means one partner trusts the other enough to expose its
valuable assets, COMCASA means one is confident that it can rely on
encrypted systems to connect the two militaries, and BECA means it can
share highly classified information in real time without fear of being
compromised. All this signals the level of trust that has developed between
the two countries and their militaries, faced with an increasingly aggressive
China.

So, what does this mean in the context of the ongoing border standoff?
Amid the longest stand-off on the India-China border in three decades, India
and the US have intensified under-the-radar intelligence and military
cooperation at an unprecedented level, especially since June.

After Pompeo called up Jaishankar in the third week of June, National

Security Advisor Ajit Doval has been in touch with the US NSA, Robert C
O’Brien, while Chairman of the Joint Chiefs of Staff Gen Mark A Milley
has been in touch with Chief of Defence Staff Gen Bipin Rawat. Also, Esper
called up Rajnath Singh in July second week.

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 These conversations have facilitated information-sharing between security,
military and intelligence branches of the two countries — almost
reminiscent of the Indo-US cooperation of the 1960s, especially after the
1962 war. The cooperation includes sharing of high-end satellite images,
telephone intercepts, and data sharing of Chinese troops and weapons
deployment along the 3,488 km Line of Actual Control (LAC). Sources said
New Delhi is watching the Chinese movements in “all sectors” of the LAC.

The Indian defence establishment also has enhanced capability with some
American equipment. The armed forces have used at least five American
platforms at the LAC— C-17 Globemaster III for military transport,
Boeing’s Chinook CH-47 as heavy-lift helicopters, Boeing’s Apache as
tank-killers, P-8I Poseidon for overland reconnaissance, and Lockheed
Martin’s C-130J for airlifting troops.

Now, with these key defence pacts in place, cooperation can happen in a
more structured and efficient way, rather than episodic.

Is there a catch in all this?

The US wants India to move away from Russian equipment and platforms,
as it feels this may expose its technology and information to Moscow. So
far, India is going ahead with the purchase of the S-400 air defence missile
system from Russia, and this has been a sticking point for American
interlocutors. For its part, India is wary of Pakistan’s deep-rooted ties with
Pentagon, and Washington’s dependence on Rawalpindi for access to
Afghanistan as well as its exit strategy.

But, because of Chinese belligerence being the clear and present danger,
New Delhi’s strategic embrace of Washington is the obvious outcome.
It is important to note that while LEMOA was signed during the Barack
Obama regime (August 2016), COMCASA was signed in the middle of
Trump administration (September 2018) and efforts are under way to sign or
conclude BECA before the US goes to polls on November 3.

Source:
https://indianexpress.com/article/explained/michael-pompeo-rajnath-singh-
india-visit-us-defence-deals-6812159/

27 | P a g e
 7. Amazon sends legal notice to India’s Future Group over deal with
Ambani’s Reliance Retail
8. Amazon sent Future Group, India's second largest retail chain, a legal notice
for violating the terms of its contract by selling a substantial portion of the
company to Ambani's Reliance Retail.

In late August, Future Group announced it was selling its retail and
wholesale business, as well as its logistics and warehousing business, for
$3.4 billion to Reliance Retail.
But Future Group and Amazon already had an offer before Reliance Retail
came into the picture.

Last year, Amazon acquired a 49% stake in Future Coupons, a group entity
owned by Future Group’s retail business. The deal gave Amazon a 3.58%
stake in Future Retail, and the right of first refusal to purchase more stake in
Future Retail both directly as well as via entities, Future Group said in a
filing at the time.

28 | P a g e
 According to TV network ET Now, which first reported about the legal
notice, the deal between Amazon and Future Retail also restricted the Indian
firm from entering into a deal with certain firms.
Future Group, which kickstarted its journey as a stonewashed-fabric seller in
the 1980s, served millions of customers through more than 1,500 stores in
more than 400 cities as of earlier this year.

The legal notice has puzzled many in India, as Amazon is reportedly

preparing to acquire a multi-billion-dollar stake in Reliance Retail, India’s
largest retail chain, according to earlier reports by ET Now and Bloomberg.

