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Friday, March 20, 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


World's Covid-19 fight comes at a very heavy economic price

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NEW DELHI: Success in containing coronavirus infection comes at the price of slowing economic activity, a blogpost by IMF experts has stated.With the number of coronavirus cases rising in India, Prime Minister Narendra Modi has appealed to citizens to observe a 'Janta curfew' on Sunday to check the spread of deadly novel coronavirus.In the blogpost, the IMF experts observed, "Success in containing the virus comes at the price of slowing economic activity, no matter whether social distancing and reduced mobility are voluntary or enforced."The IMF China's experience so far shows that the right policies make a difference in fighting the disease and mitigating its impact-but some of these policies come with difficult economic tradeoffs, the blog authored by Helge Berger - IMF's China mission chief and Assistant Director, Kenneth Kang - Deputy Director in the Asia & Pacific Department of the IMF, and Changyong Rhee - Director of the IMF's Asia and Pacific Department, stated."By all indications, China's slowdown in the first quarter of 2020 will be significant & will leave a deep mark for the year," the blog said.The IMF said the past weeks have shown how a health crisis, however temporary, can turn into an economic shock where liquidity shortages and market disruptions can amplify and perpetuate."In China, the authorities stepped in early to backstop interbank markets and provide financial support to firms under pressure, while letting the renminbi adjust to external pressures.Among other measures, this included guiding banks to work with borrowers affected by the outbreak; incentivizing banks to lend to smaller firms via special funding from China's central bank; and providing targeted cuts to reserve requirements for banks."Larger firms, including state-owned enterprises, enjoyed relatively stable credit access throughout-in large part because China's large state banks continued to lend generously to them," the IMF pointed out.Noting that while there are reassuring signs of economic normalization in China-most larger firms have reported reopening their doors and many local employees are back at their jobs, it said stark risks remain."This includes new infections rising again as national and international travel resumes. Even in the absence of another outbreak in China, the ongoing pandemic is creating economic risks," it said.The number of novel coronavirus cases in India rose to 223 on Friday evening after 50 fresh cases were reported from various parts of the country while 6,700 people who came in contact with the patients are under rigorous surveillance, the Union health ministry said.

Stock brokers allowed to work from home

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MUMBAI: For the first time stock brokers have been allowed to access the market from their homes. Amid fears that the COVID-19 virus could further spread, dealers and employees of brokerages have been temporarily permitted to log into trading systems from remote locations to put through client orders and execute transactions.The arrangement will continue till April 30 or longer if the situation demands.Under security market regulations, stock exchange members can trade from specific locations: registered office, corporate office, registered branches, offices of registered sub-brokers and sites dedicated for disaster recovery (DR) or business continuity plan (BCP) – with the provision to connect remotely from the DR and BCP sites to the main office. Also, there are restrictions for brokers to trade simultaneously from the main site and the BCP site unless IDs are pre-allocated.As countries grappled with a public health emergency, large brokers as well as foreign portfolio managers, the largest investor group in the Indian stock market, had asked bourses to let their dealers access the system from home & other locations.On Friday, India's largest bourse NSE announced that as a temporary measure, members opting for this facility shall be permitted to operate the trading terminals from locations -- other than main or branch offices or from the office of an authorized person -- subject to certain rules. Brokers will have to put in place an internal policy to prevent unauthorised trading and provide a list of approved users, terminal details, segment, certificate details and the alternate location address to the Exchange. "Members shall undertake necessary due diligence w.r.t operation of such trading terminals and shall be liable for any improper use of the trading terminals by any of the users," said an NSE communiqué issued after the trading hours. Some of the jurisdictions and financial centres have allowed such flexibility to brokers.One of the issues that had to be taken into account in implementing the alternate location arrangement was the rule requiring brokers to record conversations. "The post-trade confirmations could be preserved as emails and chats. It was unclear whether telecom regulations and laws allow recording of conversations held in locations outside brokerages. Moreover, a conversation recorded by a dealer working from home can be deleted," said a person.A November 2017 circular of capital market regulator Sebi allows brokers to offer post-trade evidence -- such as confirmations by client receipts, payment of fund or delivery of securities -- in cases of disputes related to trades executed under exceptional circumstances."This flexibility was urgently needed. Even though stock exchanges, brokers and other market bodies are not required to shut down, most organisations are advising employees to work out of home. Only 25% our people are attending office," said a senior broker.Trading from a different location requires traders to remotely access the front-end trading software in their authorised offices to access the exchange trading system.Global asset managers and institutional investors had put across their views on the subject to regulators in Hong Kong, Singapore, UK and USA. The US Financial Industry Regulatory Authority (FINRA) recently said that traders could work remotely and firms may need to implement alternative supervisory systems to support it. In its communiqué, FINRA also said that it would temporarily waive some record-keeping requirements and be flexible if firms face difficulty in meeting other filing obligations. The UK Financial Conduct Authority said it has no objection to brokerage staff working from home if certain standards like recording of conversation and prompt execution of orders are met.

