retail sector in india

Why India Needs a National Policy for Its Retail Sector?

By Economy No Comments

National Policy on Retail Sector in India

To state the matter quite plainly, a holistic retail policy is the need of the hour. This is a suggestion that needs to be implemented for the effective working of the sector and for moving up the ladder of the ease of doing business.

The battle against corona is not over yet. The economy may be recuperating but one thing one cannot expect is complacency. With various sectors that were crippled by the covid pandemic, the retail sector was one of them.

Secondly, given the ongoing battle against the virulent virus, one cannot deny the crucial role of the retail supply chains that are facilitating essential movements and delivery in the economy. Though, it is to be noted that the first wave was quite crippling for the retail sector due to the blanket lockdown but the second wave was quite lenient given its nature of being partial.

retail tradeOne fact that is worthy of being mentioned is that the retail sector has much to offer the economy but this comes only after prerequisite incentives and policy support can be provided for the same.

Certain reports have shown that the retail sector in India has great potential for employment. One quite comprehensive report that was published was a report by CII and Kearney. This report emphatically sheds light on the potential of the retail sector given a comprehensive National Retail Policy is implemented.

It states that the retail sector has an immense potential to effectively facilitate the creation of three million jobs by the financial year 2024. Also, given the unemployment woes of India, one can rightly state that the retail sector will be a boon for reviving the economy.

It is to be noted that since the trade effectively has upstream and downstream linkages, investments in the retail sector will beneficially generate an appreciable cascading effect.

This will help produce value for the stakeholders via employment generation, value chain modernization, upskilling of employees and consumer experience, etc. this will in turn also lead to increased investment in the sector due to its increasing lucrativeness.

retail industry in indiaIn addition to creating utilities and employment in the retail sector, one will also witness the increase in employment generation in allied sectors. Talking about the gender disparity in India, retail sector up-gradation will also lead to more employment of women as the retail industry is one of India’s largest employers of women.

Thus, with its upgradation, it will also lead to the closing value of gender disparity in India. This will also help generate women-centric policy reforms which will also help the government gain political capital.

But why is the support of the government so necessary and crucial? It is mainly due to the fact that 5-7 lakh retailers were emphatically forced to close down due to various policy changes. It is to be noted that due to unpredictable policy stance and environment in India, many companies and especially the retail sector have to bear the brunt.

Thus, a stable policy mechanism is the need of the hour. Another utility that can be created out of such policy implementation is the fact that enabling such stable policies actually helps in facilitating their return to business. This can consecutively lead to the generation of employment in the economy and will help contribute to the GDP of the country.
But how does the policy framework of such policy implementation be designed? It is to be noted that according to the CII National Committee on Retail stresses such a National Retail Policy emphatically should bring all categories of retail under a single rule.

Furthermore, what is most required for the strong efficiency of such a policy program is the fact that attention needs to be paid to technological development, ease of doing business, and ease of access to capital. Consecutively, the sector also requires up-skilling of workers for the usage of technological advancement in the sector.

indian retailThe government’s response too for such a sector has been accommodating. This has been seen due to the approval that was garnered by the government for its revelation of its accommodating policies in the financial budget 2022. However, various aspects of the same remain untouched.

The retail sector’s association has expressed its concern over the effective and emphatic withdrawal of import duty exemptions that own some of the products of interest.

This is mainly due to the fact that many retail sector owners rely on imports. Given that some government policies target the same, it has garnered some disapproval from the government.

Thus given the present situation at hand, many retailers and businesses may have to emphatically and crucially depend on domestic suppliers to safeguard their margins. Thus, a robust policy that does not offer such immediate shocks is needed for the betterment of the sector.

On the other hand, it is worthy of mentioning here that the government’s ambitious plan for effectively reviewing 400-plus customs duty exemptions that will come into effect from October 1 could heavily result in a revised duty structure. This could definitely eliminate major distortions at play.

Thus, one can state that when such ambiguities have been removed earnestly, traders that are importing goods can benefit immensely and joyously.

On that note, another major announcement that has been enthusiastically welcomed by the traders is the government’s thrust on EoDB.

This will effectively help and push women’s participation in the sector as it will permit women to work in all categories without any restrictions. Thus, is the situation being to be scrutinized, much work can be done to increase the gender diversity in the sector which will emphatically help in the betterment of the sector. But how long will a robust, efficient system take to materialize in the economy is still a mystery?

 


Terms related to the article:

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retail sector in India, national policy on retail sector.

lehman brothers moment

Why Evergrande’s Debacle Can be China’s Lehman Brothers Moment?

By Other No Comments

Evergrande China’s Lehman Brothers Moment

The 2008 Lehman brother’s debacle may be on play in China. With the high possibility of default, Evergrande brings back the stories of the 2008 financial crisis.

This emphatically tells us that leading firms can be quite crucial for the fate of the economy as a whole. This is due to the very pertinent fact that they can ruin a nation and pull a nation together.

But can Evergrande be the Lehman brothers’ moment for China? This calls for speculation and inspection. According to reports, Evergrande is cash strapped and has emphatically missed its payments that were due on Monday.

Given the trend that is playing out at the real estate giant, it can be stated that further payments of interest and principal amounts too cannot be expected of it.

evergrande lehman brothers

Additionally, if the nature of the debt is to be scrutinized owns a total of $300 billion debts to two crucial, large banks of China. With the nonpayment of dues, an economic fallout for such banks can be likely.

