Important Budget Announcements: Hike in duty on precious metals & fuel, 100% FDI in insurance intermediaries & recapitalisation of PSU banks

29th June – 05th July

1. India allows 100% FDI in insurance intermediaries

July 5, 2019

Finance Minister Nirmala Sitharaman made an announcement in her maiden budget speech to allow 100 per cent Foreign Direct Investment (FDI) in insurance intermediaries. The government will examine suggestions for further opening up of FDI in sectors, including insurance. This may bring in cost-effective capital for several insurers that are investing in technology and digital solutions, and wanting to expand their network.

Source : India Today

2. Government to hike the FDI limit in domestic air carriers from the existing 49%

July 5, 2019

In her budget speech, the Finance Minister has proposed to hike the Foreign Direct Investment (FDI) limit in domestic air carriers from the existing 49% in the financial year 2019-20. FDI limits in aviation could help troubled airlines such as Air India and Jet Airways, which had been grounded since 18th April due to an acute fund crunch, to find buyers.

Source: Livemint

3. Government to recapitalise PSU banks

July 5, 2019

The Finance Minister proposed to allocate Rs. 70,000 crores for the recapitalisation of state-run banks. Public Sector Undertakings (PSU) banks are likely to see a turnaround in profitability given that most of the pain has been recognised and Non-Performing Assets (NPAs) and credit costs are peaking out.

Source: Money Control

4. India to revive the troubled NBFC Sector

July 5, 2019

Top rated NBFC’s will get help in terms of enhancement of liquidity access for the sector. The government will provide a one-time six-month partial guarantee of Rs. 1 lakh crores to state-run banks for purchasing consolidated high-rated pooled assets of financially-sound NBFC’s. This will cover their first loss of upto 10 percent.

Source: Money Control

5. Government increased duty on precious metals and fuel

July 5, 2019

Finance Minister Nirmala Sitharaman has hiked the import duty on gold and other precious metals in the Budget to 12.5% from 10%. The gems and jewellery industry has expressed disappointment with the Union Budget 2019-20. The government has also decided to impose an additional excise duty and cess of Re. 1 each, which would be added to the cost per litre. (Effectively Rs. 2 per litre on petrol and diesel)

Source: Business Today

6. Copper falls on weak demand outlook and inventory pile up

July 3, 2019

Copper prices fell after a jump in inventories. LME copper stockpiles on Tuesday jumped 14% in one day to a one-year high of 272,500 tonnes, data released on Wednesday showed, which put pressure on copper prices ; the demand outlook for copper has not picked up.

Source: Reuters

7. OPEC extends production cut for 9 months

July 2, 2019

The OPEC+ group agreed to roll over production cuts of 1.2 million barrels per day (bpd) that were implemented in Jan’19 for another nine months, to Mar’20. This move is designed to keep oil prices from falling as U.S. production increases and concerns grow over global demand.

Source: Bloomberg

8. Gold drops below $1,400 per ounce post US-China trade talks at G20

July 1, 2019

Gold tumbled below $1,400 an ounce after the U.S. and China reached a truce in their trade war. This step has reduced the safe haven demand for gold. After meeting Xi, US President Trump said he would hold off imposing additional tariffs on Chinese imports and delay restrictions against Huawei Technologies Co., letting U.S. companies resume sales to China’s largest telecommunications equipment maker.

Source: Bloomberg