How to make India ready for covid-like crises

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By Kiran Majumdar ShawThe Covid-19 outbreak has taken the world completely unawares, exposing the vulnerability of public health systems in coping with infectious disease pandemics. Effective governance of pandemics involves preparedness, response and recovery at local, national and international levels. As the world has fallen short on all these counts, the failure has allowed Covid- 19 to spread like wildfire across hundreds of countries, affecting lakhs & killing thousands.While many apocalyptic predictions are being made about a post-Covid-19 world, it can act as a wake-up call for all of us, as individuals, as a society and as a country. Life after Covid-19 will not — and should not — be the same. It will call for a change in priorities, in focus and in the way we do things.The coronavirus pandemic is a lesson that governments worldwide ignore research into infectious diseases at their own peril. Avian flu, SARS (Severe Acute Respiratory Syndrome), MERS (Middle East Respiratory Syndrome), Ebola, Zika, Nipah, etc, are a clear example of the warning signals they have sent to us. Moreover, with bacterial infections becoming increasingly resistant to antibiotics, common infections can potentially become life-threatening in the future.Infectious diseases, which posed a significant disease burden in developed countries until the mid-20th century, gradually declined due to better standards of living and improved hygiene and sanitation. The advent of antibiotics in the 1940s-50s further lowered the threat. As a result, research into infectious diseases started losing sheen in the developed countries. Globalisation and market forces meant that even in poor countries such as India, this kind of research went into the backburner.In a post-Covid-19 world, there needs to be a course-correction. While it is virtually impossible to predict what the next pathogen threat will be, from where it will emerge and when it will strike, pandemic-focused research could give us a future head start in the battle against infectious diseases.India has a very important role to play in this battle. Given the long history of this type of diseases in our country, we have accumulated years of experience and scientific knowledge to prevent and treat them. Institutes like the National Institute of Epidemiology in Chennai, the National Centre for Disease Control in New Delhi, the Centre for Infectious Disease Research in Bengaluru, and the National Institute of Virology in Pune, already exist. GoI will need to invest significantly in strengthening the capabilities of these institutions to give a fresh impetus to research into infectious diseases.India urgently needs to create a virus repository with genomic data. This will be tremendously useful in developing diagnostics and vaccines for these diseases, thus helping to control them early and stopping their spread. In tackling pandemics like Covid-19, rapid response is going to be very important and bioinformatics will play a key role in this.The large infectious diseases burden in India presents a very important research resource. We need to combine India's world-class IT prowess in mining infectious diseases data to crack the genetic code of pandemic-causing viruses. Combining this knowhow with advanced medical technologies will enable us to develop a battery of low-cost rapid diagnostic tests for various infectious diseases.At present, India is mostly dependent on imported diagnostics. An India-US joint venture, CoSara Diagnostics, became the first company in India to develop a US Food and Drug Administration (FDA)-approved Covid-19 diagnostic test that is awaiting a licence from the government to manufacture coronavirus test kits.Expedited regulatory clearances, and the right kind of support from GoI will enable many more companies in India to come forward for developing these diagnostic tests indigenously. GoI can also allow companies to deploy their corporate social responsibility (CSR) funds for this kind of capacity creation.As vaccines are the most important tool for reducing the high morbidity and mortality invariably associated with pandemics, governments across the world will explore ways to expedite the development of these therapeutics. While the Indian vaccine industry has been instrumental in facilitating cost-effective immunisation in the country and the rest of the developing world, suboptimal public sector investment in vaccine research poses a major challenge for future preparedness. Indian vaccine producers cater to 50% of global needs of MMR (measles, mumps, rubella), diphtheria, tetanus, polio, pertussis and BCG (Bacillus Calmette-Guérin) vaccines (used primarily against tuberculosis) in volume terms.The development of new vaccines is fraught with risk and requires heavy investment over long periods. Which is why, public investment and government support are indispensable for driving a dedicated vaccine research programme. We need to go beyond developing 'me too' vaccines that build on basic research overseas to developing pandemic vaccines for novel influenza viruses. Indigenously developed vaccines from India could help save millions of lives and help Indian companies capture a larger share of the international market.The current crisis has reiterated the fact that healthcare and life sciences is the biggest opportunity for a country like India. GoI needs to seize this moment to redirect its focus on biotechnology, life sciences and healthcare, and work together with the private sector to make India not only the 'Pharmacy of the World' but also the 'Laboratory of the World'.The writer is chairperson-managing director, Biocon

