Research Committee

Crux
The news compendium of
SIBM-Bengaluru

Crux is a Research Committee endeavor which aims to provide the

students of the institute with weekly updates on the most important
news worldwide. Each news update in the newsletter has been
analyzed by the members of the Research Committee to bring you the
most relevant points related to particular news. Along with the news
updates, it also covers articles on important topics which have been in
news recently.

With our newsletter series this time, along with the news we are also
providing useful links to allow you to delve into the topic further.
Through this compendium we offer a comprehensive handbook of the
news we have covered in our weekly newsletter during this month for
ease of reference to our readers.

You call it news. We call it a step towards awareness.

 What is GPT-3: The Machine Learning Model that has taken AI world
by storm
 This mega machine learning model, created by OpenAI, can write its own op-eds, poems, articles,
and even working code.

 Even though this model is not open for all, but the applications of this model seem endless – you
could ostensibly use it to query a SQL database in plain English, automatically comment code,
automatically generate code, write trendy article headlines, write viral Tweets.

 GPT-3 is a neural-network-powered language model. A language model is a model that predicts the
likelihood of a sentence existing in the world.

 For example, a language model can label the sentence: “I take my dog for a walk” as more probable
to exist (i.e. on the internet) than the sentence: “I take my banana for a walk.” This is true for
sentences as well as phrases and, more generally, any sequence of characters.

 Like most language models, GPT-3 is elegantly trained on an unlabelled text dataset (in this case, the
training data includes among others Common Crawl and Wikipedia). Words or phrases are randomly
removed from the text, and the model must learn to fill them in using only the surrounding words as
context. It is a simple training task that results in a powerful and generalizable model.

 One of the biggest reason that it is special is with 175 billion parameters, it’s the largest language
model ever created (an order of magnitude larger than its nearest competitor!), and was trained on
the largest dataset of any language model.

 As a result of its humongous size, GPT-3 can do what no other model can do is perform specific
tasks without any special tuning. You can ask GPT-3 to be a translator, a programmer, a poet, or a
famous author, and it can do it with its user providing fewer than 10 training examples.

 Other language models (like BERT) require an elaborate fine-tuning step where you gather
thousands of examples of (say) French-English sentence pairs to teach it how to do translation.

 To adapt BERT to a specific task (like translation, summarization, spam detection, etc.), you have to
go out and find a large training dataset (on the order of thousands or tens of thousands of examples),
which can be cumbersome or sometimes impossible, depending on the task.

 With GPT-3, you do not need to do that fine-tuning step. This is the heart of it: custom language
tasks without training data.

Reference: https://thenextweb.com/neural/2020/07/23/openais-new-gpt-3-language-explained-in-
under-3-minutes-syndication/
 An end to the stock market rally?
 The Covid-19 crisis has rattled economies all over the world and the governments have been taking
unconventional measures to tackle this unprecedented crisis.

 Even as the Indian economy suffered the markets have been going higher and seem to be detached
from the economic reality. This rally has primarily come on the back of fiscal stimulus package
which was announced by the Government in May 2020.

 From July 2020 onwards several major companies have declared the Quarter 1 results which will
provide an actual measure of the impact of the virus and the lockdowns on various sectors.

 The April 2020 to June 2020 quarterly results are significant because it is the first full quarter that
captures the impact of business uncertainty from the pandemic.

 The overall results show that the revenue growth has been badly hit and it will take a longer time to
return to normalcy (pre-Covid levels).

 The defensive sectors such as the Pharmaceuticals sector and the Information Technology sectors
have stood out with their results. Consumer-Durables sector has also shown mixed results.

 The margins for most of the pharma companies have improved on account of lower selling &
distribution and branding expenses. Dr. Reddy’s Laboratories Ltd. reported a 15% rise in revenues to
Rs. 4417.5 crores as against Rs. 3843.5 crores in Q1 of the previous fiscal.

 In the Information technology sector, Tech Mahindra reported a rise in net profit by 1.4% at Rs.972
crore. Infosys Q1 profit saw a jump of 11.5% to Rs.4,233 crore as it won large deals amounting to
$1.74 billon.

 However, these green shoots are few and far between. The automobile sector which was already
under pressure from the past year was hit hard. High fixed costs coupled with diminishing demand
played a dampener for this sector.