With e-commerce commanding only between 3 -7% of all retail sales in

India — and Reliance Retail launching its own e-commerce business to fight
Amazon and Flipkart — Amazon’s deal with Reliance Retail is seen by
many industry analysts as crucial for the American e-commerce firm’s
future in India. Amazon, which kickstarted its journey in India seven years
ago, has invested more than $6.5 billion in its local business in the country.

Amazon confirmed that it had filed a legal notice but did not elaborate as the
matter is “sub judice.” Reliance Retail and Future Group did not comment.
As of Wednesday midnight (local time), Future Group had not disclosed the
notice on the stock exchange.
Founded in 2006, Reliance Retail serves more than 3.5 million customers
each week (as of early this year) through its nearly 12,000 physical stores in
more than 6,500 cities and towns in the country.

The retail chain, run by India’s richest man, Mukesh Ambani, has raised
about $5.14 billion by selling about an 8.5% stake in its business to Silver
Lake, Singapore’s GIC, General Atlantic and others in the past four weeks.

Ambani’s other venture, Jio Platforms, this year raised over $20 billion from
more than a dozen marquee investors, including Google and Facebook.

Learning Outcomes:

About the Companies:

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 Amazon: Amazon is the world’s largest online retailer. The company was
originally a book seller but has expanded to sell a wide variety of consumer
goods and digital media as well as its own electronic devices, such as the
Kindle e-book reader, Kindle Fire tablet and Fire TV, a streaming media
adapter.
Jeff Bezos incorporated the company as Cadabra in 1994 but changed the
name to Amazon for the website launch in 1995. Bezos is said to have
browsed a dictionary for a word beginning with “A” for the value of
alphabetic placement. He selected the name Amazon because it was “exotic
and different” and as a reference to his plan for the company’s size to reflect
that of the Amazon River, one of the largest rivers in the world.

Amazon is headquartered in Seattle, Washington. The company has

individual websites, software development centers, customer service centers
and fulfillment centers in many locations around the world.

Future Group: Future Group operates multi-branded retail outlets. The

company’s retail chains include department stores, outlet stores, sportswear,
home improvement and consumer durables, supermarket, and convenience
stores as well as food parks.

It offers life and non-life insurance services and products; supply chain and
logistics service to large corporates in food and FMCG; apparels, footwear,
and accessories; consumer electronics and hi-tech; automotive; and
pharmacy and light engineering domain. The company provides mobile
telephony services under the brand name T24 on the GSM platform; IT
service focused on retail and allied consumption sectors; a range of
customized programs in leadership, management, personal effectiveness,
sales maximization, business processes, and customer retention; audit and
consultancy services to corporate clients; graduate, post-graduate, diploma,
and certificate courses; and skill development programs to make below-
poverty-line youth employable.
FutureFuture Group is based in Mumbai, India.

Contract:
A contract is an agreement enforceable by law. In a general sense, a
contract is a cluster of reciprocal promises, written or oral, between the two

30 | P a g e
 parties, binding them in a legal relationship. A contract is a legal obligation
on the parties to that contract who have agreed to deal with each other.

What is a breach of contract?

A breach of contract is the failure on part of either of the parties to perform
their obligations specified under the contract. Such non-performance causes
the other party to suffer a loss. According to Black’s law dictionary, breach
of contract means “failure to live up to the terms of a contract”.

Since a contract is legally binding according to the Indian Contract Act,

1872, it follows that where there is a breach of contract, there is a violation
of legal duty. In such a violation, one party refuses to fulfill the contract and
the other has to terminate it. A breach of contract can be wholly or partly.
The party who breaches the contract must give compensation only for the
part he has not performed.
Legal notice: it is simply the requirement that a party must be furnished with
sufficient knowledge concerning the legal processes that affect his rights and
duties or obligations. In other words, it is a way of notifying individuals or
organizations about a matter by using a method required by the law courts.
Venture: an undertaking involving uncertainty as to the outcome, especially
a risky or dangerous one.
Retail chain: A retail chain is a retail outlet in which several locations share
a brand, central management, and standardized business practices. They
have come to dominate the retail and dining markets, and many service
categories, in many parts of the world.

