1. The overall private capital industry has risen to $7.4 trillion by end of 2020, on the back of investors chasing yields. Of this around $2.5 trillion is dry powder waiting for investment opportunities.
Industry insiders say that the biggest drivers of the appetite for private capital investments are the low interest rate environment and lofty stock market valuations, which have dimmed the outlook for future returns from those asset classes. At the same time, private markets are less volatile as they trade only rarely and valuations can be more subjective, an opacity that actually increases their lustre to many investors.
2. Tamal Bandopadhyay has some very interesting facts about State Bank of India
State Bank has 470 million customers and 80 per cent of its new customers are in the 20-40 age group. Roughly one out of every three Indians banks with State Bank. It has the largest mutual fund under its belt; boasts of the second largest credit card portfolio; and its life insurance arm is among the largest in the private sector. Has it been using the enormous data base for cross-selling financial products? It doesn’t seem so, if its fee income is any indication. The bank has already put in place the technology platform. When it comes to transactions, 93 per cent happen outside its 22,000-strong branch network. Around 67 per cent of all transactions are digital and one out of five of its customers (90 million) uses internet banking. Its end-to-end digitisation mobile banking and lifestyle app, YONO, has 37 million customers.
However, the fact that income tax collections fell by a much smaller amount than corporation tax collections during 2019-20 and 2020-21 (see chart 1) shows that owners rather than their white-collar workers had a better deal when it came to tax rates.
4. Many years back I blogged here and here about Kerala being a narrow strip of urban continuum and therefore the value of a high speed rail network running across the length of the state. The State Cabinet has approved a Rs 63940 Cr and 529.45 km long SilverLine high speed rail project connecting Trivandrum to Kasargode in less than 4 hours. If implemented, it has the potential for transformational impact on the state over the next couple of decades.
5. This was waiting to happen. Citing Covid, the Adani Group has asked for another extension till December 2021 to take over the three airports it won in a tender - Trivandrum, Jaipur, and Guwahati. The bids were finalised in February 2019. The Group had bid very aggressively, quoting Rs 85 and Rs 69 per passenger for Ahmedabad and Jaipur respectively, more than double the next bids of Rs 177 and Rs 174.
Andy Mukherjee has a piece on the Adani Group's recent wobbles in the equity market.
6. Contrasting monetary policy trajectories being charted out by the central banks in Brazil and India. Both countries, like many others, face the twin challenges of rising inflation and struggling economies at a time of monetary accommodation. Persisting with loose monetary policy runs the risk of inflation getting unanchored while tightening would threaten economy recovery. How long can monetary policy remain accommodative without inflation getting out of hand?
The Brazilian central bank has raised rates by 225 basis points this year to 4.25%, betting that inflation is a greater threat and it's better to act early on it. The RBI in contrast has preferred to continue with accommodation despite rising inflation, betting that inflation is likely transient and accommodation is critical to support the economy. The RBI has company among all developed countries.
7. The Biden administration has displayed remarkable courage and commitment by appointing Lina Khan as the Chair of the Federal Trade Commission, the premier competition regulator. Khan, 32, has been at the forefront of demands for anti-trust actions against the big tech companies and business concentration. As FT reports, this has naturally raised fears among the big technology firms about breaking them up.
At the heart of Khan’s philosophy is the idea that companies, including Amazon, have benefited from lax antitrust scrutiny for decades, a period during which low consumer prices became the dominant factor in setting competition policy. She envisions a different antitrust regime, similar to that which existed earlier in the 20th century, when US authorities did not hesitate to break up monopolies.
This from her famous essay on Amazon's anti-competitive practices,
This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.
8. Amazon and NR Narayana Murthy have been making news for the wrong reasons. The Government of India rules on e-commerce prohibit digital market place operators from being sellers in their own marketplace. But Amazon and Narayana Murthy have found ways around it. This is an example,
Amazon reportedly developed independent sellers such as Cloudtail, as 'special merchant' which enjoyed over 35 per cent of total sales on the platform until 2019. While NR Narayana Murthy's Catamaran Ventures indirectly holds 76 per cent in Cloudtail and Amazon the remaining 24 per cent, the firm's two top posts - chief executive and finance director - were with the US retailer. Cloudtail's holding company, Prione is also run by a former Amazon manager, the report in 'The Guardian' newspaper said.
And this is how Amazon ploughs back the profits from the 'outsourcing',
The latest Guardian' report claims... Cloudtail which only sells via the Amazon platform paid Amazon fees of 95 million pounds last year, almost 10 times more than the Indian business reported in profit. According to its analysis, Murthy created the venture capital firm Catamaran, a trustee of the Hober Mallow Trust, which ultimately owns the stake in Cloudtail and whose beneficiaries are the Murthy family. "The whole structure raises questions if Cloudtail is really an asset of Amazon and if the Murthys are the name lenders. The exact detail of the deal will only be known if the investigation agencies seek details of their shareholder agreements, Rashmi Das, an author specialising in Indian e-commerce, is quoted as saying by the newspaper.
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