India's new Time of Day system for electricity tariffs; The latest updates on the NCP crisis; And, is India Inc reluctant to invest

Market Watch

• Indian benchmark indices ended the day flat, with the Sensex decreasing 33.01 points at 65,446.04, and Nifty up 9.50 points at 19,398.50.
• Sectorally, Nifty Financial Services (-0.82%) and Financial Services 25/50 (0.41%) shed the most, while FMCG (1.82%) and Auto (1.64%) gained the most.

Four things to know:

• The Indian government is set to introduce two major insurance policy reform bills in the Parliament’s monsoon session.
• Nykaa has been downgraded from a large-cap to a midcap after falling 42% from its 52-week high.
• PharmEasy intends to raise funds at 90% discount to repay loans to Goldman Sachs.
• LTI Mindtree is set to replace HDFC on the Nifty 50 benchmark and Nifty Services Sector, following the merger of HDFC with HDFC Bank.

India looks to shift to time-based electricity tariffs

India is planning to shift from fixed electricity tariffs to Time of Day (TOD) tariffs, which change according to the time of use. What are the implications?

The context: The plan, which comes into effect from 2025 for most consumers, divides the day into three time segments — solar, peak and normal hours.

• Utility rates will be lower during solar hours and higher during peak hours.

Between the lines: TOD tariff systems aim to manage demand and supply of electricity more efficiently, reduce the overall cost of electricity production, and accelerate the switch to renewable energy.

• Much of the electricity produced in off-peak time (e.g., late nights) cannot be stored efficiently and is wasted.
• Electricity producers can also curb the usage of electricity generated during peak demand times; creating systems to manage this requires heavy investment despite such high demand occurring very rarely throughout the year.
• Furthermore, reduced tariffs during the day could encourage people to consume more electricity when the sun is out, allowing for greater reliance on solar energy — which is important as it’s infeasible to store renewable energy for night usage, and as coal-generated electricity is 4x more expensive than using solar power.

The other side: Implementing this policy requires the installation of smart meters across the country, which has been hindered by various challenges including high installation costs.

• So far, India has only installed 6.5 million smart meters, far short of the goal to install 250 million smart meters by 2026.
• Furthermore, it remains unclear whether TOD tariffs actually bring down electricity bills, as research has shown mixed results.

Ajit Pawar stakes claim to NCP leadership and symbol

Ajit Pawar has reportedly approached the Election Commission of India to stake claim to the party name and symbol of his uncle Sharad Pawar's National Congress Party (NCP).

The context: Maharashtra’s political crisis took another unexpected twist on Sunday when Ajit Pawar and eight other NCP MLAs rebelled against their party, joining the BJP and Shiv Sena-led government.

• In order to avoid disqualification under the anti-defection law, Pawar, who was sworn in as Deputy Chief Minister, must now prove that his faction is the ‘real’ NCP.

The details: Ajit Pawar has now held a meeting in Mumbai’s Bandra, with at least 32 NCP MLAs present, in a bid to prove that his faction has the majority support.

• However, he has repeatedly claimed he has the support of more than 40 NCP legislators.
• He has also stated that he wants to be the Chief Minister of Maharashtra and called on his uncle to retire.

On the other hand, 17 MLAs attended at the Sharad Pawar-led meeting at Nariman Point in Mumbai, as both sides look for the support of the party’s 53 Maharashtra legislators.

Reality check: Despite growth, India’s private sector hesitates to invest

While India’s economic policy prioritises private sector investment, a recent Bank of Baroda study examines whether this push has been successful.

The context: Since the 1991 economic reforms, the government has begun incentivising the private sector corporations to take the lead in boosting job creation and formalising the economy.

Reality check: Over the past five years, the fixed assets of corporates have increased by only Rs 8 lakh crore, with an investment growth rate of just 4.9% — half the rate at which the nominal GDP grew over the same period.

• Even this modest increase in investments is limited to a few sectors: crude oil, power, and telecom account for 51% of the fixed asset creation over the past five years.
• Of the 3,420 companies in the sample, only 85 were PSUs, yet these accounted for close to 39% of all the investments — highlighting the lack of initiative by private companies.

Between the lines: Despite India’s tag as the “fastest-growing major economy,” companies are likely holding back investments due to muted growth in consumption levels.

• The economic growth is also not broad-based, with most investment growth occurring in infrastructure-related sectors.
• The problem is further exacerbated by fundamental issues like high unemployment and low productivity in existing jobs, leading to lower than expected capacity utilisation levels.
• Another problem may be a lack of confidence in the government’s management of businesses — i.e., failure to deliver on reforms and “harassment” by regulators and agencies.

ICYMI

• An Indian footballer draped himself in a Meitei flag during the SAFF Championship medal ceremony, unwittingly sparking a row on social media.
• Google has revised its privacy policy to openly state that it reserves the right to use any content posted online to build its AI tools.
• The Institute for Economics and Peace has released its 2023 Global Peace Index, ranking 163 countries based on their level of peacefulness.
• The US government is planning to limit Chinese companies’ access to US-based cloud-computing services in another escalation of the trade war between the two economic giants.
• After tomatoes, the price of other items like chillies, ginger, cumin, and green peas is also rising.
• Smartwatches from brands like Apple, Google, and Garmin, known for their fitness tracking capabilities, are now being explored as potential tools for early detection of Parkinson’s disease.
• A man in Jaipur, Rajasthan, was seen inappropriately touching a foreign female tourist in a viral video that has sparked outrage on social media.