Source:
https://techcrunch.com/2020/10/07/amazon-legal-notice-india-future-group-
deal-reliance-retail/amp/

31 | P a g e
 9. Swedish steelmaker SSAB looking at merger of Tata Steel Europe
business

In the midst of industry restructuring, Swedish steelmaker SSAB AB is

considering a combination with Tata Steel 's European sector as a back-up
option for a contract with Thyssenkrupp AG, according to individuals
familiar with the matter.

SSAB is holding preliminary talks with India's Tata Steel as it explores

merger options, the individuals said, asking not to be recognised as private.
The Swedish group, which has a market valuation of about $3.2 billion,
would gain ownership of the European business of Tata Steel if such an
arrangement were sought, they said.

Having been hit by weaker demand and global overcapacity, combined with
increasing iron ore prices and high supplies of low-cost imported steel, steel

32 | P a g e
 producers in Europe are under pressure to consolidate. As a result, several
big manufacturers are talking about possible mergers with each other.
SSAB is among steelmakers interested in acquiring steel assets from
Thyssenkrupp, the German conglomerate that’s restructuring to ensure its
survival. That is their preferred partner due to the strategic fit, two of the
people said. But the Swedish pursuit was complicated last week by news
that Sanjeev Gupta’s Liberty Steel had made a non-binding indicative offer
for the German business.

Thyssenkrupp will carefully examine the offer, while continuing discussions

with other potential partners, the company said in a statement last week.
Representatives for SSAB, Tata Steel, Liberty Steel, and Thyssenkrupp
declined to comment when contacted on Thursday.

Liberty is a relative upstart controlled by commodity trader-turned-serial

dealmaker Gupta. It’s a unit of GFG Alliance, a loose structure of companies

33 | P a g e
 owned by members of Gupta’s family. The company has drawn the spotlight
for its rate of expansion in the past five years. GFG has also faced scrutiny
for the opaque structure of its business and heavy reliance on financing from
Lex Greensill’s eponymous firm.
Thyssenkrupp previously tried to partner with Tata Europe but the joint steel
venture faced opposition in 2019 from European regulators. It’s also held
initial talks with SSAB and Tata as well as domestic rival Salzgitter AG
over a potential combination with its steel unit, people familiar with the
matter have previously said.

SSAB Chief Executive Officer Martin Lindqvist on Thursday said the

company was “not engaging in any bidding process” for Thyssenkrupp steel
when asked by an analyst on a third-quarter earnings call. He didn’t
comment on whether the company is holding talks.

Tata, which operates the iconic blast furnace at Port Talbot in the UK and
another big plant in the Netherlands, has been trying to find a solution for its
European business since being hit by the 2016 commodity crisis, though
many of its troubles stem from before then.

Learning Outcomes:

About the Company:

SSAB: SSAB AB, earlier Svenskt Stål AB (English: Swedish Steel),
(Nasdaq Stockholm: SSAB A) is a Swedish company, formed in 1978 and
specialised in processing raw material to steel. The largest shareholders are
Aktiebolag Industrivärden and the Government of Finland.
SSAB is the largest steel sheet manufacturer in Scandinavia, with its blast
furnace, coking plant, and steelworks located in Luleå and its rolling mills
and coating plants in Borlänge—the initial product is sent from one location
to the other via train. The division also has a coil coating line, lamination
line, and special steels production. SSAB Special Steels in Oxelösund is the
only steelworks in Sweden to have its entire vertical production base in one
place, from raw material handling to its rolling plates. Ninety percent of its
production is exported, with its chief export partner being Germany.

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 TATA Steel: Tata Steel is one of the world's largest steel companies with a
steel production capacity of approximately 27.5 million tonnes per annum
(MnTPA) as on 31 March 2017. The company is a diversified steel producer
with major operations in India, Europe and South East Asia. The company
has manufacturing units in 26 countries and a commercial presence in over
50 countries. Tata Steel is the second largest steel producer in Europe with a
crude steel production capacity of over 12.1 million tonnes per annum.
The company together with its subsidiaries, is engaged in the manufacture
and sale of steel products in India and internationally. They offer hot and
cold rolled coils and sheets, galvanized sheets, tubes, wire rods, construction
rebars and bearings. Tata Steel is one of the few steel companies that are
fully integrated – from mining to the manufacturing and marketing of
finished products.