Indian banks seek more time over bad loan classification

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MUMBAI: Indian bankers want the regulator to ease rules on loan recovery timelines to give borrowers the breathing space and monetary health they need to pay back, with large swathes of the economy choked by the lockdown mandated to contain the spread of the coronavirus.The Indian Banks' Association (IBA) has made a five-point wish-list for the consideration of the Reserve Bank of India (RBI), and the request to defer term-loan installments for six months tops that charter of demands.Also on the list is an extension of the time period for classification of NPAs on short term loans like cash credits and overdraft and guarantees like letters of credit (LCs) from the present 90 days to 180 days.This wish list has been sent to the RBI on Friday after the IBA managing committee unanimously approved them at its meeting, CEO Sunil Mehta said."These are the five points that we decided should be sent to the RBI for immediate consideration. We have left the decision on what has to be done to the judgement of the RBI. We expect to hear from the central bank next week," Mehta said.The IBA recommendation says that banks can decide on the deferment of term loans according to the severity of the impact on the borrower."Suppose a borrower has lost his or her job due to this crisis, then the loan installments could be deferred by six months. But if there is a partial impact like delay in salaries then deferment could be less. The extension for the repayment should be done without downgrading of the asset," Mehta said.Similarly, missed payments on LCs, cash credit facilities and overdrafts would not be classified as SMA 1 (Special Mention accounts with missed payments for 31 to 60 days) or SMA 2 (missed payments for 61 to 90 days) giving more time to borrowers to make up for delays.Although the total impact of this unprecedented virus outbreak is yet to be quantified, analysts are penciling in a dent in bank profits in March - and consequently in the first quarter of fiscal 2021 - due to slower new loan generation and delays in recoveries and payments. Sectors like airlines, hospitality and small and medium enterprises are said to be immediate casualties."Growth will take a big hit…and impact will be felt from 1QFY21 onward. Tough to give earnings impact here but assuming loan growth is cut by 1000bps (10%) and credit costs increased by say 50bps then 30-40% of earnings or 6-7% of book value is shaved off," said Suresh Ganapathy, analyst at Macquarie Securities. One basis point is 0.01 percentage point.In its wishlist the IBA has also requested a 1% cut in the cash reserve ratio (CRR), or the amount the deposits banks keep with the RBI without earning any interest, to ensure liquidity."We have also asked for a six month extension for cases undergoing resolution under the June 2019 ICA framework, which means the six month deadline will now be extended to 12 months. However, those cases which have no resolution in sight can be take to NCLT," Mehta said.RBI norms issued in June last year say that banks have to find a resolution to stressed assets under the Inter Creditor Agreement (ICA) framework under a strict six-month timeline.IBA has also sought RBI forbearance on reporting timelines for crucial bank data of various frequencies because of the disruptions in operations.