But will the fallout be limited to the banks in the Chinese economy? The answer is an emphatic no. Various experts and analysts are worried that the debt default can have repercussions not only for the Chinese economy but also for the world economy.

This is due to various basic reasons like globalization and how integrated the Chinese economy is with the world market. In fact, China is the biggest importer and exporter of goods in the world market.

Thus with a slump in its economy due to huge fallout, one can expect lower demands and thus losses to various sectors and companies in the global market.

lehman brothers crisisBut it is to be noted that China isn’t exactly like the US in the financial year 2008. These have various reasons, firstly, the reach and impact of the USA were far much more than China, at least in terms of currency.

Secondly, the fed was quite reluctant in bailing out Lehman’s brother and had not anticipated the huge worldwide repercussions.

But given the character of the Chinese government, where everything is controlled by the government, it is quite unlikely that the government will allow such social upheaval, that it values the most.

Thus the impact and the extent of the debacle will depend on the government’s willingness to contain the social and financial upheaval a messy Evergrande collapse could cause.

Evergrande- a story of another debacle

If the reports are to be believed, it is to be noted that Evergrande has been conferred with the title of the most dubious title of the world’s most indebted real estate developer.

It has a wide network of real estate projects in the Chinese economy with 1,300 real estate projects around 280 cities. This shows the extent of spread and reach of the real estate sector.

Talking about the liabilities of the firm, as aforementioned, it stands at a humungous at $300 billion. With the striking numbers, the leaders have mentioned that they do not have the prerequisite funds to fund the debt. This has got the investors inside and outside China worried about a potential contagion effect.

lehman brothers collapseThe contagion effect means that turmoil or crisis in one large corporation can easily spread to others. these fears have resurfaced due to the nightmares of the Lehman Brothers crisis that had had the worst contagion effect on the other major financial institutions too. These financial intuitions were strategically its trading partners.

Secondly, the impact of the same can be huge given the current slowing economic conditions of the second-largest economy. With demand and investment in the economy already plummeting, another debacle that can affect the banking sector, whose crucial role is to lend, and the public, who are demand drivers in the economy, the impact of the same can be colossal.

Similarly, the very fact that China is the world’s second-largest economy is important. This in itself sends a message that whatever happens in China’s Evergrande, has an immense potential to affect financial institutions and nations around the world.

But are there any signs of the ripple effect yet? Yes, closer to home example is the Hong Kong stock exchange market. According to reports, Hong Kong’s Hang Seng Index fell significantly by 3.3 percent after the news of the Evergrande debacle hit the market. On the other hand, its properties index fell by a whopping and was significant 6.69 percent. It is to be noted that this was the lowest in 52-week.

Similarly, at the far end, US stocks too showed their uneasiness. According to reports, US stocks too showed their biggest drop since May. This was emphatically fueled by the Evergrande anxieties. Though certain mention about Fed anxiety is to be also made that has kept the investors on edge.

Not only has the stock market started showing the effects of the Evergrande debacle, but certain traces of it can also be found in the commodities markets. This is due to the fact that it had helped send the copper prices in the economy plummeting.

This was in fact nearly a one-month low. This is mainly due to the fact that the demand for the metal is plummeting which is emphatically used in the construction business.

Thus the only question that needs answering now is whether the Chinese government will step in to bail out the real estate corporation or will it stand by and let the market showcase its worst scenario of social and financial upheaval.

 


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videocon insolvency

Videocon Insolvency News and Updates

By Other No Comments

Videocon Insolvency Latest Updates

In yet another insolvency case, that is Videocon insolvency. Videocon finds itself at the altar of bankruptcy. In the recent turn of odious events, Videocon was effectively acquired by the Billionaire Anil Agarwal. The resolution was passed by the National Company Law Tribunal which facilitated this takeover by Twin-Star Technologies.

If the details of the deal are to be scrutinized, Twin Star Technologies had effectively offered Rs 2,962 crore. This humungous amount was offered for Videocon’s 13 group firms. According to reports, these groups consisted
of Millennium Appliances India, Videocon Industries, Applicomp India Limited.

Videocon Telecom etc.

Though many might argue that the case was put to rest in an amicable and efficient way and that the Indian insolvency structure had successfully concluded the high-profile insolvency case.

However, it is to be noted that according to various analysts, the valuation of the company was severely devalued. This argument was surfaced due to the fact that the offer of Rs 2,962 crore was finalized against the admitted claims of Rs 64,838 crore.

Thus, it can be effectively stated that the amount under consideration was quite meager and lenders would effectively have to take a haircut of over at least 95 percent.

But even given the discrepancy in valuation, it is worthy of mentioning here that the dissent was presented by the smaller lenders. These lenders were namely like Bank of Maharashtra, Morgan Securities, IFCI, SIDBI, etc. to the contrary, in fact, top lenders voted enthusiastically in favor.

videocon insolvency newsBut has the insolvency takeover led to any significant suppression of descent? Perhaps not. many individuals, especially the Videocon promoter has come to the forefront to fight the NCLAT’s order to approve the bid by Twin-Star Technologies. This is mainly due to the fact that the Videocon promoter had earlier enthusiastically offered to pay up for the withdrawal of insolvency proceedings.