 Maruti Suzuki India Ltd, Tata Motors and TVS suffered operating losses due to decline in sales
volumes (with high fixed costs) which dragged down profits.

 The Airlines are in a turbulent spot as they have higher fixed operations costs and lower operating
margins. With restrictions on the movement of people it is yet to be seen how the industry recovers
from this scenario. Spicejet reported a loss of Rs.807 crores in the March Quarter(Q4) on account of
disruptions. Indigo reported a net loss of Rs. 2844 crores as its revenues plunged by 92%.

Reference:https://www.livemint.com/market/mark-to-market/stock-markets-are-low-on-steam-as-
results-show-covid-19-scars-11596357442485.html
 Financial Stability Report
 Every 6 months Reserve bank of India releases Financial Stability Report. It reflects the collective
assessment of the Sub- Committee of Financial Stability and Development Council headed by
Governor of RBI.

 The report discusses issues relating to development and regulation of financial sector and risks to
financial stability and resilience of financial system.

 According to the report Gross Nonperforming assets (GNPA) ratio of all scheduled commercial
banks may increase from 8.5% in March 2020 to 12.5% in March 2021. It may further escalate to
14.7% under very stress situations.

 According to FSR 55% of all customers from schedule commercial banks (HDFC, SBI) opted to
defer their loan repayments-about 50% of all outstanding loans. Out of this 5% of the moratorium
loans could turn into NPA according to some experts.

 RBI projected that Capital Adequacy Ratio could slide to 13.3 % in March 2021 under normal
scenario and to 11.8% under very severe stress scenario.

 CPI inflation adjusted deposit rate turned 0.8 % in December 2019, when inflation touched 7.4% and
deposit rates 6.6%. Report expects that inflation will remain at elevated levels for the next few
months so the real interest rate will continue to be in negative zone.

 Foreign investors have been moving money out of the emerging markets; moreover global debts
have reached unprecedented highs. Currently global debt to GDP ratio stands at 3.2.
 Lockdowns owing to Covid19 may lead to contraction of GDP by 8.9% in 2020-21.

Reference: https://www.rbi.org.in/Scripts/FsReports.aspx
New Darwinism: The Post Covid Consumer Behavior Report by DAN India

 India's leading Creative Agency, also a bell weather in its arena, Ogilvy has been bagging some
news making project. Some noteworthy being creative content and branding outsourced by
Cars24.com and recent campaign of #RestartRight for ICICI Lombard or Partnership with Savlon for
Surface Disinfectant Spray.

 Following such change of approach, the Direct competitor to Ogilvy, Mcgarrybowen India
(subsidiary of DAN India) released a much insightful report titled “New Darwinism” which has
caused ripples in the recent Marketing Newsgroups.

 The report attempts to predict how humans will behave once the lockdown is lifted and travel bans
are revoked.

 The report helps brands to be prepared for the change in consumer behaviour due to the effects of
the pandemic and builds on the idea of post-Covid transformations, changing lifestyles, new work
culture and brand revolutions.

 Some of the points included in the Report are:

o The need for entertainment is going to redefine the home space. The interest in Smart TVs,
Firestick, Chromecast, Xbox and Bluetooth speaker is going to intensify.

o When it comes to the durable category, kitchen appliances will get a facelift with consumers
spending more time in the kitchen and experimenting with food. Hence, oven, microwave and
water purifier might get traction, as will durable categories that drive convenience.

o There will be a resurgence of themes like national pride and sustainability, DIY (Do it yourself)
beauty products will see more adoption as will ‘do-good’ products rather than ‘look-good’
products.

o Party wear will get replaced by more comfortable house party ranges. Fashion may see a rise of
the new WFH wear, clothes that are multi-functional, activewear and people might focus on
affordability.

o Since some people will still be wary of travelling, staycations will be the preferred way of
unwinding over vacations. Staycation to emerge as the baby budding sector of the industry.

 As a testament to the expectations from the Report, Brands have started responding in order to
develop resilience in their business.

