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Tuesday, March 17, 2020

economic news of india - world economic news - economics news for students - indian economy news

economic news of india - world economic news - economics news for students - indian economy news


Coronavirus is the last thing bad loan-plagued Indian banks need

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MUMBAI: Large banks had an emergency meeting on Monday evening to explore ways to lend a helping hand to businesses hit by the Covid-19 outbreak. At the hurriedly called videoconference attended by close to 20 senior bankers, there were discussions on possible credit lines and special benefits that could be given to certain sectors such as transportation, travel and tourism, exports and MSMEs.The meeting was called by the Indian Banks' Association, the industry lobby."Banks are collating information, and IBA will then forward the recommendations to RBI," said IBA chief executive Sunil Mehta. He said IBA and member banks are planning to come out with advisories to create customer awareness and promote contact-less banking. IBA will also assure clients that institutions are putting in place business continuity plans, and encourage banks to have flexible working hours.Trade Bodies Reach Out to Banks, RBIMany trade bodies have reached out to lenders as well as the banking regulator, drawing attention to the plight of industries — particularly those dependent on imported raw materials and having exposure to markets such as the US, Europe, Middle East and China. 74682378 "Several businesses are stuck… there are so many cases where letters of credit have been opened, payments made, but shipments have not arrived," said another banker. "Some of the banks felt that the present circumstances may call for regulatory forbearance as many borrowers could find it difficult to service loans in time," said the person.Some of the trade associations are pleading for waiver of interest on packing (or, pre-shipment) and post-shipment credit for a six-month period beginning January 1, 2020, and extension of packing credit availed for manufacturing or procurement of goods meant for exports by at least 180 days. In most cases, an exporter is required to receive payments within 180 days.After dispatching goods to foreign buyers, an exporter hands over shipping documents to his bank. The exporter's bank (wherever post-shipment credit limits have been put in place) pays the shipment amount to the exporter after deducting bill discounting. The shipment documents are then sent to the foreign buyer's bank by the exporter's bank."Where the amount is payable upfront and no credit is allowed by the exporter to foreign importer, the foreign bank will collect the amount and release the shipping documents to the importer. The buyer's bank will then remit the amount to the exporter's bank. The entire cycle normally takes 90-180 days. Sometimes, if the local exporter does not have credit limits with the local bank or if the limit is full and no more room is available to discounting more export bills, the exporter will ask his bank to send the shipping documents on 'collection' basis. Here, the exporter receives the money only after the foreign buyer has paid. In such cases, the entire credit risk on foreign importer is borne by the local exporter unless ECGC (Export Credit Guarantee Corporation of India) has guaranteed the amount. The period of 180 days should be extended by the RBI as this is a force majeure situation," said veteran banker PH Ravikumar.A note from the China Banking Association — circulated among Indian lenders — said banks in China have taken steps such as waiver of transfer fees for donations or remittances, providing 24X7 services through e-platforms, rescheduling repayment plans for affected lenders, disinfecting brick-and-mortar branches and bank notes, besides providing regular updates.In many cases, Indian banks have told borrowers that extending pre-shipment or post-shipment credit facilities in the current situation would require regulatory approval.

The possible antidote for virus-hit economy

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MUMBAI: A combination of monetary as well as fiscal policy measures are called for to salvage the economy from the collateral damage from the fallout of the spread of coronavirus disease-COVID-19, according to a research report by the State Bank of India.On the monetary side, besides maintaining a proactive liquidity regime as well as facilitating stability in financial markets through unconventional measures, the research report makes a case for a rate cut by the central bank to accommodate the possible surge in liquidity demand and shock-related price increases. The RBI may also need to consider a degree of prudential forbearance in specific sectors like hotel, aviation, transport, metal, auto components and textiles, it said. The central bank should make use of the current situation to incentivise digital payments given the risk of using currency notes in times of pandemic.The output in the economy is expected to slow down on account of both demand-side and supply side factors. On the demand side, inoperability analysis for three sectors namely Transport, Tourism and Hotels show significant impact on demand and hence output. The SBI research team estimates that the impact of a 5% inoperability shock could be 90 basis point on GDP from Trade, Hotel and Transport and Transport, Storage and Communication segment, that could be spread over FY20 and FY21, with a larger impact in FY21.On the supply side China is an important source of critical inputs for many sectors. Supply shock is akin to higher price of inputs which in turn affects the price of all the commodities up the supply chain. A simultaneous demand and supply shock to the economy will also have implications for the banking sector.On the fiscal side the nearly 30% fall in crude oil prices could lower the petrol prices by Rs12/litre and diesel prices by Rs10/litre in India from their present prices. The additional revenue accruing to Centre from increasing the excise duty (Rs 35,000-Rs 40,000 crores) could be spent on providing relief to people at the lower strata who will lose income because of shutdown of commercial activity in states, the report said.

