India’s economy may see first contraction in 40 years on lockdown extension

The lengthening of the mandatory stay-at-home period to 40 days from 21 days will result in a direct output loss of more than 8 per cent over that time, according to Sonal Varma of Nomura Holdings.

India’s economy may be heading for its first full-year contraction in more than four decades after the government extended the lockdown to contain the coronavirus. The lengthening of the mandatory stay-at-home period to 40 days from 21 days will result in a direct output loss of more than 8 per cent over that time, according to Sonal Varma of Nomura Holdings. Varma and Kunal Kundu of Societe Generale GSC now predict a decline in GDP for the year to March 2021 of 0.4 per cent and 0.1 per cent, respectively. The economy had last contracted in 1980, when GDP shrank 5.2 per cent.

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“There will be indirect effects such as the persistence of the public fear factor even after the lockdown ends,” said Varma, head of Asia economics ex-Japan at Nomura. Besides, there will be an “impact on livelihoods of the unorganised workforce, and a sharp increase in corporate and banking sector stress, which are likely to further weigh on growth.” Bloomberg India economist Abhishek Gupta said, “A precipitous recession in India is inevitable. We are slashing our fiscal 2021 GDP forecast to a contraction of 4.7 per cent, down 10.7 percentage points from 6 per cent growth we expected before the coronavirus sideswiped the economy.”

Covid-19 crisis: PM, FM to finalise details of second stimulus package soon

The stimulus package is expected anytime this week and will again be aimed at the urban and rural poor; disadvantaged sections of society; MSME sector; and some of the worst-affected sectors

Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman are expected to meet soon to finalise the details of a second stimulus package to mitigate the impact of Covid-19 on the economy, Business Standard has learnt. The meeting is also likely to be attended by senior officials from the finance ministry and the Prime Minister’s Office.

The stimulus package is expected anytime this week and will be aimed at the urban and rural poor; disadvantaged sections of society; micro, small and medium enterprises (MSMEs); and some of the worst-affected sectors. Late last month, Sitharaman had announced a Rs 1.7 trillion stimulus package, which included measures like free foodgrain and direct cash transfers for targeted beneficiaries, and an increase in wages under the employment guarantee programme.

ALSO READ: Punjab, Haryana to begin wheat procurement with social distancing in mind

A senior government official said this would not necessarily be the last Covid-related stimulus package. A call on further measures will be taken later, and could even be announced after the lifting of the lockdown. The measures that are being finalised could include easier access to credit for MSMEs, and further cash and food transfers, sources said. “There is a proposal for another hike in MGNREGA payments,” an official said. To create some rural jobs, officials said the construction of rural roads during the lockdown period, with the help of MGNREGA workers, was being considered. The resumption of economic activity from rural areas, they said, was the safest bet since Covid-19 hotspots were mostly centered in urban or semi-urban areas…Read Here More

Coronavirus outbreak: A 21-day lockdown may have cost India Rs 8 trillion

The sectors that have been most impacted are transport, hospitality, and real estate

The world’s biggest lockdown that shut a majority of the factories and businesses, suspended flights, stopped trains and restricted movement of vehicles and people, may have cost the Indian economy Rs 7-8 trillion during the 21-day period, analysts and industry bodies said. With the intent to contain the spread of Covid-19, Prime Minister Narendra Modi with effect from March 25 announced a nationwide complete lockdown that brought as much as 70 per cent of economic activity, investment, exports and discretionary consumption to a standstill. Only essential goods and services such as agriculture, mining, utility services, some financial and IT services and public services were allowed to operate.

Stating that the pandemic came at the most inopportune time for India whose economy was showing signs of recovery after bold fiscal/monetary measures, Centrum Institutional Research said the country again stares at the possibility of low single-digit growth for FY21 (April 2020 to March 2021).

“Nationwide complete lockdown is likely to shave off at least Rs 7-8 trillion,” it said. Acuite Ratings & Research earlier this month estimated that the lockdown will cost the Indian economy almost $4.64 billion (over Rs 35,000 crore) every day and the entire 21-day lockdown will result in a GDP loss of almost $98 billion (about Rs 7.5 trillion). The rapid spread of Covid-19 has not only disrupted the global economy but also triggered a partial shutdown in many parts of India from early March and an almost complete shutdown from March 25…Read More Here

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…

Moody’s cuts India outlook to negative, predicts ‘prolonged slower growth’

Moody’s projects a budget deficit of 3.7% of GDP in the year through March 2020, a breach of the government’s target of 3.3%.