 AB InBev, the world biggest brewer, has set up a new unit to enter fashion clothing segment, the
new retail firm, Budweiser Streetwear Co will make apparel and face masks and has partnered
fashion marketplace Myntra to sell the brand.
 “The diversification will help us explore a new business line with our patrons as well as build a new
consumer base”, said Kartikeya Sharma, South Asia president at AB InBev that had earlier tied-up
with designers to launch limited range of street wear collection.

 To indicate motivations behind the report, The Head of Mcgarrybowen India, Nishi Kant indicated
that instead of discovering it when it happens, why don’t start imagining how it will look like.

 Thus, Mcgarrybowen India wants to create a playbook that brands across different categories can
use. Not only did the company considers the present, but wants to emphasize on the future and create
something that brands, and businesses could put to use.

Reference: https://brandequity.economictimes.indiatimes.com/news/mcgarrybowen-india-launches-
its-latest-report-the-new-darwinism/77298579
 Enforcement of Consumer Protection Act 2019

 The New Consumer Protection Act 2019 that replaces more than a three decade old Consumer
Protection Act, 1986 has tried to address the challenges that digital media has imposed on
consumers.

 The law widens the definition of ‘consumer’- includes any person who buys goods digitally or
offline, via teleshopping, direct selling or multi-level marketing. Earlier act did not include e-
commerce.

 The new law also provides flexibility to encourage consumers to file complaints against misleading
ads electronically and for hearing and or examining parties through video-conferencing.

 As per the act, a regulatory authority known as Central Consumer Protection Authority, headed by
government- appointed chief commissioner will also be set up in Delhi.

 It will regulate violations of false or misleading advertisements, consumer rights and unfair trading
practices.

 The law will hold manufacturers, celebrity endorsers accountable for coming up with misleading
advertisements.

 They may be imposed with a penalty of upto Rs 10 lakh for a false or misleading advertisement.

 They may also be sentenced to imprisonment for upto two years for the same.

 In case of a subsequent offence, the fine may extend to Rs 50 lakh and imprisonment of upto five
years.

 It can also disbar the endorser of a misleading advertisement from endorsing that particular product
upto one year.

 National Commission can hear cases above Rs 10 crore when compared to above Rs 1 crore earlier.

 Pecuniary jurisdiction of District Commission has increased to upto Rs 1 crore from Rs 20 lakh
earlier.

 Pecuniary jurisdiction of State Commissions increased from Rs 1 crore to Rs 10 crore.

Reference:https://www.livemint.com/industry/advertising/new-law-may-alter-ads-landscape-
11595205294803.html
 Supply Chain Resilience Initiative – Counter to China’s Dominance

 Japan, India and Australia are planning to build stronger supply chain to counter China’s dominance
as the trade and geopolitical tensions escalate across the regions.
 The three nations are trying to bring a “SUPPLY CHAIN RESILIENCE INITIATIVE”. Japan has
proposed this initiative and is taking shape now.
 Dates are being worked out to hold the first meeting of trade and commerce ministers of these three
countries. The talks are at a working level, but Japan would like to bring them to a higher level at
some point and launch SCRI by November.
 Indian government is considering the plan quite seriously, especially in the light of China’s moves
on the Line of Actual Control in Ladakh.
 This initiative is also in line with Modi’s Key themes of Independence Day speech making India as a
possible “hub for supply chains” and that India must also “make for the world”.
 Another objective of the initiative, is to attract foreign direct investment to Indo-Pacific into an
“economic powerhouse” and to build a mutually complementary relationship among partner
countries.
 Japan is trying to pare its reliance on Chinese factories, with the government subsidizing some
companies to shift or expand operations in Japan and Southeast Asia. So far 87 firms are
participating in the program, which will pay out 243.5 billion yen ($2.3 billion).
 Both India and Australia trade and diplomatic relations with China are fraying. Prime Minister
Narendra Modi’s government restricted some Chinese imports and banned several Chinese apps
after a deadly border clash with its neighbor.
 In Australia, exports like beef, barley and now wine have been targeted by China amid deteriorating
ties between the two nations.
 Also, the trade and diplomatic relations are looking good between India and Australia, adding to this
the countries already signed a pact in early July to work together on “diversifying supply chain”.
 The new proposal will seek to lean on such bilateral agreements between countries and put in place
further measures for trade facilitation and attracting foreign direct investment in the Indo-Pacific
region.
 The ASEAN countries will be invited further once the Indian and Australian government gives green
signal to the initiative.
References: https://economictimes.indiatimes.com/news/economy/foreign-trade/india-japan-
australia-supply-chain-in-the-works-to-counter-china/articleshow/77624852.cms
https://www.bloombergquint.com/global-economics/japan-india-and-australia-are-said-to-seek-
supply-chain-pact
 Bid for TikTok
 TikTok’s fate has been up in the air ever since President Donald Trump issued an executive order
demanding that its parent company ByteDance either sell or spin off the US portions of the
company, citing national security concerns from the China-based company.

