Business

View: For its own political safety, if not for India’s economy, GoI must fully open the expenditure tap

Published

4 years ago

May 22, 2020

At first, New Delhi struggled to square the circle to make sense of the zeros in the economic stimulus. After unconvincing attempts, there are hints of unused ammunition that can be fired later to counter the trail of destruction that Covid-19 will leave behind. It’s a marathon, not a sprint, as a government adviser reminded — a reassuring message, as long as men and businesses can touch the finishing line with their bodies and souls together.

That story, however, is not finding too many takers. There’s outright disbelief among obvious fault-finders as well as scepticism among admirers. The government’s stance, measures and fears have deepened the doubts. Besides the fiscal orthodoxy, the Centre is caught in its professed preference to ‘endowment’ over the Congress legacy of ‘entitlement’ and doles that the ruling party believes to have kept the poor stay poor. So, it bets on ‘atmanirbharta’ even when the house is on fire.

In politics, as in business, the biggest risk could well be not taking one. Why is GoI so afraid to spend? Bloated fiscal deficit, along with a higher public debt to a shrinking GDP, could trigger a downgrade of the sovereign rating to ‘junk’; since a sovereign (unlike a company) upgrade back to ‘investment’ grade can take a long time, the ‘junk’ tag may stick till the elections in 2024; why subsidise loans and waive interest when benefits could land in the wrong hands; tax relief to a tiny group (which pays income-tax) may politically backfire amid the plight of migrant labourers.

But such risks could pale in comparison with the damages that a prolonged recession would wreck. There are already self-inflicted wounds: the abrupt lockdown and its unplanned lifting; a flawed stimulus; the ‘no free lunch’ comment by GoI’s chief economic adviser; proposing harsh labour laws; the inability to help the urban poor, and disturbing images of families of labourers that remind old-timers of newspaper photographs of refugees after the 1971 Bangladesh War. The sequence of events has a takeaway for the powers that be: while Indians have learnt to live with bumbling, corrupt governments, they may be still unprepared for a government that appears insensitive.

A Scoring Subject

Against this backdrop, the upsides of extra spending can outweigh the fears. There is a difference between ‘sovereign rating’, which measures the ability of a sovereign to pay back, and ‘country rating’, which assesses a country’s long-term potential.

Even after a sovereign downgrade — which makes foreign loans expensive and weakens the currency as hot money flows out — the country rating can be preserved if a government pursues reforms, generates demand to pull an economy out of the rut, and generously supports states to gain their trust to push through far-reaching changes in agriculture. That would be atmanirbharta in a wider sense — instead of harbouring an unrealistic expectation that companies with no earnings visibility would borrow even if there’s no demand.

Similarly, a tax cut to 1% people may not be an attractive political option, but it can have a demand spin-off due to the disproportionate share of a small army of taxpayers in the final consumption. None of the criticisms — by the Opposition, hard-nosed analysts or rating agencies — would eventually matter if the economy recovers. That is possible if the government gives growth a chance. But, today, there is a cloud over the stimulus. Check the details, for therein lies the devil.

On Friday, RBI cut rates, a move that will only make it easier for companies that are receiving enough funds to get more money at a cheaper rate. But it didn’t let banks rejig loans without categorising them as non-performing assets (NPAs). In the absence of regulatory forbearance, no bank will restructure loan and add to its NPA that will eat into capital and profits.

A company that receives a new loan will be first asked to repay the earlier loan — leaving very little money for the borrower to grow the business. This brings back the old question: why on earth would a company borrow if demand is missing? That missing piece of demand would fall in place with higher government spending and easier regulations — steps that would prompt banks to lend and businesses to borrow. Else, the central bank would be left to do a bad job of an impossible task.

Fuzzy Signals
There are other unanswered questions. How was the Rs 3 lakh crore guarantee for MSME loans calculated? The total Special Mention Accounts SMA0 and SMA1 loan outstanding to MSMEs is estimated at Rs 10 lakh crore. If 20% of that amount is covered by the guarantee, the total guaranteed amount will not exceed Rs 2 lakh crore (assuming all loans turn delinquent and every guarantee is invoked).