The contentions

It is to be noted that various contentions rise, given the fact that it is being perceived that the assets owned by Videocon Group, particularly assets in gas and oil assets were not effectively included in the information memorandum. Thus, subsequently, this has led to no valuation which has been considered.

Thus, one can effectively say that the insolvency case has not to be concluded by the administration and rather is ongoing. Dhoot’s appeal to NCLAT is a glaring example of that. Dhoot’s appeal includes a request for a fresh resolution plan for the oil and consumer durable assets that should be considered.

IBC

videocon bankruptcyIt is no news that IBC was effectively passed and implemented for the successful resolution of the insolvency cases in the economy and to effectively present time-bound resolution of the same.

But, given the series of happenings that have played out for the Videocon resolution, it is worthy of mentioning that it has become a classic instance and example of even when the case has settled, the creditors are still recovering just a meager portion of their dues.

In fact, according to various legal experts, it is to be noted that the Videocon resolution offer is actually low and needs to be relooked at. Thus Videocon’s insolvency case presents a snippet inside the IBC structure of the Indian economy and how it has been failing for years.

If the offer of a fair bid is to be scrutinized, according to valuation agencies, the fair value of Videocon stands at around Rs 4,000 crore. Additionally, the effects are aversive as the banks are acutely facing a 95 percent haircut if the deal with Twin Star for acquiring Videocon per the NCLT order is taken forward.

Though nonaccommodative and critical comments like the successful resolution applicant are paying almost nothing by the NCLT have been made, the reality of the IBC and insolvency sector in India remains the same: grim.
Now with reassessment queries, it can be seen that certain contentions have been raised over the confidentiality law.

This is mainly due to the fact that the resolution applicant had valued that had valued the 13 segments was too little but even then, the bid was selected and was given a go-ahead.

Another argument that has been raised is that why wasn’t Dhoot’s offer overlooked even though it could have been improved? Such contentious arguments made by the bidders and analysts have risen questions about the confidentiality issue which according to many needs thorough examining.

videocon bankruptcy news and updates
With Videocon’s insolvency and resolution, it can be effectively seen that the insolvency laws in the country are not competitive or efficient. This is especially visible in the fact that Videocon attracted such lower bids that were approved in the clear scenario of better bidders. This is in fact the reality of the banking sector and insolvency issues in the economy.

Even though the provision of appealing against the NCLT order is there through NCALT, it is quite ambiguous whether it will rule against the NCLT verdict. needs to be seen.

Thus, what turn will this nightmare for Videocon take is something that depends on NCALT’s sagacious decision-making instincts

 


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universal credit

Towards Universal Credit Inclusion

By Economy, Banking No Comments

Universal Credit Inclusion

It is no news that digital lending has taken a great leap into the life of the customers since its inception in recent years. Given the immense potential that digital lending has to offer in the market, it is quite viable that rapid growth in technology takes place.

But with the rapid growth that is happening in the sector, is putting immense pressure on the seams. It is to be noted that some of these harmful effects of the ever-growing fast growth of digital lending had expressed themselves last year through lack of compliance with customer protection norms.

This had emphatically led the RBI to constitute a working committee to effectively recommend certain guidelines that can strategically allow digital lending to grow. This was done to grow the digital lending sector in a more coherent and orderly fashion to protect the interest and welfare of the users or customers.

what is universal creditThus, it can be argued that the issue of improving the digital lending sector should be viewed with the primary lens of consumer protection.

It is due to this reason, it is important that it is viewed in terms of stringent re-emphasizing of some of the existing guidelines, namely Fair Practices Code and Outsourced Service Provider Guidelines amongst others. it is well known that for the successful initiation of the process, a governing or regulatory authority is needed for chaperoning the ill aspects of the industry.

Thus, as recommended by the RBI committee, the proposal to effectively set up a self-regulating organization, that can a perfect sense provide in-depth analysis, oversight, and guidance. It is to be noted that the establishment of an industry-led SRO will emphatically help ensure that guidelines can keep pace with the rapid evolution of the industry.

Given that regulation plays a key role in making the industry abide by the regulations, thus it is important to ensure that unregulated lending activities are curbed as largely as possible to preserve consumer confidence and welfare.

This is also needed as last year it was discovered that unregulated lenders were emphatically the prime source for many of the aberrations that were observed in the market. On the top, such an issue garners extra importance due to the fact that such lending activities bypass various guidelines and supervision for responsible lending.

credit

Responsible lending, if not regulated will heavily cost the customers who are largely unaware of the consequences. Some of the recent unregulated lendings that have cropped in the recent years go by the name as buy-now-pay-later.

Quite similarly to the unregulated BNPL sector, the need for curbing the authority of the loan sharks which function through fraudulent apps and technology-based measures is also needed. This can be highly achieved through app marketplace gatekeepers like apple and Google. This will strategically help curtail the immense spread of unscrupulous lending that at the moment is plaguing the market.

But what happens when the system is overburdened with regulation? The answer demands deeper introspection, especially in relation to additional regulations, such as National Financial Consumer Protection Regulation, Agency Financial Service Regulation, etc., it is to be noted that multiplicity of regulations can effectively hamper the growth of the nascent digital lending sector, as this can foster reluctance, inefficiency, and non-competitiveness.

