The Federal brings to you today’s (April 21) major business developments including states set to ease labour laws.
States set to ease labour laws to lure multinationals
States, including Tamil Nadu, are set to relax labour laws to attract more multinationals to set up their factories and offices.
What it implies: Karnataka was the first state to relax norms which allowed women to work during night shifts and increase the number of working hours even though it left out giving more rights to workers. Even though the Karnataka government increased minimum wages in eight scheduled employment by an average of 10 per cent last year, trade unions say it is too low considering the Post-Covid cost of living. Several multinationals like Foxconn, which makes Apple products, have placed pre-conditions before announcing new state investments. Trade unions say most states, in trying to attract investments, have been diluting labour safety norms, leading to a situation where the number of fatalities has been increasing. According to one report, at least three deaths are reported daily in factories nationwide.
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RBI monetary panel warns against over-tightening of rates
The Monetary Policy Committee (MPC) of the RBI is split in the middle regarding the state of the economy. Some members believe further tightening of interest rates will impact the economy, while the rest are optimistic about growth prospects.
What it implies: The RBI finds itself in familiar territory with discordance among the members about changing the repo rates. The RBI Governor Shaktikanta Das believes that a thrust on infrastructure (an increase of 37 per cent in capital outlay to Rs 10 lakh crore in the Union Budget announcement) should be good enough to increase economic activity in the country. In contrast, a few others point out that the MPC should not ignore early signs of a slowdown. Last month, Das said that the decision to pause the repo rate at 6.5 per cent was tactical and not a change in direction. However, economists like Emeritus Professor Indira Gandhi Institute of Development Research, Ashima Goyal, said that a further increase in interest rate is “best avoided” since high accurate rates can lead to lower growth. It is likely that during its next meeting, MPC might press the pause button again regarding the repo rate.
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More startup layoffs continue
There is no let-off regarding layoffs, with Koo, a competitor to Twitter, letting go of 30 per cent of its workforce.
What it implies: According to one report, over 90 firms fired off over 25,000 employees between January and April, with edtech startups accounting for nearly one-third of the total number of terminated staff. This is primarily due to a slowdown in investment. With the Centre planning to levy a 20 per cent tax on startups that receive overseas angel funds at higher valuations, further layoffs are predicted throughout the year. While laying off employees is one method of sustaining operations, most Indian companies do not have products with a global reach. As a result, they find it challenging to retain their investment partners for an extended period of time. Hence it is likely that the industry may now be poised for consolidation, but unless a greater vision drives their startups, they may find themselves in a similar predicament in the future.
Research Report: Agri input industry
Historical data suggest El-Nino directly correlates with food grain production: In the last 38 years, there have been 12 years of EL-Nino (3- strong years, 5- moderate years, and 4- weak years). It is observed that there has been no impact on food grain production in the case of weak EL-Nino (4 times in 38 years), whereas solid and moderate EL-Nino has resulted in a 7 per cent and 10 per cent decline in kharif food grain production. For the current year, according to IMD (India Meteorological Department), monsoons to average 96 per cent of LPA (long period average); however, they have indicated that El-Nino patterns could be developed during the mid-monsoon season (August- September), which in turn could have an impact on food grain production in the upcoming kharif season.
IMD and Skymet, in their recently released monsoon forecast, have predicted ‘Normal’ monsoons (96 per cent of LPA- Long period average) and ‘below normal’ rainfall (94 per cent of LPA) for the forthcoming monsoon season. Hence, IMD expects monsoon to be at 96 per cent of LPA, with El-Nino patterns likely to develop during 2nd half of the season (mid-August to September).
On the other hand, Skymet expects monsoons to be at 94 per cent of LPA, with Northern and Central parts of the country risking deficit rainfall. The gloomy forecast concerns the beleaguered agri-input industry, which is already reeling under high channel inventory and high-cost raw material inventory amid a falling raw material cost scenario.
“We have factored in revenue growth of 9.6 per cent YoY in FY24E for our agrochemical coverage universe vs 8.7 per cent CAGR clocked over FY14-16 (FY15/FY16 witnessed deficit rainfall). However, we believe that pressure this time would not be as severe as FY15/16, primarily as overall inventory remains comfortable with domestic crop prices continuing to be remunerative, the government’s thrust on improving farm income, and expectations of special aid from the government. Given the Lok Sabha elections next year, any damage to the crop may be made good by the various governments.” (Source: Prabhudas Liladhar).