Can the guarantees be easily invoked? Will money received by non-banking financial companies (NBFCs) from the special RBI-backed fund be rolled over till the market thaws? The clues to these puzzles lie in New Delhi, not in the money markets of Mumbai. The answers are with the government that should be ready to spend, sooner than later — simply because no political party would like to be remembered as a prisoner of rigid beliefs.

Views expressed are author’s own

(Note: This is a Article Automatically Generated Through Syndication, Here is The Original Source

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World

New Class-Action Lawsuit Accuses Rivian of Making Materially False and Misleading Statements

Published

9 hours ago

April 25, 2024

Manoj Nair

New Class-Action Lawsuit Accuses Rivian of Making Materially False and Misleading Statements

Electric vehicle manufacturer Rivian has been slapped with a lawsuit which alleged that the company misled the investors with false claims regarding its business, operations and prospects.

The class-action lawsuit made a number of allegations which included overstating the demand of its Electric vehicles and also not making it clear how it will handle the negative and near-term macroeconomic impacts.

The lawsuit also revealed that Rivian’s business was experiencing reduced demands as well as increased customer cancellations precipitated by inter alia, high interest rates.

The orders had significantly reduced and this has significantly reduced the profits and the manufacturing of vehicles in 2024.

Rivian Faces New Class-Action Lawsuit Alleging Deceptive Statements

The lawsuit also alleged that the Company’s public statements were materially false and misleading at all relevant times.

Rivian’s stock, like all other EV startups, has been tanking and this has angered the investors who saw a major portion of their investments eroded and a number of law firms like Bernstein Liebhard LLP announced this week that it has filed a securities class action lawsuit on investors’ behalf.

The lawsuit stated that the EV manufacturer had violated the Securities Exchange Act of 1934 and has asked investors who had bought shares of Rivian Automotive, Inc. between March 1, 2023, and February 21, 2024, to join its suit.

The company’s stocks have fallen and one of the primary reasons was the high interest rates. Rivian’s products are beyond the reach of an average income household.

Also Read: Prime Hydration Faces Lawsuits Claiming Its Sports Drink, Prime Energy, Contains PFAS and Excessive Caffeine

The Rivian’s Electric vehicles target customers were wealthier clients and the spurt in order cancellations means this class is walking away from Rivian’s product.

The stocks of the company were popular for the investors but the reduced demands caused by higher borrowing cost have hit its stock prices badly.

The price war has also affected the EV sector and the company also with its competitors like Tesla has been uniformly affected.

The EV sector marked value has tanked by more than 57% year-to-date.

The chance of a fall in interest rates is not expected since the Federal Reserve will not lower the benchmark interest rate since it could lead to a bout of hyperinflation.

Also another factor which will discourage the Federal Reserve to lower interest rates is the soaring energy prices caused by the war in Ukraine and the Middle East.

Also Read: Lawsuit Claims Kennywood Concealed Steel Curtain Closure to Boost Sales

World

Lawsuit Claims Kennywood Concealed Steel Curtain Closure to Boost Sales

Published

13 hours ago

April 25, 2024

Manoj Nair

Lawsuit Claims Kennywood Concealed Steel Curtain Closure to Boost Sales

Kennywood’s Steel Curtain roller coaster will not be available this 2024 season, and this has miffed a Kensington man to the extent that he has filed a lawsuit against Kennywood and its parent companies, alleging that the officials had known this fact long before but withheld it to boost season pass sales.

Lawsuit Against Kennywood

The lawsuit, filed in the Allegheny County Common Pleas Court by Joshua Miller and his attorney, John A. Biedrzycki III on Monday, alleges that it was a deliberate attempt to hide the fact to accrue financial benefits by boosting season pass sales.

The lawsuit alleges that Kennywood has created advertising campaigns targeting consumers like Mr. Miller and others to purchase the 2024 season pass under the belief that the benefits included myriad park attractions, including the Steel Curtain.

In the lawsuit, it was revealed that Mr. Miller bought his season pass under the assumption that all rides would be operational.

However, on April 17, three days before the park opened for the season, it was revealed that Steel Curtain would be closed for the season.