This will be especially true for the recent startups in the digital lending sectors that are currently driven by younger startups. This is true as younger innovative startups increasingly have limited ability to invest in compliance overheads.

Another area of importance is the role of embedded finance. Embedded finance can play a crucial role in reducing information asymmetry that exists in the market and leads to inefficiency. It is no news that information asymmetry is a fundamental problem in extending credit in the market. This issue is systematically resolved through embedded finance as it provides strong end-user control and repayment mechanisms.

universal credit complaintsTalking about business lending, there are key building blocks of lending and are extensively used in supply chain financing. Given the nature of the business, it is to be noted that largely finances flow to the supplier accounts which are paid back through an intermediary account.

Thus it can be argued that the odious risk is often shared with an anchor corporate that has better operational risk management capability for transactions. Thus, disallowing such intermediary accounts will emphatically and increasingly restrict the ability of risk to flow where, as a matter of fact, it can be operationally managed the best.

Thus, in totality given the changing digital landscape in India and the massive growth potential that the sector has to offer, India needs to inculcate a sense of regulated transaction habits.

On the other hand, the authorities also need to keep in mind that the robust financial system does not need to be overregulated to foster inefficiency in the bussing ecosystem.

The need of the hour is to roll perfectly regulated public financial infrastructure, that facilitates transactions, encourages innovation, and protects the interests of the consumers.

universal credit overpayment Given the already existing framework, India today stands tall to offer its citizens and businesses the benefits of universal credit access.

At last, it needs to be concluded that digital lending is the need of the hour with increasing relevance every day, and with the right regulatory architecture, it has an immense potential to serve as a pertinent key driver to the growth in the country.

 


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The Rise of The Indian NFT Market

By Other, Others No Comments

The Indian NFT Market

It is no news that the digital economy is on the rise. The era of the digital economy was effectively ushered by the pandemic. The digital transformation took place rapidly which was mainly due to the compulsion faced by many individuals to work in their remote surroundings.

Not only cryptocurrency but the rise of the broader digital asset industry was also witnessed. Thus, with the rise of cryptocurrency, the rise the popularity of non-fungible tokens has also been seen. It is to be noted that according to various reports a total of more than $208 million of NFT artwork had been sold.

indian nft marketGiven its recent nature, it is quite extraordinary that it has recorded such a humungous growth. This also corroborates the fact that NFT is on the rise and is just in its nascent stage of development, mustering all the growing popularity in the global market.

Since the onset of the pandemic some $250 million worth of total NFT volume has been traded. This data was collected for just one year i.e.2020. This effectively shows that even with economic uncertainty and financial crippling of many, NFT trade is on the rise.

The NFT model has been immensely helping various sectors that are looking for alternatives to monetize their businesses. In addition, creative artists are effectively utilizing NFTs to significantly generate revenues for their creative works.

It is to be noted that concerts and music festivals were not held due to the onset of the pandemic, but many artists around the world have enthusiastically used the novel methods of monetizing their creative work by selling in the form of NFTs.

A very appropriate example for the same is the music brand, Kings of Leon, releasing its new album as a limited edition NFT. The sale of just six NFTs has provided lifetime tickets to front-row seats for the band’s shows in the future.

nft market in indiaIt is to be noted that NFTs that are digital creative works are actually premised on blockchains which work quite similarly to crypto. Blockchain technology which is quite permanent and has unchangeable digital ledgers provides the user the security of recorded transactions that reveal history.

It is to be noted that this has led to growing confidence in the industry which secures transactions for future issues and gives effective ownership of NFTs to the rightful owners.

It is to be noted that before the invention or emphatic use of the NFTs the creators were facing limitations for their revenue. But now with the rise of the NFTs, an infinite number of copies can be made of their digital creative works and can be distributed throughout the internet to generate humongous revenue.

This gives rise to the question that how does NFTs make it possible for creators to genera

nft market place

te and distribute their artwork that cannot be plagiarized? It is to be noted that the finite tokenized versions of these digital creative works ensure their uniqueness and make the attempt to counterfeit scarce. this helps the artists to preserve the uniqueness of their work.

Additionally, the NFTs cannot be replicated which insures the creators of his or her work. Thus, given the robust base of the establishment of the NFTs, it can be rightfully stated that excitement relating to NFTs is growing exponentially in the global market.nft marketplace bsc

But given all the favorable attributes of the NFTs, their legal treatment and regulation are somewhat unsettled. As aforementioned that the royalties and uniqueness of the work are preserved through NFT trading, it is to be noted that this might not always be true.

Smart contracts are written into the code of NFTs. This invariably allows for the distribution of funds in the form of royalties that the creator receives each time his or her work is resold. However, this is applicable and works only when the NFT resale is done through the same platform.

To add to the arduous attribute of the NFT, US law does not effectively recognize resale rights. These resale rights are unrecognized and are in relation to the creative works. Thus, this nonrecognition of the resale attribute of the NFT means that no law provides recourse for unpaid resale royalties.

Given the exuberant rise of the NFT market, people from all walks of life are participating in the NFT market. But given various legal restrictions, many are unaware of the same. This usually leads to odious infringement liability.

Thus, lastly, it can be stated that the introduction of NFTs has great potential to emphatically influence and usher the digital revolution in the economy. Its usage has led many artists to earn their due during the failing pandemic period and can be used in the future too making the transition to the digital world more prominent.