What Is a Merger?
A merger is an agreement that unites two existing companies into one new
company. There are several types of mergers and also several reasons why
companies complete mergers. Mergers and acquisitions are commonly done
to expand a company’s reach, expand into new segments, or gain market
share. All of these are done to increase shareholder value. Often, during a
merger, companies have a no-shop clause to prevent purchases or mergers
by additional companies.

Industry Consolidation:

Industry consolidation is a situation in which separate companies become

one. It is sometimes described as a merger, although technically these are
two different situations. In a merger, a new business is formed when one
company absorbs the other; in a consolidation, companies join forces on
relatively equal terms to form one new company. However, the two terms
are often used interchangeably.
Consolidation is a major trend in many industries, and the main reason why
companies consolidate is to improve investment returns through cost cutting
and productivity gains. Sometimes, even companies that have nothing in
common come together in order to diversify. All these consolidations can be
voluntary, or hostile—when the management of one firm resists the
advances of the other, but is eventually forced to accept a deal by its current

35 | P a g e
 owners. The Economist magazine writes that consolidation is an activity that
happens in waves.
Source:
https://www.business-standard.com/article/international/swedish-
steelmaker-ssab-looking-at-merger-of-tata-steel-europe-business-
120102301715_1.html

10.South Africa's Aspen Pharmacare, Johnson & Johnson sign COVID-19

vaccine deal

36 | P a g e
 On Monday, November 2, South African pharmaceutical company Aspen
Pharmacare announced the signing of an agreement with two Johnson &
Johnson subsidiaries to begin production of the multinational company's
COVID-19 vaccine.
The development will be based, according to reports, on the sterile Aspen
Pharmacare facility in the South African city of Port Elizabeth. In order to
facilitate the processing and packaging of drugs and vaccines, the company
said it has invested more than $184 million in the facility.

Signs of Aspen contract with Johnson&Johnson

Aspen said in a press release, "Aspen is pleased to announce that one of its
wholly owned South African subsidiaries, Pharmacare Limited (which trades
as 'Aspen Pharmacare'), has entered into a preliminary agreement for the
technological transition and proposed commercial transfer with Janssen
Pharmaceuticals, Inc. and Janssen Pharmaceutica NV, two of Johnson &
Johnson's Janssen Pharmaceutical Companies."

Aspen Group’s chief executive, Stephen Saad added, “We have invested
globally in our sterile capability and are determined to play a role in the

37 | P a g e
 manufacture of vaccines to add to our proud track record of making
contributions to humanity in times of global pandemics.”
Earlier on October 12, Johnson & Johnson announced a temporarily paused
the Phase 3 clinical trial of its COVID-19 vaccine candidate after one of the
participants fell sick. In a statement released on the official website, the
American multinational corporation assured that there is “no greater priority
than safety” of the people and that it is committed to providing transparent
updates of its clinical development process.

However, it added that the study participant showcased an “unexplained

illness” which is currently being reviewed and evaluated. The Johnson &
Johnson Phase 3 trial had started enrolling participants in late September and
set a goal of recruiting up to 60,000 volunteers across more than 200 sites in
the US, Argentina, Brazil, Chile, Colombia, Mexico, Peru and South Africa.
Earlier, Johnson & Johnson’s COVID-19 candidate was reported to have
shown a strong immune response with a single dose in the early trial stages.

The COVID-19 pandemic which saw its first outbreak in a wet market in
Wuhan, China last year has now spread all across the world. The virus,
named COVID-19 by the World Health Organisation, has infected
47,237,899 people worldwide with the global death toll reaching at
1,209,786. As per the John Hopkins coronavirus resource centre, the United
States has reported a total of at least 9,535,926 positive virus cases and has a
death toll of 236,831. The US currently has the highest number of reported
cases in the world, making it the epicentre of the deadly virus.

Learning Outcomes:

About the company:

Aspen pharmacare: Aspen is a supplier of branded and generic
pharmaceuticals in more than 150 countries across the world and of
consumer and nutritional products in selected territories.

Aspen is represented in South Africa, Australia, Hong Kong, Malaysia,

Philippines, Taiwan, Japan, Kenya, Nigeria, Tanzania, Uganda, Ireland,
United Arab Emirates, France, Germany, the Netherlands, Mauritius, Brazil,
Mexico, Venezuela and the United States of America. Acquisitions

38 | P a g e
 announced in 2013 have further extended the Group’s emerging market
presence to the Commonwealth of Independent States, comprising Russia
and the former Soviet Republics as well as to Central and Eastern Europe.
The Group currently has 50 business units.