SBI announces emergency credit line in light of COVID-19

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Mumbai: India's largest lender State Bank of India became the first bank to open an emergency credit facility for borrowers affected by the Coronavirus outbreak. In a three-page departmental circular addressed to all its chief general managers, the state-owned lender directed that a maximum loan amount of upto Rs 200 crores or 10 percent of the existing fund based working capital limits can be availed under this emergency line. The facility will be available till end of June and will be specifically aimed at MSME borrowers. These loans will be given at a flat rate of 7.25%."With a view to provide some degree of relief to the borrowers whose operations are impacted by Covid 19, it is decided by the Bank to make available additional credit facilities to the eligible existing borrowers by way of ad-hoc facilities i.e COVID 19 emergency credit line (CECL) to tide over the current crisis situation," the note read.All standard accounts which have not been classified under the category of special mention accounts 1 & 2 as on March 16 will be eligible. Existing SBI customers who have availed special loan products under the MSME category can also avail this facility. The borrowers will be able to avail the entire amount in one go and will be repayable in six instalments after a moratorium period of six months from the date of disbursement of the loan.In light of the Coronavirus outbreak the Indian Banks Association has sought a host of relief measures from the Reserve Bank of India including an extension of 90 days in classifying accounts as non-performing assets (NPA) and deferring the installment of term loans. The bankers association has also sought allowing deferment on loan payments for a specific period, a percent cut in the cash reserve rate and a six month extension for cases which are undergoing resolution under the inter-creditor framework.Most analysts feel that the Coronovirus outbreak is likely to have the worst impact on small businesses."Growth will take a big hit and impact will be felt from 1QFY21 onwards, 4QFY20 will not see the impact much as issues started cropping only a week ago seriously in India," said Suresh Ganpathi of Macquarie. " NPAs in this (MSME) segment have already been running at sub 12% and are expected to rise further from current levels."

Hindustan Unilever to slash prices of hygiene products, pledges Rs 100 crore to fight Covid-19

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MUMBAI: Hindustan Unilever, India's biggest consumer goods firm, said it will drop prices of essential hygiene products by 15% and committed about Rs 100 crore in an effort to slow the spread of novel coronavirus. The Indian unit of Anglo-Dutch consumer giant Unilever will also ramp up production and supplies of sanitizers, handwash and floor cleaners."In crisis like this, companies have a big role to play. We are working closely with the Governments and our partners to ensure that we overcome this global health crisis together," said Sanjiv Mehta, chairman and managing director of HUL, the first company to extend an aid to fight the pandemic in the country.The company said both production and supplies of Lifebuoy sanitizers and handwash and Domex floor cleaners' supply will increase even as prices for these brands are slashed by 15% With newer manufacturing planned immediately, it will take another few weeks for these products with revised price-tags to hit retail shelves.HUL will also donate two crores pieces of Lifebuoy soap bars, the country's biggest soap brand, in the next few months to the sections of the society. It will also partner with medical institutions that are providing testing and care facilities to affected people and provide them free supplies of sanitation and hygiene products apart from donating Rs 10 crores to upgrade the health care facilities in testing centres and hospitals.The pledged amount translates into 1.7% of its FY18-19 net profit and about 0.3% of annual sales. A year ago, the company's entire corporate social spend was about Rs126.4 crore.HUL, for long considered a good proxy to gauge consumer sentiment across the country's socio-economic spectrum, was also the first company to announce that office-based employees will work from home. At the same time, field sales employees have been connecting with customers virtually wherever possible and minimising the use of public transport if a customer visit is necessary.

Oil falls back as Russia rejects Trump's intervention in price war

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LONDON: Oil prices fell on Friday after rising 10% in the session as the coronavirus epidemic knocked the outlook for demand and Moscow rejected an intervention by U.S. President Donald Trump in Russia's price war with Saudi Arabia.Brent crude futures were down 32 cents, or 1.1%, at $28.15 a barrel by 1331 GMT.Brent is on track for a weekly loss of more than 16% and its fourth consecutive weekly decline.U.S. crude futures for April fell 72 cents, or 2.8%, to $24.50. The front-month contract expires on Friday. The more active U.S. crude contract for May was down 70 cents, or 2.7%, at $25.21."The world is awash with oil... Simply put, oil is facing a prolonged period of demand destruction," said Stephen Brennock of oil broker PVM.Brent and U.S. crude have both collapsed about 40% in the past two weeks weighed by the spread of the virus and the collapse of coordinated output cuts by producers from the Organization of the Petroleum Exporting Countries (OPEC) and others including Russia.Trump said on Thursday that he would act on the price war at the appropriate time, saying low gasoline prices were good for U.S. consumers even though they are hurting the industry."At the appropriate time I'll get involved," Trump said."The low prices are threatening to hit the U.S. shale oil industry hard, thereby jeopardising the U.S. position as the world's largest oil producer," Commerzbank analyst Carsten Fritsch said.However, the Kremlin on Friday said that Russia and Saudi Arabia have good relations when it comes to oil markets and Moscow does not need anyone else to intervene. Oil prices pared some of their gains after the Russian remarks.To counter the impact of the spreading virus, the world's richest nations are pouring unprecedented aid into the global economy to fend off a recession.Sources told Reuters that China was set to unleash trillions of yuan of fiscal stimulus to revive an economy facing its first contraction in four decades.The announcements by central banks lifted oil prices by 10% in the session, but crude futures turned negative as demand concerns persisted."My concern relates to the likelihood of more mobility restrictions around the globe, which is likely to weigh further on oil demand. Hence, the worst is probably not over for oil prices," said UBS oil analyst Giovanni Staunovo.Supply restraint by core OPEC producers could push up second-quarter Brent prices to $30 a barrel, while U.S. measures to support the market could underpin prices in the near term, Goldman Sachs said in a research note.

