Covid-19 impact on GDP to be felt for years in advanced economies: Fitch

Huge uncertainties surround the economic outlook in aftermath of the massive shock in H1 2020

The impact of coronavirus will continue for years as GDP levels in the largest advanced economies remain around 3 to 4 per cent below their pre-virus trend path by the middle of this decade, Fitch Ratings has said in a new report.

“There will be lasting damage to supply-side productive potential from the coronavirus shock as long-term unemployment rises, working hours fall, and investment and capital accumulation slow,” said Maxime Darmet, Director in Fitch‘s Economics team. Huge uncertainties surround the economic outlook in aftermath of the massive shock in H1 2020. The path that the coronavirus outbreak will take is unknown.

“Repeated waves of new infections and renewed nationwide lockdowns could see a very sluggish recovery while medical breakthroughs could result in a rapid normalisation of economic activity,” said Fitch in the report. A reasonable base-case working assumption for the purpose of economic analysis is that the health crisis gradually eases over time, with renewed nationwide lockdowns avoided and virus containment sought through more targeted responses.

With Rs 20-trn package, fiscal deficit to balloon to 7.9% in FY21: Report

“We estimate a 4.5% direct impact on fiscal deficit purely because of revenue shortfall / automatic fiscal stabilizer and a 0.9% indirect effect because of GDP change,” the SBI report says

With the government’s Rs 20 trillion stimulus package, the country’s fiscal deficit is likely to be more than double to 7.9 per cent in the current financial year, according to an SBI research report. The report had earlier estimated the fiscal deficit to be 3.5 per cent of GDP this fiscal. The government has announced a cumulative package of Rs 20 trillion, which is nearly 10 per cent of GDP to provide relief to various segments of the coronavirus-hit economy.

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“After taking into account cash outflow of these measures as well as the previous and the recent excise duty hike and DA freeze (amounting to around 0.8 per cent of GDP), we now revise our baseline fiscal deficit (excluding extra-budgetary resources (EBR)) to 7.9 per cent of the revised GDP in FY21 from 3.5 per cent earlier, owing to lower revenues and higher expenditure against the backdrop of COVID-19 pandemic,” the SBI’s research report Ecowrap. said. Baseline fiscal deficit based on CSO’s earlier estimates of GDP is around 7.1 per cent of GDP, it added.

“We estimate a 4.5 per cent direct impact on fiscal deficit purely because of revenue shortfall / automatic fiscal stabilizer and a 0.9 per cent indirect effect because of GDP change,” the report said. The government Rs 20 trillion package includes Rs 1.7 trillion of fiscal stimulus announced in the first phase, Rs 5.6 trillion stimulus provided through various monetary policy measures and Rs 5.94 trillion through the second phase, implying Rs 6.70 trillion package is still to be announced.

China suffers first GDP decline on record as coronavirus cripples economy

The world’s second-largest economy shrank 6.8% from a year ago in the three months ending in March after factories, shops and travel were closed to contain the infection, official data showed.

China suffered its worst economic contraction in the first quarter of 2020 as the coronavirus outbreak paralysed production and spending, whichmakes recovery harder than initially expected. This is the first recorded decline in China’s GDP data since it started publishing in 1992. According to AP, this was China’s worst performance since before market-style economic reforms started in 1979.

The world’s second-largest economy shrank 6.8% from a year ago in the three months ending in March after factories, shops and travel were closed to contain the infection, official data showed Friday.While China has managed to get large parts of its economy up and running from a standstill in February, analysts say policymakers face an uphill battle to revive growth as the coronavirus pandemic ravages global demand.

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Some forecasters earlier said China, which led the way into a global shutdown to fight the virus, might rebound as early as this month. But they have been cutting growth forecasts and pushing back recovery timelines as negative trade, retail sales and other data pile up.

Retail spending, which supplied 80% of China’s economic growth last year, plunged 19% in the first quarter from a year earlier, below most forecasts. Investment in factories and other fixed assets, the other major growth driver, sank 16.1%.On a quarter-on-quarter basis, GDP fell 9.8% in the first three months of the year, the National Bureau of Statistics said, just off expectations for a 9.9% contraction, and compared with 1.5% growth in the previous quarter..Read More

Coronavirus outbreak to have limited impact on India, says RBI Governor

Only a couple of sectors in India are likely to see some disruptions but alternatives are being explored to overcome those issues, he said

The coronavirus outbreak will have a limited impact on India but the global GDP and trade will definitely get affected due to the large size of the Chinese economy, RBI Governor Shaktikanta Das has said. Only a couple of sectors in India are likely to see some disruptions but alternatives are being explored to overcome those issues, he said.