Johnson & Johnson: Johnson & Johnson, incorporated on November 10,

1887, is a holding company. The Company and its subsidiaries are engaged
in the research and development, manufacture and sale of a range of
products in the healthcare field. The Company operates through three
segments: Consumer, Pharmaceutical and Medical Devices. The Company’s
primary focus is on products related to human health and well-being. The
Company’s subsidiaries operated 119 manufacturing facilities, as of January
1, 2017. The Company’s research facilities are located in the United States,
Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the
Netherlands, Singapore, Switzerland and the United Kingdom. The
Company has over 230 operating companies, which conduct business around
the world.

What Is a Multinational Corporation (MNC)?

A multinational corporation (MNC) has facilities and other assets in at least
one country other than its home country. A multinational company generally
has offices and/or factories in different countries and a centralized head
office where they coordinate global management. These companies, also
known as international, stateless, or transnational corporate organizations
tend to have budgets that exceed those of many small countries.

Covid 19 and economic impact:

The novel coronavirus that emerged in Wuhan, China, in December 2019
has leaped across borders, sending ripples around an interdependent and
highly mobile global population.
The virus, referred to as SARS-CoV-2, causes a disease that has been
officially named COVID-19. On March 11, 2020, the Director General of
the World Health Organization (WHO) declared COVID-19 a global
pandemic. China has since managed to contain the virus through the use of
draconian measures. However, Western Europe continues to grapple with
severe outbreaks, while as of 6 April 2020 the United States (US) has over
330,000 cases, more than any other country. In New York City, the hardest

39 | P a g e
 hit state in the US, hospitals are barely coping with the soaring numbers of
patients as supplies of personal protective equipment (PPE), ventilators and
other essential equipment needed to treat patients are in short supply. On
April 6, there were 1,275,856 confirmed cases and almost 70,000 deaths due
to COVID-19 in 183 countries or regions globally. Given that testing rates
have been poor in many countries, the true number of cases is likely to be
much higher. As the virus continues to make its way around the world, the
potential health impact of the pandemic in low-income countries,
particularly in Africa, that already face struggling health care systems and a
scarcity of skilled health workers, is of grave concern. While the pathogen’s
epidemiological trajectory remains uncertain; various mathematical
modelers have attempted to estimate the potential health impact of the
disease. Their estimates range from 20% to 80% of the global population
being infected.
The economic fallout from this pandemic is likely to cripple even the most
resilient of markets, threatening national and global growth. Although the
pathogen has not yet completed its world tour, the global economy is already
showing signs of slowing down. Service sectors, including aviation, travel,
and tourism, are being hit the hardest. Business activity has ground to a halt
in many sectors. Airlines have already experienced a steep fall in traffic on
their highest-profit international routes. In the US, almost 6.6 million
workers filed for unemployment benefits at the end of March, ending a
decade-long streak of employment growth. More than 60% of Americans
have lost hours or pay, been laid off, or closed a business in response to the
pandemic, with predictions that the US jobless rate could reach as much as
30% in the second quarter. The British Chambers of Commerce revealed
that by early April, 32% of businesses in the United Kingdom will have
temporarily laid-off staff. In many low-income countries, the informal sector
is a substantial source of employment. In many of these workers, out-of-
pocket expenditure for health care already comprises a large proportion of
household incomes. Increased demands on families are likely to push them
further into poverty. The Organization for Economic Co-operation and
Development (OECD) predicts that some countries could be dealing with the
economic fallout of the COVID-19 pandemic for years to come.

Source:

40 | P a g e
 https://www.business-standard.com/article/companies/south-african-firm-and-johnson-
johnson-strike-vaccine-deal-south-120110300045_1.html

11.Indonesia adds Microsoft, others to list of tech firms that must pay
VAT.

