In this week's wrapup, we talk about India's inclusion into JPMorgan's Global Bond Index, the US Government shutdown, why creditors misuse the Insolvency Code and more.
For the markets edition this week, we discuss why affordable housing finance companies are getting attention from investment analysts. You can read it here.
Meanwhile, here’s a recap of what we wrote over the week.
Why do creditors misuse the Insolvency Code?
In 2018, Wipro’s operational creditor Tricolite Electrical Industries dragged it to insolvency court. An operational creditor is someone who provides goods or services to a company and stands to receive money from it.
The case goes that Wipro was involved in a government project involving MV panels. Since Tricolite was good with designing, manufacturing, supplying and installing them, Wipro handed over a part of the job to it. Along the project, Wipro had placed a purchase order of about ₹13 lakhs with Tricolite, which it duly executed. But apparently, Wipro didn’t settle the payment in full. Tricolite only received 97% of its bill amount. And despite knocking on Wipro’s doors several times, Tricolite failed to recover its money.
Several reminders later, Tricolite’s only resort was to sue Wipro for insolvency under the Insolvency and Bankruptcy Code (IBC). The IBC meanwhile, is a law that helps debtors or creditors resolve matters if debtors go bankrupt. But the insolvency court sided with Wipro. Tricolite was obviously unhappy and appealed to an upper court. Its plea was dismissed here too.
If you’re wondering why, it’s got a lot to do with how a lot of creditors misuse the IBC to recover payments which remain pending owing to disputes between two parties. And we wrote about it on Monday. Well, it doesn’t talk about Wipro. But has other similar examples which will sort out the Wipro-Tricolite mystery for you. You can read it here.
The impact of long notice periods
Last week nearly 40 of 450 pilots walked out on Akasa without serving their mandatory notice periods. Now you probably know what a notice period is. You let your employer know you’re leaving when you put in your resignation papers and you serve for a bit of time before leaving for good. This helps both you and the company transition. But Akasa’s pilots didn’t keep their commitments. This obviously brought the airline’s operations to a temporary halt. And Akasa was quick to drag these pilots to court.
While it's not very certain what really happened, the media pointed out that these pilots were shackled by unfairly long notice periods. As per government rules, pilots are expected to serve notice periods ranging between 6-12 months. It believes this is fair because it takes 8-9 months to train a new pilot to operate an aircraft. And their sudden exit could be hard on an airline. On the flip side, a longer notice period could give it more breathing room.
However, lengthy notice periods could have adverse impacts. And the Akasa crisis gave us a reason to write about it. You can read our story here.
A simple explainer on India's inclusion into JPMorgan's Global Bond Index
A couple of days ago, 23 Indian Government Bonds worth about $330 billion made it to JP Morgan’s Global Bond Index. And it’s kind of a big deal because India has been trying to enter the index for nearly a decade now. But because of foreign investment restrictions back then, followed by a lot of other operational issues later we couldn’t get through.
We finally got included now. And many of you wrote to us, asking to break things down. So we went ahead and did a simple explainer on it. You can read the story here.
Is the US Government shutting down?!
Every year, the US Congress must decide how much money it can spend for the upcoming year. Think of the Congress as a parliament made up of people from both parties. And this exercise is an annual budget of sorts. They have to pass 12 Appropriations Bills. These bills determine the quantum of money that can be doled out to various government agencies such as Defence, Education and Health to function smoothly. And this decision has to be made by the and of September every year. That’s the end of the fiscal or financial year in the US.
Now, if they don’t decide how much money they can spend, employees at various government agencies won’t receive what they’re due. They won’t get salaries. Even some welfare schemes for food and childcare will remain penniless. And the US government will basically remain in a “shut down” mode.
That’s pretty much the situation the US government is in today. So we wrote a story about how it could possibly affect the economy. You can read it here.
An explainer on Tourism Tax
Imagine that you’re a couple of days away from taking an international vacation. You’re excited! You’ve budgeted carefully and saved up enough money. You’ve got your manager to approve the leaves for that much-needed break from work.
But suddenly, the government of your destined vacay spot decides to impose a tourism tax or a special fee on tourists. This means that for every day you spend in that country, you have to shell out an additional sum of money. That’s definitely going to burst your bubble right?
That was just an anecdote and such swooping decisions obviously don’t happen overnight. But it could. In fact, over 40 tourist destinations already levy some form of tourism tax. And the numbers only seem to be going up every year.
So, why do they do this and how could it impact tourism? We answered that in our Friday’s story here.
We hope you enjoyed our weekly wrapup. Have a great weekend!