The deadly coronavirus has brought a large part of the world’s second-largest economy China to a standstill and its impact has been felt across industries. India’s pharmaceutical and electronic manufacturing sectors are dependent on China for inputs and they may be impacted, Das told PTI in an interview here. “It is definitely an issue which needs to be closely monitored by every policymaker whether in India or any other country. Every policymaker, every monetary authority needs to keep a very close watch. So coronavirus issue needs to be closely watched,” he said.

A similar problem, perhaps on a lower scale, occurred last time during the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, he said adding that the Chinese economy had slowed down by about 1 per cent during that time. At the time of SARS outbreak, China was the sixth-largest economy and accounted for only 4.2 per cent of the world’s GDP. While, the Asian giant is now the world’s second-largest economy, accounting for 16.3 per cent of the global GDP, therefore, any slowdown in the Chinese economy would impact the global economy…

FM Sitharaman ends MAT confusion: Reduced rate to be applicable from FY20

Decreased rate pertinent from current FY; last approach financial shortage will be taken at Revised Estimate arrange

The lower least exchange charge (MAT) rate declared as a feature of the company charge rate cuts in September will be appropriate from the current financial year (2019-20 or FY20), Finance Minister Nirmala Sitharaman explained on Monday in the Lok Sabha after a mistake in the Taxation Amendment Bill frightened organizations.

For the second time in under seven days, Sitharaman additionally talked about the difficulties in keeping up monetary order, while contrasting the Modi government’s financial record and that of the Manmohan Singh government. Nirmala Sitharaman said a last approach the monetary deficiency will be taken at the Revised Estimate arrange.

The Taxation Law Amendment Bill, 2019 was presented and went in the Lok Sabha on Monday. It had said the lower MAT pace of 15 percent, down from 18.5 percent, will be material from the following money related year (2020-21 or FY21), while the Ordinance had said the lower rate will be compelling from the current monetary year. The remedies were made by method for an official alteration, changing FY21 to appraisal year 2020-21…

FM Sitharaman ends MAT confusion: Reduced rate to be applicable from FY20

Reduced rate applicable from current FY; final call on fiscal deficit will be taken at Revised Estimate stage

The lower minimum alternate tax (MAT) rate announced as part of the corporation tax rate cuts in September will be applicable from the current fiscal year (2019-20 or FY20), Finance Minister Nirmala Sitharaman clarified on Monday in the Lok Sabha after an error in the Taxation Amendment Bill spooked companies.

For the second time in less than a week, Sitharaman also spoke of the challenges in maintaining fiscal discipline, while comparing the Modi government’s fiscal record with that of the Manmohan Singh government. Sitharaman said a final call on the fiscal deficit will be taken at the Revised Estimate stage.

The Taxation Law Amendment Bill, 2019 was introduced and passed in the Lok Sabha on Monday. It had said the lower MAT rate of 15 per cent, down from 18.5 per cent, will be applicable from the next financial year (2020-21 or FY21), while the Ordinance had said the lower rate will be effective from the current financial year. The corrections were made by way of an official amendment, changing FY21 to assessment year 2020-21.

“The intention has always been to apply reduced MAT rate from the year 2019-20. That error will be corrected through an official amendment now. The original intent was to apply it from 2019-20, which continues to be the case now,” said Sitharaman…Read More

Black money stashed outside India is estimated at $216-490 bn, say studies

MPs’ panel: There’s huge variation in estimates of black money circulation from 7% to 120% of GDP

Various studies and estimates have pegged black money circulation in India anywhere between 7 per cent and 120 per cent of the country’s gross domestic product (GDP) in 2009-10 and 2010-11. This was revealed by the standing committee on finance, quoting various studies and estimates. It highlighted the lack of a reliable estimation of unaccounted income and wealth. Given that the GDP stood at Rs 64.5 trillion in FY10 and Rs 76.7 trillion in FY11 (in old series), black money could amount to Rs 4.5-77.4 trillion in FY10 and Rs 5.3-92.08 trillion in the following year.