Additionally, not the conventional arts being monetized but also the creators can also monetize against other unconventional physical properties and can gain proof, scarcity and uniqueness, ownership to digital assets.
However, it is to be noted that the NFT market is still in its nascent stage of development.

 


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arbitrability of ip disputes

The Arbitrability of IP Disputes

By Others No Comments

Arbitrability of IP Disputes in India

Courts around the world have been systematically enlarging the ultimate scope of alternate arbitration dispute mechanisms. This is due to the fact that it has been witnessed throughout the years that arbitrability of ip disputes has progressively become the default commercial dispute mechanism around the globe.

Thus, it is quite imperative that the scope of alternative dispute mechanisms is widened in order to reduce the burden on courts. But talking about the Indian jurisprudence, on the contrary, it has been encountered that time and again courts have emphatically6 and effectively held that the disputes concerning various Intellectual Property Rights as non-arbitrable.

But why is this case with India? This is due to a pertinent and prime reason that courts often strongly are of the opinion that enforcement of IPR involves the public policy aspect. This effectively means that it would be strong going against the interests of the public if such contentious matter of intellectual rights is made arbitrable.

On the other hand, what makes the possibility of enactment of arbitration difficult is the fact that the Indian domestic statutes such as the Arbitration and Conciliation Act of 1996 and various other IP legislations do not effectively provide a concrete expression.

This concrete expression pertaining to the availability of Arbitration in IP Disputes is not strategically laid out by the aforementioned Acts.

arbitrability of ip disputes in india

To state the specifics to reinforce the fact, it is to be noted that Section 89 of the code of Civil Procedure, 1908 strategically states that the court has the extreme power to refer the IP matters to ADR. Thus, Courts are given the authority or the extreme power to deem fit and consequently allow arbitration, mediation, or conciliation for the alleged settlement of disputes.

Given the aforementioned authority, Courts have been strongly trying to settle the ADR practices. They have also come up with various tests to strategically and easily determine the arbitrability of various types of disputes. Thus, one can conclude that the arbitration process in India is well laid out by the courts that laid out the tests and measures to effectively determine the arbitrability of disputes.

To cite a case, the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. Serves as a perfect example. In the aforementioned case, the Supreme Court had strongly held that all the disputes which directly pertain to “right in personam” are arbitrable in nature. On the other hand, for clarity, it was stated that all the disrupts that highly relate to “right in rem” are effectively unsuitable for arbitration.

So, the gist of the aforementioned example gives us a much-needed sneak peek into the world of arbitration in India. It intelligently informs us that a major aspect that determines arbitrability is actually the nature of judgment sought by the aggrieved. This determinative attribute states that if the judgment that is sought by the arrived is against
The current status

To judge the current status of arbitration in India, the latest case of the Delhi High Court Judgment is worthy to be scrutinized. The case of Golden Tobie (P) Ltd. v. Golden Tobacco Ltd., is the case where the defendant had effectively filed an application under Section-8 of the aforementioned act namely Arbitration and Conciliation Act, 1996.

To lay down the facts of the case, the parties had entered into a master long-term supply agreement. Now, by the agreement, the defendant had supplied exclusive brands of the defendant to the Plaintiff. Here, to complicate the matter, the plaintiff had subsequently had entered into a trademark license agreement.

arbitrability

The reason by the plaintiff for the same was stated, he had acquired or had been effectively granted an exclusive non-assignable, non-transferable license. The license gave the power to the plaintiff to strategically manufacture the Defendant’s product.

Here, it was stated by the plaintiff, that despite the humungous operational expenditure and capital spent by the plaintiff to amicably and effectively increase the availability of the Defendant’s products, he was issued a termination notice.

Now here it is to be noted that since the commercial production had not yet begun in strength, the agreement was rightly terminated. Subsequently, it was informed by Defendant, upon receiving another termination letter that the timely payment had not been made.

Thus, this meant, according to the defendant, that the plaintiff had no right to potentially and effectively sell his products or manufacture the exclusive brands in the market. Hence, when this suit was filed, it was decided by the apex court that the matter under consideration will be referred to the sole arbitrator.

Thus, given the aforementioned case, it can be strongly argued that the arbitration in Intellectual property rights matters only arises out of the nature of the dispute. This also reinforces the idea that if the procedures are well in place, they can bring an affirmative impact.

 


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sebi aif regulations

SEBI’s New AIF Regulations

By Corporate Law No Comments

New SEBI AIF Regulations

India, a developing economy is all set to accommodate investments in the economy. Given the outrage against the Chinese government for its pandemic containment policy, many companies have been leaving China for alternative business investments.

Thus, it can be rightly stated that the pandemic has presented India with a golden opportunity to attract investments in its economy. It is to be noted that this has been materialized in some sense as the FDI equity investments in the economy in the last quarter jumped by 168 percent.

Now, to make the investment environment more accommodative, SEBI has stepped up with its investment accommodation policy. Recently, in a meeting held, the Securities and Exchange Board of India had approved various accommodating amendments to the regulations.

These regulations were brought into force to facilitate alternative investment funds in the economy. It is to be noted that the regulations by the SEBI will effectively ease compliance needed for Alternate Investment funds. On the other hand with flexibility in ease of compliance, such regulations will also foster investment flexibility that will ramp up further investments and will streamline regulatory processes.

sebi regulationsTalking about the recent announcement compared to the earlier archaic regulations, it is to be noted that as per SEBI’s amendments made to Alternative Investment Funds Regulations, 2012, Venture Capital Funds will need to invest at least 75 percent of investable funds.