Indonesia has added eight more technology firms to a list of companies that
have to pay a 10 percent value-added tax (VAT) on revenue, including
Alibaba Cloud (Singapore) Pte Ltd and Microsoft Corp. Since July 7, when
Netflix Inc and Alphabet Inc 's Google Asia Pacific were listed among other
tech firms, the country's tax authority has classified 36 companies, including
the latest additions, as liable to pay VAT.

The other six named on Friday were GitHub Inc, Microsoft Regional Sales
Pte Ltd, UCWeb Singapore Pte Ltd, To The New Pte Ltd, Coda Payments
Pte Ltd and Nexmo Inc. The companies in Friday’s announcement must start
charging VAT to advertisers and other customers from Nov. 1, the
Directorate General of Taxes said in a statement.

The companies were not immediately available to comment. Non-resident

foreign firms that generate annual sales of at least 600 million rupiah
($41,000) for digital products and services from at least 12,000 users in
Indonesia are required to pay VAT, the authority said.

41 | P a g e
 Microsoft would like to immediately invest in Indonesia ,so they will decide
about the issue a simple regulation to support investment in a data center.
Microsoft company faced in constructing its own data centre in Indonesia.
Direct Foreign Investment is encouraged by the Indonesian Government,
though multinational data centre operators might work with local partners
for their know-how or to mitigate risk.

Learning Outcomes:
About the Company:
Microsoft is a leading global vendor of computer software; hardware for
computer, mobile and gaming systems; and cloud services. Microsoft’s
corporate headquarters is located in Redmond, Wash., and it has offices in
more than 60 countries.
Microsoft’s roots go back at least as far as 1975, when the first
commercially available personal computer appeared on the cover of Popular
Electronics magazine. The Altair 8800 was a rudimentary system, but it
found a market for home-based computers and created a new demand for
software to use with these systems.

Bill Gates and his friend Paul Allen immediately saw the potential. Gates
contacted the manufacturer Micro Instrumentation and Telemetry Systems
(MITS) and offered to write a program for the new computer. Gates and
Allen created an interpreter for BASIC – then a mainframe programming
language – to use with the Altair.

MITS hired Gates and Allen in 1975. But by 1976, they had left to devote
more time to their own fledgling company, Microsoft, which they
incorporated in 1981. The company went public in March 1986.

VAT:
Value Added Tax ( VAT) is type of the indirect tax levied on goods and
services for value added at every point of production or distribution cycle
,starting raw materials and going to all the way to final retail purchase.
Value added tax minimizes the tax evasion due to its catch up effect. Its
simple to administer as compared to other indirect tax.

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 Value Added Tax is transparent and has minimum burden to consumers as it
is collected in small fragments.

Foreign Direct investment:

A foreign direct investment (FDI) is an investment made by a firm or
individual in one country into business interests located in another country.
Generally, FDI takes place when an investor establishes foreign business
operations or acquires foreign business assets in a foreign company.
However, FDIs are distinguished from portfolio investments in which an
investor merely purchases equities of foreign-based companies.
Foreign direct investment is beneficial for Indonesia Country for developing
economies and emerging markets where companies need funding and
expertise to expand their international sales.
Foreign direct investment creates new jobs, as investors build new
companies in the target country, create new opportunities. This leads to
increase in income and more buying power to the people which in turn lead
to an economic boost.

Tax Authority:
Tax Authority means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.

International licensing:
An international business licensing agreement involves two firms from
different countries, with the licensee receiving the rights or resources to
manufacture in the foreign country.
Rights or resources may include patents, copyrights, technology, managerial
skills, or other factors necessary to manufacture the good.
Advantages of expanding internationally using international licensing
include: the ability to reach new markets that may be closed by trade
restrictions and the ability to expand without too much risk or capital
investment.
Disadvantages include the risk of an incompetent foreign partner firm and
lower income compared to other modes of international expansion.

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 Taxation of non-residents has been a vexed issue for a long time.
Applicability of tax laws of different countries makes it difficult to ascertain
taxability of non-residents who have global presence.

In case where non-residents are liable to tax in country other than their
resident country, they may have to adhere to various compliances required
by tax law of the other country. One of such important compliance is filing
of Income Tax Return.

Source:
https://m.economictimes.com/news/international/business/indonesia-adds-
microsoft-others-to-list-of-tech-firms-that-must-pay-
vat/amp_articleshow/78566435.cms

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