The announcement was made by Ricky Spicuzza, the park’s assistant general manager, and the reason for the closure was cited as the coaster undergoing an “extensive modification project.”

Ricky Spicuzza said,

“We understand the frustration many of you have felt not being able to experience the Steel Curtain. On behalf of our entire team, we absolutely share that frustration with you.”

However, the lawsuit contends that the fact was known long before last week that the 220-foot-tall coaster would be out of commission.

The lawsuit states,

“The company withheld this information from season pass purchasers so as not to lose season pass customers, or, alternatively, so as not to offer a discount on season passes due to the unavailability of the Steel Curtain.”

The lawsuit also details numerous violations of the state’s unfair trade practices and consumer protection law. This includes failure to disclose the Steel Curtain’s closure with the full knowledge that the consumer believed that it would be functional for the 2024 season.

The park offered varied passes, which ranged from season passes priced from $109.99 to $239.99.

The lowest endowed pass was the bronze pass, which provided unfettered admission except on certain blackout dates.

The premium range included the platinum pass, which offered year-round admission to Kennywood, Sandcastle, Idlewild, and Palace Entertainment’s Dutch Wonderland in Lancaster.

Additionally, it also offered free parking, discounts on food and retail, and three free guest tickets.

Also Read: Prime Hydration Faces Lawsuits Claiming Its Sports Drink, Prime Energy, Contains PFAS and Excessive Caffeine

World

Prime Hydration Faces Lawsuits Claiming Its Sports Drink, Prime Energy, Contains PFAS and Excessive Caffeine

Published

1 day ago

April 24, 2024

Manoj Nair

Prime Energy, the sports drink from Prime Hydration, has been hit by a number of lawsuits for containing excessive amounts of caffeine and PFAS. Another lawsuit was filed on April 8 in the Southern District of New York, accusing Prime Hydration, the parent company which manufactures the sports drink, of engaging in misleading and deceptive practices.

Prime Hydration was founded by two Logan Paul and KSI in 2022, and the products became very popular thanks to the huge followings of the YouTubers. However, the company is now facing a slew of lawsuits over the ingredients in their energy and sports drinks.

New Lawsuit Against Prime Hydration

The latest lawsuit, filed on April 8, accuses the company’s 12-ounce energy drinks of containing 215-225 milligrams of caffeine, exceeding the permissible limit of 200 milligrams. The lawsuit was filed by Lara Vera, a resident of Poughkeepsie, New York.

The lawsuit details that the plaintiff had purchased Prime’s Blue Raspberry products on numerous occasions in August 2022 for about $3 to $4 each, unaware that the products contained caffeine beyond the permissible limits. The plaintiff is seeking damages of $5 million from the company. Lara Vera’s lawsuit alleges that Prime advertised 200 milligrams of caffeine, which is equal to six Coke cans or two 12-ounce Red Bulls. One Red Bull can could contain 114 milligrams of caffeine.

Also Read: Johnson Controls subsidiary Tyco Fire Products to pay $750 mn to settle ‘forever chemicals’ lawsuit

The suit also alleges that there are no safe limits of caffeine for children and that caffeine has been indicted for causing tachycardia, headaches, convulsions, tremors, upset digestion, and adversely affecting mental health.

Earlier, Senator Charles Schumer, D-N.Y., had asked the Food and Drug Administration (FDA) to investigate Prime energy drinks in 2023 after reports that the products contained high levels of caffeine. The Senator also accused the company of using vague marketing tactics focused on young people, influencing parents to buy the caffeine-laced drinks for their kids. The lawsuit by Vera also quotes the Senator’s call to the FDA.

Prime is also facing another lawsuit filed on Aug. 2, 2023, in the Northern District of California by the Milberg law firm on behalf of Elizabeth Castillo and others. The lawsuit charges Prime’s products with using flavors containing PFAS, or “forever chemicals.” Forever chemicals are a class of chemicals that are not degraded in the human body or nature and have been indicted as a carcinogenic substance. Independent third-party testing has confirmed that Prime Hydration grape flavor contained PFAS.

Also Read: California mother files lawsuit against Tesla after her 2-year-old child starts Model X and runs over her