But it is to be noted that in a partial relief that has been provided by SEBI to alternative investment funds, it has provided the Investments certain exemptions. Such exemptions come in regard to the investment committee. It is duly noted that under the recent norms, AIF members of an investment committee will no longer be effectively responsible for any investment decisions.

Also, as aforementioned, compliance will be made flexible as members of the committee would not be effectively liable for the compliance of the AIF investments. This will be in relation to governing documents, the regulatory provisions, and other applicable laws. This will emphatically take off the burden from AIF investments that will see an inflow in the coming months.

It is to be noted that due to the recent amendments, existing investment restrictions in investable funds of VCFs will be happily done away with. As per the newer regulations, Social Venture Funds that lead to the minimum amount of grant of ₹25 lakh that has been stipulated for Category I AIFs shall not be applicable anymore.

However, it is to be noted that such exemptions come with certain conditionalities. According to the recent amendments, the exemption in the AIF rule is conditional upon capital commitment. As aforementioned, the rule states that the capital commitment of at least ₹70 crores from each investor will be accompanied by a suitable waiver.

However, the effectiveness is somewhat thwarted as the exemptions are quite limited to an AIF in which effectively each investor other than the sponsor, directors, manager, and employees of the AIF or employees has effectively and emphatically committed to investing not less than ₹70 crores.

This is what puts certain conditionalities in investments which can present some kind of hindrance in the promotion of investments. Secondly, the waiver that has been furnished for the AIF is in respect of compliance with the said clauses and is effective in the manner specified by the board. Thus, even with investment promotion, certain conditionalities with the same have been imposed.

sebi guidelinesBut it is to be noted that such investment promotion comes as a series of steps. In October amendments were passed by Sebi that had amended the AIF regulations.

This had provided the recommendation and regulation for shared responsibilities for the members of the investment committee. These responsibilities were to be shared with the investment manager. This has been done to bring in efficiency and accountability in the system as prior to this only fund managers were effectively responsible and accountable for investment decisions.

Thus, it can be rightly stated that such amendment provided an accommodative opportunity for equal responsibility for the members of the IC and the investment managers with regard to investment decisions of the AIF.
Also, such joint accountability will lead to AIF’s compliance with the regulations.

This will also help in doable compliance with the private placement memorandum and the applicable law.
Scrutinizing the newer regulations it is to be noted that the newer AIF fund that is established or incorporated in India and is a privately pooled investment vehicle that emphatically and effectively collects funds from foreign or Indian investors, will invest in accordance with a defined investment policy.

This will effectively lead to the benefit of its investors and thus it can be rightly stated that such amendments have led to upholding of investors’ rights which will again foster confidence and will call for increased inflow of investments in the economy.

In fact, given the data released by the SEBI such regulations led AIFs to witness a surge in commitments worth ₹82,228 crores in the financial year 2021. Such investments found their way from family offices, institutions, and high net-worth individuals.

 


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retail inflation

Retail Inflation for Industrial Workers Rises Marginally to 4.5 PC in October

By Labour & Employment No Comments

Rising of Retail Inflation for Industrial Workers

Inflation is burning a hole in the consumer’s pocket. The claim can be corroborated by the recent shreds of evidence that suggest that there was a marginal rise in retail inflation. Industrial workers had to significantly bear the brunt as food inflation was soaring making the means of livelihood difficult.

Retail inflation for industrial workers rose marginally to 4.5 percent in October as compared with 4.41 percent in September.

The reason for the rise of retail inflation

Given the unconventional year that the world had witnessed, the aftereffects of the same have been lurking across the economy. With high stimulus packages that were rolled out last year, for liquidity and growth, inflation was an apparent threat from the very start. Given, the case of India, a developing economy, the stimulus was all the more needed for sustained growth and recovery in order to get the growth engine on track.

retail inflation in indiaWith a high accommodative stance that was adopted by the RBI and startup culture that was soaring, liquidity in the economy was bound to rise. Though initially the inflation was assumed to be of transitory nature, recent data shows that the need to curb the same is crucial.

What makes the matter all the more sensitive is the fact that given the discovery of the newer variant around the world, the accommodative stance of the central bank might have to be continued. With the high potential of lockdowns that can be placed in the economy, the stimulus will once again gain center stage. This, emphatically will not materialize well for the economy.

But is the stimulus and excess liquidity a sole contributor to the burgeoning inflation in the economy? Apparently not. Given supply constraints in the market in the form of crippled semiconductors and raw materials, inflation effects have been felt by the consumer. With slow supply and high demand, due to recovering economy, inflation has been seen growing and gnawing at the expenses of the workers and the consumers.

The need for government intervention

retail inflation meaningIt is to be noted that given the recent situation of burgeoning prices, the government needs to step in, soothe the apprehensions of the spenders in the economy. Given the massive recession that was witnessed by India last year, the country is still in the process of recovery.

Thus, consumer confidence is needed to ramp up the growth engine of the economy. But with given burgeoning prices, it is arduous to garner consumer or investors’ confidence, especially when the financial state of many in India is crippled. This assumes all the more important as the bulk of inflation pressure is being exerted through food and beverages.