Covid effect: Forex reserve falls most in 8 yrs as RBI defends Re

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Mumbai: India's foreign exchange reserves likely fell $5.3 billion from the peaks as the central bank intervened to reduce the slide of the currency.India's reserves fell from its peak of $487 billion to $ 481.9 billion during the week ended March 13, latest data released by the Reserve Bank of India said.According to a Bloomberg report, foreign-exchange reserves plunged the most in about eight years as the central bank stepped in to defend the rupee.The increased risk aversion on account of the fallout of the new corona virus disease ( COVID-19), that is emerging as a global Pandemic has resulted in foreign investors pulling out from the emerging markets. It is estimated that they have pulled out close to $ 9 billion from the Indian markets causing the rupee to depreciate against the rupee. In the month of March so far, the rupee has slipped around 3 per cent to the dollar. The central bank on its part had to intervene to stem the fall of the rupee. "RBI would be highly prudent in using dollar stocks amid drying up global liquidity," said Anindya Banerjee, currency analyst at Kotak Securities. "It apparently tried to intervene attempting to limit the rupee's losses".India's foreign exchange reserves comprises both gold and a host of foreign currencies, expressed in dollars. The value of central bank's stock of gold eroded by $1.5 billion during the week weak as the COVID-19 concerns and its potential impact on the global economy, also derailed commodities including crude and other metals including bullion prices.The forex reserves are expected to drain further in the subsequent weeks as major financial markets fell sharply with investors rushing to park their money in safe haven assets such as the US treasury. With Fed rates at nearly zeros, investors are expected to make valuation gains on their US treasury investments.

Netflix and YouTube reduce resolution as virus hits web

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Brussels: Netflix and YouTube will reduce the default image quality of streaming video in Europe to ease pressure on the internet, the firms said Friday, as demand soars with millions confined to their homes over coronavirus fears. EU commissioner for the digital economy Thierry Breton urged internet giants to switch from high definition to the former standard definition to reduce file sizes while stranded householders seek entertainment as well as news about the epidemic. Late Thursday, entertainment platform Netflix agreed, and on Friday Google's video-sharing service YouTube said it would follow suit, although videos viewed on the site from a European connection on Friday by AFP were still defaulting to high definition mode. "While we have seen only a few usage peaks, we have measures in place to automatically adjust our system to use less network capacity," a Google spokesperson said. "Following the discussion between Google's CEO, Sundar Pichai, YouTube's CEO Susan Wojcicki and Commissioner Thierry Breton we are making a commitment to temporarily switch all traffic in the EU to Standard Definition by default." Separately, Netflix will "begin reducing bit rates across all our streams in Europe for 30 days," a spokesperson for the streaming giant said in a statement. "We estimate that this will reduce Netflix traffic on European networks by around 25 percent while also ensuring a good quality service for our members," the statement added. With wide-ranging lockdowns and quarantines, schools, shops and borders closed and gatherings banned, people across Europe are increasingly turning to the internet to stave off boredom. But the huge file sizes of high definition offerings from web giants like Netflix, Disney Plus, Hulu, HBO and Amazon are slowing the web, Breton warned. "Teleworking and streaming help a lot but infrastructures might be in strain," he said in a tweet Thursday, calling for online platforms to switch to streaming in standard definition instead of HD. Gamers breathed a sigh of relief on Wednesday after the end of an hours-long network outage that affected Nintendo's online games and prompted despair from users. "Only a few days into the coronavirus self-isolation and Nintendo servers are already down... oh dear god," tweeted one.

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