These estimates were given by the National Institute of Public Finance and Policy (NIPFP), the National Council of Applied Economic Research (NCAER), and the National Institute of Finance Management (NIFM). The previous UPA government had commissioned studies by these institutions. The report, submitted to Parliament on Monday, also quoted these studies, estimating that the black money stashed away by Indians abroad was in the range of $216.48 billion to $490 billion between 1980 and 2010.

Besides, the committee, chaired by former law minister Veerappa Moily, pressed for the earliest introduction of the direct taxes code (DTC) in order to simplify and rationalise direct tax laws in the country. Moily told Business Standard that the Income Tax Act, due to its various amendments, had become a ‘fountain of black money generation’, and hence the entire Act needs to be simplified instead of making adhoc amendments.

World Bank retains projections for India’s economic growth at 7.5%

For the current fiscal year, the growth is quite high, given the fact that India’s economy grew just 6.8 per cent in 2018-19, a five-year low

After the feeble total national output (GDP) information, India has something to cheer about. The World Bank has held projections for India’s monetary development at 7.5 percent for the current financial year even as it cut worldwide monetary extension by 0.3 rate focuses. In its Global Economic Prospects report, the World Bank, be that as it may, pegged the development at a similar pace of 7.5 percent for the following two financial years.

For the current monetary year, the development is very high, given the way that India’s economy became simply 6.8 percent in 2018-19, a five-year low. Likewise, the development dove to 5.8 percent in the final quarter of the financial year, additionally a five-year base. Additionally, the International Monetary Fund (IMF) had prior sliced financial development of India to 7.3 percent from prior projection of 7.5 percent. The Asian Development Bank (ADB) pegged the development at 7.2 percent.

World Bank holds projections for India’s financial development at 7.5%

Without naming Pulwama fear assault and Balakot strike, the Bank made a reference to these episodes among India and Pakistan. “Engagements among India and Pakistan in February are an update that dormant geopolitical pressures can erupt whenever,” the Bank said. The Bank said venture rate in India was relied upon to develop at a slower pace in 2019 than in 2018. It, in any case, said speculation development was relied upon to stay strong as advantages of ongoing strategy changes additionally appeared.

“Private utilization and speculation will profit by fortifying credit development in the midst of progressively accommodative money related approach, with expansion having fallen underneath the Reserve Bank of India’s objective,” it said.

India GDP to grow faster in FY18 at 7.5%: Moody’s

Moody’s said the inflation rate in India has steadily declined to 3 per cent as of April

The Indian economy will grow at 7.5 per cent in the current fiscal, which rate will accelerate to 8 per cent in about four years, US rating agency Moody’s said on Wednesday ahead of the release of GDP figures for 2016-17 later in the day.

“We expect marginally faster growth in India. According to our forecast the economy will grow 7.5 per cent in fiscal year 2017 (2017-18) and 7.7 per cent in fiscal year 2018 (2018-19),” Moody’s Investors Service said in its Global Macro Outlook.

“Overall, we continue to believe that economic growth will gradually accelerate to around 8 per cent over the next three to four years,” it said,

The American agency also said that the negative impact of the November 8 demonetisation of high-value currency on the economy was limited in size and duration.

“The ruling BJP’s victory in the Uttar Pradesh state elections indicates that the government has remained politically popular despite the demonetisation exercise,” the report said.

The government has pushed through major reforms like further liberalising foreign direct investment (FDI) rules in a number of key sectors, the Direct Benefit Transfer scheme for food, fertiliser and kerosene subsidies, the Goods and Services Tax (GST) and a National Bankruptcy Code.

“Together, these will help reduce inefficiencies and improve trend growth over the long run,” Moody’s said.

The rating agency, however, cautioned that “persistent banking sector weakness from a high proportion of delinquent loans on bank balance sheets will weigh on growth, if not resolved, by constraining credit for investment-related activity”.

“Private sector investment has remained weak despite progress on reforms, suggesting that some hurdles to investment remain binding in many cases.”

Moody’s said the inflation rate in India has steadily declined to 3 per cent as of April, owing to weaker food price inflation.

“We believe that the inflation rate will rise to around 5 per cent by the end of this year, once the effect of this temporary factor fades,” it said. | READMORE…