Covid-19: 25K auto execs to work from home

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MUMBAI/NEW DELHI: India's automobile sector will see an unprecedented number of 25,000 office employees working from home for at least two weeks. This is as part of the safety measures being implemented across companies to contain the spread of Covid-19.While employees working from home are mostly holding desk jobs, the factory workers continue to work as before, in an extremely controlled environment. These measures are being taken at a critical time of the transition from BS-IV to BS-VI and the companies are under pressure to meet annual targets.Tata Motors was the first to issue an advisory asking around 3000 employees to work from home, late last week. On Tuesday, the Mahindra Group instructed over 7000 employees from the automotive and farm division working from offices to work from home.Among its peers, Volkswagen Group asked 200 employees, while Fiat Chrysler directed 300 and another 1000 employees from its joint venture company with Tata Motors - Fiat India Automobile Private Limited to work from home. Renault asked 150 to work from home, while 100 executives from M G Motor and 40 executives from Volvo Cars India have received advisory to operate from home.The biggest contingent however to get a work from home directive are over 15000 executives from the business service division of US carmaker Ford. They have now been asked to work from home.Ruzbeh Irani, president (group communications & ethics) and chief brand officer at Mahindra explained the group is carefully monitoring the rapidly evolving Covid-19 pandemic and continues to take appropriate actions to ensure the protection of its employees."We have implemented work-from-home as appropriate and feasible while ensuring business continuity. Employees will leverage a host of technology tools at their disposal to facilitate smooth collaboration and agility," Irani said.The leaders Maruti Suzuki, Hyundai Motor and rivals Honda Cars India, Toyota Kirloskar, Kia Motors have all taken precautionary measures but are yet to take a call on work from home.FCA India said it has permitted over 50% of its staff, from its Mumbai and Pune offices, to work from home, at least until March 31, 2020."We have to endure these challenging times together as responsible citizens and care for our families, friends and colleagues, while at the same time, ensuring business continuity," said FCA India's president and MD, Partha Datta.Employees with business-critical needs and those using company vehicles are permitted to work in the office subject to their manager's approval. FCA field sales personnel have been advised to coordinate business from home across India.The spokesperson at ┼ákoda Auto Volkswagen India Private Limited said, in addition to stringent travel restrictions, they have ensured self-quarantine for employees who have recently returned from other countries.A Ford India spokesperson said starting March 16, the company has instructed much of its India workforce including Ford India and global business services– except those in business-critical roles that cannot be done away from Ford facilities – to work remotely until further notice."The action will additionally help reduce the risk of spreading the coronavirus while maximizing the health of our business," Ford spokesperson said.

S&P lowers India's growth forecast to 5.2 pc in 2020

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NEW DELHI: S&P Global Ratings on Wednesday lowered India's economic growth forecast to 5.2 per cent for 2020, saying the global economy is entering a recession amid the coronavirus pandemic.The agency had earlier projected a growth rate of 5.7 per cent during the 2020 calendar.Asia-Pacific economic growth in 2020 will be more than halve to less than 3 per cent as the "global economy enters a recession", S&P said in a statement.An enormous first-quarter shock in China, shutdowns across the US and Europe, and local virus transmission guarantees a deep recession across Asia-Pacific, said Shaun Roache, chief Asia-Pacific economist at S&P Global Ratings."We lower our forecasts for China, India, and Japan for 2020 to 2.9 per cent, 5.2 per cent and -1.2 per cent (from 4.8 per cent, 5.7 per cent, and -0.4 per cent previously)," S&P said.On Tuesday, Moody's Investors Service had lowered India's economic growth forecast for 2020 to 5.3 per cent (from 5.4 per cent), in the wake of the coronavirus impact on the economy.