India’s credit ratings outlook was cut to negative by Moody’s Investors Service, the first step toward a downgrade, as concerns mount the economic slowdown will be prolonged and debt will rise.

Moody’s projects a budget deficit of 3.7% of gross domestic product in the year through March 2020, a breach of the government’s target of 3.3%, as slower growth and a surprise corporate-tax cut curbs revenue. The foreign currency rating was retained at Baa2, the second-lowest investment grade score.

India’s growth outlook has deteriorated sharply this year, with a crunch that started out in the shadow banking industry spreading to retail businesses, carmakers, home sales and heavy industries. Growth has come down to a six-year low of 5%, with Moody’s saying there’s a low chance of sustained growth at or above 8%.

“A prolonged period of slower economic growth would dampen income growth and the pace of improvements in living standards, and potentially constrain the policy options to drive sustained high investment growth over the medium-to long term,” William Foster, vice president of Moody’s Sovereign Risk Group, wrote in a statement. The SGX Nifty 50 Index Futures declined 0.4% in Singapore as of 6:57 a.m. in Mumbai. The dollar-rupee one-month non-deliverable forwards rose after the Moody’s statement.

Global investors bet $45 bn on Modi’s India. Now they are reversing it

International money managers are starting to fall out of love with Narendra Modi

After pouring $45 billion into India’s stock market over the past six years on hopes that Modi would unleash the country’s economic potential, international money managers are now unwinding those wagers at the fastest pace on record. They’ve sold $4.5 billion of Indian shares since June, on course for the biggest quarterly exodus since at least 1999.

“The euphoria around Narendra Modi before 2014 has tapered off,” said Salman Ahmed, the London-based chief investment strategist at Lombard Odier Investment Managers, which oversees about $52 billion.

It’s hard to fault investors for losing faith. India’s economic growth has decelerated for five straight quarters to the weakest level since early 2013, one year before Modi became prime minister. And the 5% headline number for the second quarter may actually understate how painful the slowdown has become. Car sales are sinking at the fastest pace on record, capital investment has plunged, the unemployment rate has surged to a 45-year-high and the nation’s banking system is hamstrung by the world’s worst bad-loan ratio. Monday’s oil-price spike adds yet another headwind for a country that imports most of its crude….

Demonetisation's failure won't hurt PM Modi, he's already changed the narrative

Modi has learnt never to engage with his opponents and a hapless Opposition is trying to keep up

 

economy news:APCO Worldwide, a transnational public relations company, had their most apt pupil in then Gujarat chief minister Narendra Modi. The one thing Modi learnt was never to engage with his opponents on issues they want to talk about. He sets the agenda and a hapless opposition and media try to keep up. Demonetisation was a Modi-made disaster. Yet the disaster only served to propel Modi to greater electoral heights, and today, as he towers over a clueless opposition, even the return of 99% of the extinguished notes does not change the narrative of one man’s fight against corruption.

Modi had made an emotional pitch on demonetisation – “Give me 50 days, then punish me if I am wrong” – which was the lead story in all newspapers. Today who remembers that? Modi has moved on from “acche din” to “new India” and, like the Pied Piper, carried a mesmerised UP electorate with him. He swept the UP assembly, anointed Adityanath as chief minister and could not care less about what the opposition and media will now say.

ALSO READ: GDP growth hits 3-year low of 5.7%, slowest under Modi govt

Former Prime Minister Manmohan Singh had called demonetisation “an organised loot and legalised plunder”, and the venerable economist had a point. Modi, however, used demonetisation as a chance to reinvent himself as a “messiah of the poor”. The only jibe that struck home was Rahul Gandhi’s comment of a “suit boot ki sarkar” after Modi aired his Holland and Sherry Rs 10 lakh suit (with his name pinstriped on it) in his meeting with former US President Barack Obama.

The suit was auctioned off; the godmen and friends of the BJP are still present and in action; yet, with the demonetisation gamble, Modi achieved his aim.

ALSO READ: 99% of banned notes returned after demonetisation: RBI annual report

Modi and his closest aide, Amit Shah, are a ruthless-election winning combine. They give no quarter and expect none. No niceties of politics are maintained and the BJP has been transformed into a formidable election-fighting machine, modelled from the booth level upwards on the Congress of the 1950s. Modi himself is on 24/7 campaign mode. Consider this: until the Gujarat election later this year, he will make weekly trips to the state.

A senior member of the cabinet told me, “We are quiet in cabinet but occasionally the prime minister scoffs at the media. The opposition is never discussed as they have become irrelevant”.(READ FULL STORY)