24th October 2020

BUSINESS NEWSLETTER

#16
IN THIS NEWSLETTER

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 What Will Govt Employees Get As
1 Part Of Sitharaman’s LTA Offer?
Few days back, Finance Minister Nirmala Sitharaman
announced Leave Travel Concession (LTA) voucher
scheme. Government is hoping that it will help boost
consumer demand in the market. Let’s understand what
the scheme is and how it can be availed
Recent Announcement
● FM Nirmala Sitharaman recently announced Leave
travel concession (LTA) Voucher Scheme to boost
consumer demand during upcoming festivals.
● Under this scheme, cash allowance will be paid to
employees if they agree to spend three times the
eligible LTA amount to buy tax-paid goods and
services.
● Employees of Central & State govt, PSBs, PSUs, and
the private sector will be able to avail benefits. This
scheme will approximately cost the government
₹7,500 crores.
Existing Benefits In LTA The government gives leave
travel allowance once in a block of four years. LTA
includes the travel cost of a trip to anywhere in the
country and hometown or two trips to hometown
 Under the new
LTA voucher
scheme,
employees will
get cash
equivalent to
the total of the
full round trip
fare and leave
encashment.

Employee can avail benefits under the three categories:

Employees entitled to Business Class Air Travel, Economy
Class Air Travel and Train Travel of Any Class.

Did You Know In a different offer, Sitharaman announced

that Central govt employees will get ₹10,000 festival
advance in a prepaid Rupay Card. It will have to be repaid
in 10 installments and no interest would be charged on it.

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 Harshad Mehta Scam and Market
2 Manipulation
Harshad Mehta was responsible for one of India’s largest
stock market scams and the new web series based on it
‘Scam 1992’ is gaining a lot of attention and popularity.
Let’s understand how it was carried out and understand
different techniques of market manipulation.
What Was The Scam And How Was It Carried Out?
● Harshad Mehta, in the 1990s, rattled India’s stock
market, the banking system, and the stockholders by
using the loopholes in the banking system. In one of
the cases, he caused the stock of ACC to artificially
rise by 45 times. The markets crashed the day he
sold.
● He fraudulently laundered over ₹24,000 crores within
three years. He utilized the technique of Pump and
Dump which surged the Sensex to rise from 1,000 to
4,500 points within a year. It caused the great bull
run, which earned him the nickname the ‘Big Bull’.
What Is Market Manipulation?
Market manipulation refers to artificially inflating or
deflating the price of a financial instrument or otherwise
 influencing the behavior of the market participant for
personal gain and it is highly illegal.
What Is Pump and Dump?
● Pump and Dump is a market manipulation technique
in which the perpetrator attempts to boost the price
of stock through false and exaggerated
recommendation statements.
● The perpetrator already has with him significant
amount of that company’s stock and later sells them
after price increases due to his own artificially
created hype.
Change In Rules and Regulations
After the ‘Securities scam’ of 1992, The Securities
Amendments Act was passed in 1995, which widened
the jurisdiction of the Securities and Exchange Board of
India (SEBI), and allowed it to regulate depositories,
FIIs, venture capital funds, and credit rating agencies.
Did you know? In finance, a dead cat bounce is a
small, brief recovery in the price of a declining stock.
Derived from the idea that “even a dead cat will bounce
if it falls from a great height”, the phrase originated on
Wall Street.

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 Understanding the Nobel Prize
3 Winning Auction Theory

Paul R. Milgrom and Robert B. Wilson were awarded

Nobel Prize in Economics for improving the auction
theory. We see auctions all around us – from IPL player
auctions, to selling antique items, to spectrum allocation.
Let’s understand what ‘the auction theory’ is and how
Milgrom and Wilson contributed to its improvement.
What Are Auctions?
● It is a process where people bid to purchase any
goods and services.
● In Economics, it is considered one of the efficient
mechanisms for distributing resources.
Types Of Auctions:
English Auction: Here, the bidding starts with low
prices and increases over time. IPL Auctions are an
example of the English auction.
Dutch Auction: Here, the bidding starts with a high
price and descends over time. The price descends until
someone is ready to buy the item or if it reaches a
predetermined reserve price.
 What Is Auction Theory?
Auction Theory was first academically presented by
William Vickrey, who developed the Vickrey Auction and
even won the Nobel Prize in 1996 for advanced work in
auction theory.
Extension To Auction Theory
● Milgrom and Wilson extended the English Auction
format to more than one item, and multiple rounds
and named it Simultaneous Multi-Round Format.
In this format, bidders can bid for multiple items in
each round. At the end of a round, the highest bid
and the bidder on each item is declared.
● They designed an auction strategy for allocating
radio spectrums to telecom operators in 1994 in the
US.
● Between 1994-2014, US government earned $120
billion using this auction model.

Did you know? Winner’s curse is a phenomenon in

which a person for whom the private value of a product
is higher may end up paying much higher than the
actual value.

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 FDI Norms In Media Expanded To
4 Aggregators

In September 2019, Commerce Ministry announced a

cap of 26% Foreign Direct Investment (FDI), that too
only after govt approval, on digital platforms
uploading/streaming news and current affairs.
FDI In Media
● On 16th October 2020, govt clarified the 2019 digital
media FDI policy and said that news aggregators
would also be required to comply with the 26% FDI
norm.
● According to I&B Ministry officials, the influence and
interference of foreign entities on India’s domestic
affairs should be checked including Chinese and
other overseas funding entities in new digital
platforms.
New Changes
● Majority of the directors and CEO of the digital
applications must hold Indian citizenship, as it will aid
the government to seek accountability.
● Foreign directors and CEO will require a security
clearance.
 ● Foreign directors and CEOs will require a security
clearance.
● Foreign-owned news sites, which are operated in
India will require to make major changes such as
adding an Indian partner.
Who Will Be Affected?
Indian entities registered or located in the country that
are digital media entities streaming or uploading news
and current affairs on websites, apps and other
platforms will have to abide by the new rules
Popular news aggregators such as Dailyhunt, InShorts,
NewsDog, Opera News, etc are expected to abide by
the new rules.
These new changes comes only a few months after the
government re-worked the Press Act and they made it
mandatory for all online news portals to register with the
government.
Did you know? Hicky’s Bengal Gazette was an English
language weekly newspaper published in Calcutta (now
Kolkata), the capital of British India. It was the first
newspaper printed in Asia

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Hope you enjoyed reading!

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