 Under stipulations set by the White House to alleviate national security concerns, ByteDance would
need to sell TikTok’s U.S. operations to reduce the app’s Chinese ownership. It would also have to
sell to one or more companies that have a technology services provider, in part to transfer TikTok’s
American user data over to U.S. servers. Both Microsoft and Oracle satisfy those requirements.

 A deal with Microsoft and Walmart could draw on Walmart’s digital sales background to turn
TikTok into a kind of e-commerce app for both creators and users. The news caused Walmart’s
stock to jump over 7% in the last two days.

 The retailer’s involvement should come as no surprise, given that one of Walmart’s top priorities is
to build its digital marketplace and grow its advertising, especially as it tries to compete with e-
commerce giant Amazon.

 A deal with Oracle, the enterprise software company, would be more of a data play. Oracle could
use TikTok’s data about social interactions to benefit its cloud, data and advertising businesses.

 This month, President Trump signed an executive order mandating that TikTok sell its U.S.
operations by mid-September or cease transactions within the country.

 The emergence of the two bids follows the resignation late on Wednesday of TikTok’s chief
executive, Kevin Mayer. Mr. Mayer, a former Disney executive who had announced he was joining
TikTok in May, said he was resigning because he had signed on for a global role, not to run a
carved-up version of the company. In a note to employees, he also indicated that a deal for TikTok
might be close.

 Additionally, Bloomberg has reported that TikTok-rival Triller and Centricus (a London-based
global investment firm) are the latest suitors looking to buy TikTok’s US business with a $20
billion bid, joining Oracle and a recently combined Microsoft / Walmart effort.

References:https://www.theverge.com/2020/8/28/21406094/triller-centricus-tiktok-us-business-
acquisition-trump-bytedance

https://www.forbes.com/sites/sergeiklebnikov/2020/08/28/heres-why-a-tiktok-deal-makes-sense-for-
walmart/#107394474e79
 Change in Strategy of the Fed
 The Federal Reserve adopted a historic shift in its approach to interest-rate policy that places more
emphasis on boosting employment and allows inflation to rise above the Fed’s 2% target during
economic expansions, keeping rates lower for longer.

 This is because persistently low inflation leads consumers and businesses to expect it to continue,
perpetuating a cycle of meager price increases. If workers, for example, expect prices to remain
stable, they’re less likely to seek solid wage increases.

 Low inflation can lead to deflation, or falling prices, that may prompt consumers to put off
purchases, hurting the economy.

 Fed’s review was spurred by four key developments in the economy in recent years:

 Slower economic growth: Since 2012, Fed officials’ median estimate of the economy’s potential
annual growth has fallen to 1.8% from 2.5%. There are several forces, including slowing population
growth, an aging population and sluggish productivity growth.

 Lower interest rates: The Fed’s “neutral federal funds rate” – consistent with a strong economy and
stable inflation – has fallen from 4.25% to 2.5%. That’s a problem because a low long-run rate
means the Fed “has less scope to support the economy during an economic downturn by simply
cutting the federal funds rate.

 The result can be worse economic outcomes in terms of both employment and price stability, with
the cost of such outcomes likely falling hardest on those least able to bear them.

 A robust labor market before the pandemic: The record 10.5 year old expansion that was abruptly
halted by the pandemic “led to the best labor market we had seen in some time,” Powell said.
Besides unemployment that hovered near 50-year lows for about two years, a larger-than-expected
share of Americans were working or looking for jobs despite massive baby boomer retirements. And
black and Hispanic unemployment rates had reached record lows.