Vodafone Idea promoters may infuse $1.5 billion in telco if AGR dues cut

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Kolkata | New Delhi: Promoters of Vodafone Idea Ltd (VIL) — UK's Vodafone Group Plc and Aditya Birla Group — may infuse around $1.5 billion (about ₹11,060 crore) into the telco if the government cuts the carrier's adjusted gross revenue (AGR) dues based on the self-assessment, and also allows repayment over several years, analysts and executives said.A combination of reduced AGR dues and easier repayment terms on the back of recent tariff hikes, brokerage CLSA said, could send growth revival signals and encourage VIL's promoters to reassess their stance of 'no equity infusion' to bolster the struggling telco's financial position for competing more effectively with Bharti Airtel and Reliance Jio Infocomm."VIL's promoters may consider an additional capital infusion of at least $1-1.5 billion (₹7,376-11,060 crore) over the next six to nine months if the government approves a sharp reduction in VIL's AGR dues, allows repayment of such statutory liabilities over a minimum 10-year tenure and signals an early floor tariff for data services," Rajiv Sharma, research head at SBICaps Securities, told ET.A Vodafone Group Plc spokesman said the British telecom carrier "does not recognise speculation about a potential capital infusion" in a written response to ET's queries. He though added that "critical steps to ensure sustainability of a three-player market in India are measures that could be introduced by the government and a floor on pricing, which is a regulatory decision".Aditya Birla Group did not respond to ET's queries at press time. 74682539 The comments come even as the government on Monday requested the Supreme Court to allow telcos to stagger their AGR payments over a maximum 20 years, at a reduced interest rate of 8%. Vodafone Idea had said it would shut shop unless it gets relief on these dues.Vodafone Idea Ltd recently computed its AGR dues at ₹21,533 crore, way below the over ₹58,000 crore pegged by the Department of Telecommunications (DoT). Of this, the principal sum is pegged at ₹6,854 crore, which has been paid in full by the telco.Despite the expected government relief, VIL's long-term survival hinges on fresh equity infusion by its promoters as the company doesn't have cash to clear its AGR dues, say analysts.Brokerage Credit Suisse, in a note, said the telco may be able to sustain over the next two years with the spectrum and AGR payment deferments. But its "cash flow analysis suggests that business viability is under cloud even at ₹200 ARPU (and subcribers base of 280 million) once the deferred spectrum payment resumes in FY23E," Credit Suisse said in the note. It added that the telco will need strong operational improvement along with "meaningful" equity infusion to sustain in the long term."Our analysis further suggests that VIL would need ARPU levels of around ₹145 to meet interest obligation on its debt and ARPU levels of ₹230 to achieve cash flow breakeven (post FY23)," Credit Suisse said. The telco's ARPU was ₹109 in the fiscal third quarter.

