New car incentives, Google blinks, end of toll booths and other news
Business news and insights to jump start your day
“Security is mostly a superstition. Life is either a daring adventure or nothing.”
- Helen Keller
Good morning! 😀
Here’s what we are looking at today:
India’s new vehicle scrappage policy
Google bends to pressure
US stares at higher taxes
Let’s get started…
📈 How did the markets fare
BSE Sensex - 49,216.52 | -1.17% ⬇
NSE Nifty - 14,557.85 | -1.11% ⬇
10-Yr Bond Yield - 6.202% |+0.017 ⬆
S&P 500 - 3,915.46 | -1.48% ⬇
USD/INR - ₹ 72.53 | -0.02% ⬇
Equity markets in India and the US closed lower yesterday after the US bond market sell-off continued despite the Fed’s attempt to calm investors’ nerves.
Kerala-based gold retailer Kalyan Jewellers’ Rs 1,175 crore initial public offering saw tepid response, closing with subscription of just 2.64 times.
📰 What's happening around us
Auto
The much-awaited vehicle scrappage policy was announced by Transport Minister Nitin Gadkari yesterday, expected to be a win-win proposal for all. The policy will have a number of incentives to get people to scrap their old vehicles for newer ones and also disincentivize ownership of older polluting vehicles.
It will be a voluntary scheme but commercial vehicles (CVs) older than 15 years and passenger vehicles (PVs) older than 20 years that don’t pass fitness and emission tests will have to be mandatorily scrapped.
Some of the details of the policy are:
The scrap value for the old vehicle given by the scrappage centre will be 4-6% of the new car price.
A road tax rebate of up to 25% for PVs and 15% for CVs has been proposed.
States have also been asked to waive off registration fees on new vehicles.
Carmakers have been advised to offer a 5% discount on new cars to customers who submit scrapping certificate but it is not mandatory.
Gadkari has also called for a reduction in GST for new cars.
The scheme also proposes to increase re-registration fees for older vehicles to discourage their use.
The ministry will look to set up 75 fitness centres across the country by March 2023 and build 50 scrapping centres by December 2023. Mandatory fitness testing for heavy CVs will be effective only from April 2023 and June 2024 for PVs and other categories.
The scheme will not just lead to a decrease in pollution (as newer vehicles are cleaner than older ones), but will also improve fuel efficiency, boost the auto industry and also the scrap material will create a lot of value addition as raw materials like plastic, aluminium, steel and copper will be recycled.
Tech
Earlier this week, Google halved the commission app developers have to pay on in-app purchases of digital goods on its Play Store to 15% on the first $1 million they earn as revenue each year. Google said the new rules will be effective from July this year and 99% of developers that sell goods and services through the Play Store will see a 50% reduction in fees. As per estimates, only about 3% of developers globally offer paid apps or in-app purchases.
The decision comes following backlash from Indian startups when the tech giant tried to implement (now deferred to April 2022) the compulsory use of its billing system and a flat 30% commission (to Google) on all in-app purchases last year. Most app developers currently prefer routing in-app purchases through cheaper payment gateways where they pay only 1-2%.
Vijay Shekhar Sharma of Paytm, who has been most vocal about Google’s policies, dismissed Google’s announcement as a PR stunt and said established firms will still have to pay an exorbitant amount of fees to Google. Last year, Indian startup entrepreneurs along with Vijay Shekhar Sharma had approached the Ministry of Electronics and IT and the Competition Commission of India (CCI) to express their concerns over Google’s control over the Indian app ecosystem, especially considering Google’s mobile operating system Android powers more than 95% of smartphones in India.
At a time when there is increased scrutiny on Big Tech, we can expect Indian companies to exert more pressure on Google directly and through the Indian government.
International
With the US government’s debt ballooning after introducing massive fiscal stimulus packages, the Biden administration now not only wants to increase taxes in the country but also set a global minimum tax rate.
Donald Trump had cut the US corporate tax rate to 21% from 35% in 2017, part of what many term to be an unsustainable global race to the bottom on corporate taxation. But the Biden administration now wants to raise the corporate tax rate to 28% and also introduce taxes targeting those earning above $400,000 a year to fund upcoming key initiatives.
However, in order to discourage multinational companies from leaving to other countries where taxes are lower, the administration is in talks with over 140 countries part of the Organization for Economic Cooperation and Development (OECD), to agree on a minimum global corporate tax rate. The US would want to avoid losing out to countries like Ireland (where corporate tax rate is just 12.5%) who have been accused of using unfair tax policies to attract multinationals.
Higher global taxes seem inevitable as countries have to deal with expanding public deficits brought about by the pandemic. The UK for example has already announced higher taxes. But everyone may not be happy with certain countries (who some would say have spent recklessly), dictating what corporate tax rates in their country should be.
🎯 News Bites
Global crude oil prices crashed over 7% yesterday on renewed demand recovery concerns. But fuel prices in India need not come down as oil companies hadn’t raised prices in nearly three weeks even as global prices were inching up.
Physical toll booths in India will be a thing of the past. According to union minister Nitin Gadkari, the central government is all set to roll out a GPS-based toll collection system within one year.
Amazon has made its first investment in a consumer brand in India. Along with Wipro, Amazon has invested in MyGlamm, an omnichannel direct-to-consumer beauty brand that competes with Nykka, Purplle, Plum and Juicy in India’s online cosmetics space.
Volkswagen Group’s Czech auto brand Skoda is betting on its newly launched mid-size SUV ‘Kushaq’ to drive numbers in India. The Skoda Kushaq will go up against Volkswagen Taigun, Kia Seltos, Hyundai Creta, Nissan Kicks, MG Hector and Tata Harrier.
Remember Tony Stark’s virtual workspace in Iron Man? Social media giant Facebook has developed a new wrist-based interaction system for augmented reality (AR) that allows users to interact with applications via gestures. The system will let users touch virtual objects and move them around in the virtual space.
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That's it for this week. Have a great weekend and see you on Monday!
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