 Stubbornly low inflation: The strong labor market did not trigger a significant rise in inflation.
Typically, low unemployment leads to higher inflation as employers bid up wages to attract a
smaller pool of workers. But that hasn’t happened. The Fed’s estimate of the jobless rate that’s likely
to begin pushing inflation higher has fallen to 4.1% from 5.5%.

Reference: https://www.livemint.com/news/world/fed-to-allow-inflation-to-rise-to-maximize-job-
growth-jerome-powell-11598534698018.html
 End of Loan Moratorium
 The Reserve Bank of India will not extend the moratorium on loan repayments after it ends on 31
August, people aware of the matter said.

 In March, RBI introduced the loan moratorium to provide relief to borrowers and enable continuity
of viable businesses impacted by covid-19 pandemic. The central bank had initially allowed
moratorium for the three months ended 31 May but later extended it till end-August.

 Later, RBI allowed debt recast for both corporate and retail borrowers. Lenders can extend the
repayment period by a maximum of two years, allowing respite in a situation where covid-19 has
left millions jobless, curtailing their ability to repay existing debt.

 While an extension was under active consideration, RBI decided against it as it was concerned
about changes in credit behaviour it could induce among borrowers and increase the risk of loan
defaults.

 On Thursday, RBI governor Shatikanta Das said that the moratorium on loans was a temporary
solution in the context of the lockdown, while a resolution framework will provide durable relief to
borrowers facing covid-related stress.

 Bankers had also expressed their discomfort with extending the moratorium beyond the deadline.
Leading bankers like said that some borrowers who have the ability to pay are taking advantage of
the relaxation and hence, the moratorium should not be extended.

 RBI’s recent financial stability report showed the number of retail and small businesses that had
availed of the moratorium was much higher than such requests from corporate borrowers as on 30
April.

 The data also showed state-run banks, small finance banks and non-banking financial companies
had reported a higher proportion of retail loans under moratorium than private sector banks and
foreign banks.

 State-run banks saw nearly 80% of their retail borrowers availing of the moratorium as compared to
73.2% in the case of small finance banks and 45.9% in the case of non-banking financial
companies. To be sure, these numbers have come down over the past six months.

 Bankers agree loans to borrowers such as house helps, drivers and textile weavers will require
restructuring as their work has been impacted by the pandemic.

Reference: https://www.livemint.com/industry/banking/retail-loans-worry-banks-
11598663752122.html
 News from around the world

 Russia announces advanced COVID-19 vaccine trials of Sputnik V in 40,000 volunteers over six
months
https://www.firstpost.com/world/russia-announces-advanced-covid-19-vaccine-trials-of-sputnik-
v-in-40000-volunteers-over-six-months-8759451.html

 India’s ease of doing business ranking may be hit as World Bank orders review
https://www.livemint.com/news/india/india-s-ease-of-doing-business-ranking-may-be-hit-as-
world-bank-orders-review-11598612489664.html

 World Bank pauses Ease of Doing Business rankings

https://www.hindustantimes.com/india-news/world-bank-pauses-ease-of-doing-business-
rankings/story-3UTSKZX4tBhIhgUnLCvPoO.html

 SEBI may soon allow investors to trade directly on the exchanges

https://www.businessinsider.in/stock-market/news/india-stock-brokers-hit-by-sebi-direct-market-
access/articleshow/77198064.cms

 Stocks Hit Highs, Bonds Tumble After Powell Pivot: Markets Wrap
https://www.bloombergquint.com/markets/global-stock-rally-to-extend-in-asia-dollar-dips-
markets-wrap

 U.S. tech stocks are now worth more than the entire European stock market
https://www.cnbc.com/2020/08/28/us-tech-stocks-are-now-worth-more-than-the-entire-
european-stock-market.html

 Middle East Share Of India's Oil Imports At Over 2-Year High: Report
https://www.ndtv.com/business/crude-oil-import-news-middle-east-share-of-indias-oil-imports-
hits-2-year-high-2283572

 Tesla targeted in failed ransom ware extortion scheme

https://www.livemint.com/companies/news/tesla-targeted-in-failed-ransomware-extortion-
scheme-11598678044021.html

 How the US economy could shape the presidential election (Podcast)

https://think.ing.com/articles/listen-how-the-economy-could-shape-the-us-presidential-election/
 

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