Covid-19 outbreak may be a silver lining for telcos

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Kolkata: A prolonged Covid-19 pandemic over the next two quarters could be a silver lining for India's three private telcos, analysts and industry experts said. The move by companies across India asking staff to increasingly work from home (WFH), they said, is slated to boost data consumption and trigger a sharp jump in demand for home broadband and virtual private network (VPN) services in the coming weeks, creating fresh enterprise revenue opportunities for Reliance Jio, Bharti Airtel and Vodafone Idea.Analysts estimate around a 15% sequential jump in data consumption levels in each of the next two quarters, which would translate in at least 5% on-quarter revenue growth for telcos. Consumers are also likely to increase the frequency of mobile recharges as they are expected to use up their data allocations more rapidly in such a scenario.A potential drag on faster revenue growth though, they said, could be a likely slowdown in the ability of small & medium businesses/enterprises (SMBs/SMEs) to buy bulk data connections amid an imminent decline in economic activity.Industry experts though are unanimous that a protracted coronavirus outbreak will ring in big lifestyle changes in coming months driven by social distancing and safety compulsions, which would sharply increase India Inc's dependence on virtual platforms for business continuity that only telcos can provide."Big phone companies are likely to be the biggest beneficiaries as telecom infrastructure will ultimately be the main enabler for such virtual platforms to minimise business disruption as social distancing is bound to give a boost to virtual proximity," Bharti Airtel's ex-CEO Sanjay Kapoor told ET.Data consumption, he said, would see an obvious jump, which would give the three private telcos an opportunity to monetise and grow revenues if the pandemic stays over the next few quarters.Rajiv Sharma, research head at SBICap Securities, estimates a 15% sequential jump in data consumption in the near term to be driven by a surge in demand for home broadband connections and VPN services from mid-sized companies — in the ₹500-1,000 crore turnover category — for their staff working from home.He estimates the addressable combined market opportunity for enterprise business services and home connectivity solutions for the three to rise 25-30% in the medium term if the pandemic outbreak is a prolonged one.Industry estimates peg India's current home broadband and enterprise business services market opportunity at ₹30,000-34,000 crore.Rohan Dhamija, partner & head of India & Middle East at Analysys Mason, backed the view, saying companies cutting across verticals would have to invest immediately in home broadband connections for staff, who if forced to stay home and co-work, would rely heavily on video calls for daily meetings, business reviews or even connecting with clients.

Buying shares battered due to Covid-19 may prove to be risky

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ET Intelligence Group: A sharp fall in the stock market over the past few weeks may have made the prices of several stocks look attractive, thus tempting investors to make fresh purchases. But this may prove to be risky. Data over the past 20 years show that a double-digit fall from the peak in market indices within a month often results in a prolonged weakness contrary to investors' expectations of a turnaround. The current fall, which has resulted in 28 per cent drop in the benchmark indices at the end of Tuesday's trading session from the peak on January 20, is a part of a global selloff due to the uncertain economic growth amid the outbreak of Covid-19.First of such double-digit drops from the peak was in March 2000 amid the dot-com bubble burst. The Nifty 50 fell by over 10 per cent that month and continued to slide for the next 18 months, tanking by almost 50 per cent from the peak.Once the bottom was formed in 2003, markets started climbing and the rally continued until the beginning of 2008. Indices hit a lower circuit in the middle of January 2008 and the fall continued for 15 months due to subprime crisis in the US, resulting in over 60 per cent drop from the peak. The indices picked up after that and continued to gain the lost ground until end of 2010. 74672877 But once again a double-digit fall in January 2011 continued for 12 months before the markets bottomed out. The only exception during the period of two decades was a sharp fall in May 2004, which was event-driven. The UPA had won mandate to form the government at the centre, much against expectations of the market participants. As a result, the Nifty lost over 11 per cent in a day but recovered in just two trading sessions and continued to scale new peaks in the next four years.A word of caution about short-living rallies within a long drawn market weakness would be apt. During the past instances of an extended weakness in indices, there were pull back rallies lasting for short durations. In the hindsight, investors were better off selling in those rallies rather than buying into them. For instance, in 2008, after correcting in the first three months by 15 per cent, Sensex gained 11 per cent in April, only to fall by 22 per cent in the following two months.