It is to be noted that according to the reports, the maximum upward pressure in the current index is effectively coming from the food and beverages group contributing 1.31 percentage points to the total change. Given the nature of the commodity, one can emphatically argue that the inflation pressures cannot be avoided. This is due to the fact that on the item level, tomato, mustard oil, brinjal, cabbage, onion, cauliflower, etc., form the basis of the inflation pressures.

The conundrum

But is the solution of government intervention the sole savior for the debt-laden consumers? Is it as unadorned as it sounds? The answer is more complex than expected. It is no news that finances are needed for the healthy functioning of the authorities.

retail inflation rate in india

To top it all extra finances are needed to finance the growth and recovery process. Given, that the government has already given up on its crude oil excessive revenue, it is quite a possibility that the government will not try and reduce its finances through intervention and simple tax cuts. Thus, the government faces the conundrum to emphatically reduce inflation and maintain growth.

Given the complex nature of redressal by the government, it makes us seriously question the fact that is the inflation as high as we are anticipating it to be? It is to be noted that if upward pressure on the index was felt, the downward pressure was felt as well.

According to the reports, the increase in the index was effectively checked by moong dal, grapes, fish fresh, oranges, apple, and ginger, which helped in putting downward pressure on the index.

But is India the only country that is facing such inflation pressures? The answer is negative. Given the reports that are coming from across the world, it has been reported that America recently witnessed the highest ever increase in its inflation.

In fact, the market was in a little frenzy with the anticipation that the FED will increase the interest rates and the liquidity will be brought into control in the economy.

But is India’s comparison with America appropriate given the different natures of the economies? Perhaps not. It is solely due to a characteristic that America enjoys and India doesn’t, which is of free fiscal space. India doesn’t have the luxury to expand liquidity the way that can be afforded by America. Thus, comparing the redressal mechanism by two quite different nations will provide inaccurate results.

Thus, in totality, given the seriousness of the situation and the conundrum that the government faces, what will be the final choice of the authorities be? Guess, we’ll have to patiently analyze the market and wait till the government ponders on its next course of action.

 


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reit in india

The REIT in India – Policies, EITs, and InvITs

By Real Estate No Comments

The Policies of REIT in India

One benefit that is cropping out of the Real Estate Investment Trusts (REIT in India) and the Infrastructure Investment Trusts (InvITs) is the fact that it can be expected to positively fuel not only real estate growth but also multi-sector economic growth in India.

Such a claim gains traction as the real estate sector can be viably considered as the engine of growth for India/. With its high potential to effectively raise up significant capital for the future, one can state that investments in this sector will be crucial for the economy’s growth that is still recuperating from the effects of the pandemic.

This year’s budget too had laid emphasis on the fact that India’s infrastructure will be used to raise the growth prospects of the economy. Thus, for the same infrastructure- a growth-oriented budget was released. In fact, the government has also been making use of the monetization of assets to curb the budget deficit, thus, assets are proving to be a boon in India’s growth story.

how to start reit in indiaGiven the aforementioned importance of infrastructure development in India, EITs and InvITs come into the picture. According to the reports the real estate investment trusts and infrastructure investment trusts have effectively raised capital up to $9.7 billion.

Favorable policies

It is to be noted that REITs and InvITs are getting the boost due to favorable government policies and a long-term investment outlook of the government authorities. This favorably has enticed and induced many marquee investors including various other sovereign and pension funds for investing.

Another factor that is strongly contributing to increasing investments is that the investors are receiving higher returns and are benefiting from receiving regular cash distributions.

On one hand, stable and increased yield are keeping the investors interested, on the other, they are also relishing the opportunity of expanding their asset base.
as aforementioned, the government had quite enthusiastically had announced the initiation of the National Infrastructure Pipeline.

india reit

It is to be noted that such infrastructure funding is estimated to require a funding requirement of over a whopping $1.4 trillion by 2025. But given the early trends of the performance of REITs and InvITs in India, the picture looks quite satisfactory and encouraging.

This is mainly due to the fact that reports have shown the combined market cap of the three listed REITs in India to be humongous over $7 billion and over $10 billion. Thus, one could say that the infrastructure market is showing encouraging prospects for growth.

The high utility of EITs and InvITs

Given the high encouraging market indicators, EITs and InvITs have a huge potential to effectively and positively attract private investments in the infrastructure. Such investments can be attracted through the mitigation of various challenges that investors face in the real estate market.

Such challenges that need to be mitigated are long-term capital requirements, funding requirements, corporate governance issues, optimal leverage, etc.

Thus, if such discrepancies are mitigated, InvITs are highly expected to play a crucial and key role in the monetization of existing projects. One can expect humungous [potential in sectors like renewable energy, digital infrastructure, roads and highways, conventional power, airports, etc.

what is reit in indiaAs aforementioned, as the InvITS and REITs will play a significant role in effectively funding the Government’s infrastructure plans, in addition to helping in meeting the asset monetization plans of the government it will also strategically help in meeting the capitalization requirements of banks.

SEBI’s infrastructure

It is to be noted that SEBI is the main regulator of the REITs and InvITs. Under SEBI these are governed under SEBI’s Infrastructure Investment Trusts Regulations, 2014 and SEBI Real Estate Investment Trusts Regulations, 2014.

under this legal framework, InvITs can be either publicly listed or privately listed but REITs are strictly required to be publicly listed. It is to be noted that investors face many discrepancies under the system due to the intricacies and adherence to the legal framework.