Morgan Stanley, Goldman declare global recession is under way

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By Christopher Condon and Jeff KearnsGoldman Sachs Group Inc. and Morgan Stanley economists joined the rush on Wall Street to declare that the coronavirus has triggered a global recession, with the debate now focusing on its likely length and depth.A day after President Donald Trump conceded the U.S. slump alone is set to be "a bad one," economists threw away their forecasts that the world could avoid tumbling into recession for the first time since the financial crisis.Behind the rethink: The virus's spread to Europe and the U.S., as well as new evidence that China -- the first to be hit by what is now a pandemic -- experienced a harder hit to its economy than originally projected.Morgan Stanley's team, led by Chetan Ahya, said a worldwide recession is now its "base case," with growth expected to fall to 0.9% this year. At Goldman Sachs, Jan Hatzius and colleagues predict a weakening of growth to 1.25%. S&P Global added its voice to the chorus with a report expecting that growth would range 1% to 1.5%.74679634 Such slumps would not be as painful as the 0.8% contraction of 2009, as measured by the International Monetary Fund, but they would be worse than the downturns of 2001 and the early 1990s. Both Morgan Stanley and Goldman Sachs anticipate a rebound in the second half, but warn that the risk remains of even greater economic pain.The projections will apply further pressure on policy makers to do more to limit the health emergency and to deliver stimulus that helps companies and consumers through the shock and then drives a rebound in demand afterward.What' Bloomberg's Economists Say..."We are downgrading our forecast for China's 2020 growth. Our previous forecast for the year was growth at 5.2%. Our new forecast is 1.4%. That includes a 11% contraction in the first quater." -- Chang Shu, David Qu and Tom OrlikAlthough the U.S. Federal Reserve and fellow central banks have been active in loosening monetary policy, most governments have been slow in responding and are only now crafting fiscal packages that may still fail to pacify worried investors."While the policy response will provide downside protection, the underlying damage from both Covid-19's impact and tighter financial conditions will deliver a material shock to the global economy," Morgan Stanley's economists said.The outlook could darken even further if the virus lasts longer than anticipated, or wields greater economic pain -- given factories, schools, restaurants and shops are closing around the world. A freezing up of markets or a continued sluggishness by governments to act are also regarded as threats.Elsewhere on Wall Street, strategists are laying out what governments should be doing.At JPMorgan Chase & Co., John Normand advocated developed economies repeating their handiwork of the crisis when they delivered fiscal stimulus worth 1% to 2% of gross domestic product. George Saravelos, a currency strategist at Deutsche Bank AG, said governments may also need to step in to guarantee support for households and companies.74679640 While the Fed gets "full marks" for its recent response in cutting rates and moving to stabilize credit markets, Northern Trust Corp. Chief Economist Carl Tannenbaum said Congress and the White House have so far failed to act boldly enough."The other side of Washington really needs to step up with something as substantial in size, and intelligent in design," he said.China is experiencing the biggest pain, and most economists failed to capture how far it would fall, with the likelihood now that its economy will suffer the worst turmoil in many decades. The Morgan Stanley economists now reckon its economy shrank 5% in the second quarter.Since the outbreak originated in China, data is being treated by many as a harbinger of what's to come in other regions. Morgan Stanley predicts the U.S. and European economies will suffer the most in the second quarter.Predictions for the U.S. still vary wildly, with some guessing activity could even decline as much 10% on an annualized basis in the three months through June. Goldman Sachs is penciling in a 5% dive after zero growth in the first quarter."The middle two quarters of this year are going to be very challenging, even if we get the spread of the coronavirus under control quickly," said Tannenbaum.

Tech Mahindra, Innoveo partner to drive digital transformation

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PUNE: Tech Mahindra will partner Innoveo, a Zuriich based technology software provider, to drive digital transformation in insurance banking and wealth management, the IT services provider said on Tuesday. Through this partnership, both companies will leverage No-Code Platforms to accelerate the launch of custom-built applications for their collective network of clients without software coding in real-time across all banking, wealth management and insurance sectors."Through our partnership with Innoveo, Tech Mahindra will enable digitalization of sales and distribution channels for enterprises to ensure launch of new products in real time; help them trade financial and insurance products through multiple distribution channels, and improve efficiency of processes like risk assessment, insurance policies, banking products, policy lifecycle, customer advisory, servicing and claims resolution," said Gautam Bhasin, Global Head Banking, Financial Services and Insurance, Tech Mahindra.Today's business models are faced with maturing markets combined with millennial demands for engaging experiences, scarcity of technical talent with the necessary coding expertise, and the critical need to accelerate innovation and enable new business models in order to grow and succeed financially. Tech Mahindra and Innoveo will jointly offer innovative solutions to companies struggling with competitive market demands and critical antiquated legacy systems, it said in a statement.Amir Ghaffar, CEO, Innoveo, said, "While the demands for agility, market proximity and the flexibility to adapt to new trends are constantly increasing, digital businesses are struggling with restrictions in terms of development capacity and the integration capability of its often-monolithic back-end legacy systems. If you want to stay ahead of the competition, you must speed up the introduction of digital solutions and innovative offerings."

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