Under the SEBI’s framework, asset acquisition or business combination are seen to be complex and investors face difficulties inappropriate accounting for distributions.

Thus, one can state that the accounting work of REIT and InvITs is complex due to various, multiple legal entities being involved in the process. On top of it, one can also witness the show and interplay of various regulations having an effect on the investors. Thus, more transparency and ease of conducting such business is the need of the hour.

This will allow the investors to have a relevant structure in place early and will also be beneficial in evaluating the relevant tax, which is the prerequisite need of the investors. Transparency and ease in conducting the aforementioned activities will help and allow sponsors to emphatically make the most of the increasingly popular route to funding.

given the recent trends of the government’s stance and work in the sector, one can state that government authorities including other regulators and SEBI have played a tremendous role in playing a proactive role in popularizing and promoting these investment trusts.

This has been mainly done through effectively and emphatically promoting and popularizing the investment trusts. Such a claim can be corroborated by the fact that SEBI had recently reduced the minimum subscription size and trading lot for REITs and INVITs.

This will help in emphatically boosting bolster liquidity of instruments further in the future. Thus, for long-term growth and success, that needs to be achieved and are crucial for India, consistency is required in financial reporting and better transparency is needed to seep into the system.

 


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auto debit rbi

How RBI’s Auto Debt Rule Could Emphatically Cause Tax Woes for Fintech Startup?

By Economy, Banking No Comments

Auto Debt RBI Rules for Fintech Startup Companies

In another turn of interesting events, the fintech startups could run into a problem. According to auto debit RBI new rules, Fintech companies run at the risk of attracting a 2% equalization levy. In addition to the equalization levy, the fintech startups will also attract additional goods and services tax (GST) at 18%.

This GST will be attracted on part of the money the fintech startups would make through such an arrangement. This would especially include transactions where an Indian citizen has effectively subscribed to the services of a foreign OTT player.

On the other hand, this can also levy in the case where an Indian citizen buys goods and services from a company that is effectively not based in India. Thus, one could effectively state that the Reserve Bank of India’s significant auto-debit rule could effectively and largely bring tax complications for various fintech companies that are operating in In India.

According to the reports, this will also include fintech startups that had set up platforms for banks to effectively integrate with a common e-mandate platform. This was carried out or done to ensure compliance.

auto debitThis brings various Payment aggregators like Razor pay, BillDesk and PayU under the ambit of the law as these have set up platforms like MandateHQ, SiHub, and Zion, respectively. These had been operating in the capacity to form or provide a “bridge” for banks to complete the transactions.

It is no news that since the introduction of new intermediaries, they have gained popularity in recent years. These intermediaries include platforms like Netflix and Apple stores, functioning apart from the bank. With the increase in popularity, the analysis had shown that they had become an avid link between the customer and the overseas merchant establishment. Due to such arrangement, the tax implications have cropped up and have been introduced by the RBI.

auto debit payments rbiBreaking down the tax structure

It is to be noted that if the tax structure is to be broken down, the equalization levy will constitute up to a 2 percent charge on any transaction which will involve a foreign company over the internet. Additionally, on further inspection, GST that will be charged will effectively depend on the structure of the fintech player’s entities.

Thus, it would depend on how the transaction is routed and the nature of such transactions. Thus, given the ambiguous nature of various forms of transactions that take place, one can state that the government’s new equalization levy could effectively come into play.

In other clarification that has been issued, fintech companies that would attract the 2% equalization levy will be on any overseas transaction or it could also be levied on the company or the merchants that are not based in India. Thus, one can state that such an equalization levy can effectively provide the risk of the platforms charging fees from the merchants.

The businesses that will come under the setup

Firstly, according to analysis, the overseas bank from which the money is being deducted which is effectively not based in India, it will attract an equalization levy of 2 percent. Similarly, these would also include banks that don’t have an emphatic tax presence in India.

The second criterion that will attract tax is the nature and structure of the transactions that will be carried out by the company. In this case, if it is found that a fee that is emphatically received by an Indian bank that doesn’t directly come to an Indian entity, will too effectively attract a 2% tax.

It is to be noted that RBI’s newer laws also include the money that goes through a subsidiary. These subsidiaries are usually of the fintech company, even these could effectively come under RBI’s scrutiny and could attract taxes.

On top of this, there is a GST implication too. GST will come into play if the money that is positively deducted from an Indian’s debit or credit card is done via the fintech’s books before it is remitted in the foreign merchants’ account.

Thus one could effectively state that the services that are provided by the fintech companies in pursuit of validating transactions could actually attract GST on both the transaction fees and the setup fee that is charged by them.

fintech startupit is to be noted that RBI’s newer rules have come into effect from October 1. Since then it has been stated that banks can only process auto-debit transactions if they fulfill the criteria of sending a pre-debit notification to their customers well before time. This is to say that such notifications should be given out at least 24 hours before the payment.

it is to be noted that such a law has been brought into force as many banks do not wish to indulge in such transitions and do not have the technology for undertaking such transactions. Thus, this has led many to instead turn to fintech companies to effectively provide transaction platforms.

 


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