Daily Financial News Analysis – 15th Apr’20

Table of Contents

Lockdown 2.0

Possible relaxations for best performers from 20 April.
Utmost vigilance: hotspots don’t proliferate
However, this relaxation could be withdrawn if lockdown rules are broken, he warned.
Domestic and international flights and passenger trains will remain suspended until May 3.
The extension gives the government adequate preparation time to organise an orderly and safe restart of the economy as and when health conditions permit.
Industry too can devise its strategies for commencing operations accordingly during this extension period.
Delhi, Mumbai and other urban centres, which are hotspots, are unlikely to get any relief unless there’s a dramatic improvement.
The PM said the country has ample reserves of medicines, food and other essential goods.

Gradual resumption of economic activity will be based on the assessment by local administrations.
The key economic ministries are in favour of opening up agriculture and sectors that employ large numbers of people.
Modi had amended the slogan ‘Jaan hai toh jahan hai’ to ‘Jaan bhi aur jahan bhi’.
Economic activity cannot remain stalled forever.
Denmark and Spain: have announced plans to lift lockdowns.

RBI is likely to raise its liquidity game to calm market anxiety and facilitate smooth government borrowing.
The central bank may have to raise the amount it lends through the Targeted Long Term Repo Operations (TLTRO), and step up bond purchases, including purchases of corporate bonds for the first time ever.
RBI may also raise the ceiling on central and state governments’ borrowing through the Ways and Means Advances, a short term borrowing programme.
RBI, which has been reluctant in following the sweeping actions of Federal Reserve, could use Sec 17 of the RBI Act to extend bond purchases to include corporate bonds with sufficient haircuts.
With inflows drying up for the investing community — mutual funds, foreign institutional investors, insurers – and risk averse high the government may find it difficult to stick to its borrowing plan.
1. Even if it does so, costs may surge.
Collapsing tax revenues and a surge in expenses to meet the Covid-19 related work could push the combined deficit of the central and state governments to as high as 9.8 percent of the Gross Domestic Product, from the budgeted 6.4 percent.

International Monetary Fund further slashed India’s growth estimate to 1.9% for FY21 from 5.8% projected in January.
3% contraction for 2020 global GDP.
IMF warned about worst recession since the Great Depression in 1930s.
India’s FY20 growth to touch 4.2%
India’s economic expansion will likely rebound to 7.4% in the next fiscal (FY22)
IMF Chief Economist ________: This crisis is like no other.
India and China would be the only two major economies likely to register growth, with all others contracting.
Investment bank Barclays trimmed its growth forecast for the country to 0% for calendar year 2020 from its earlier projection of 2.5%.
1. Barclays pegs the country’s economic loss due to the disruption in several manufacturing and service sectors at close to $234.4 billion, or 8.1% of GDP, in 2020, assuming that the country would remain under a partial lockdown at least until the end of May.
Rating agency ICRA, too, revised down its growth forecast for the country to anywhere between -1% to 1% in FY21.
The World Bank has slashed its FY21 India growth forecast to anywhere between 1.5% and 2.8%, the lowest in around three decades.

Package of proactive measures to boost credit availability for India’s micro, small and medium enterprises (MSMEs).
MSME sector accounts for about 40% of exports and almost a third of national output.
Estimated 6.3 crore MSME units employ 11 crore persons across the country.
Sector should be provided credit guarantees and interest subventions to survive the lockdown.
SIDBI has announced emergency loans at a concessional interest of 5%.
A far more comprehensive coverage is surely warranted.
It has also been reported that public sector banks are extending emergency lines of credit to MSME borrowers, of up to 10% of their working capital limits.
But much larger loans are required to tide over the present crisis in earnings capacity.
The Centre has, rightly, already permitted delayed GST payments until June 2020 and without levy of interest, late fees or penalties.
MSMEs employ a majority of our skilled workers and the current clampdown on economic activity must not precipitate a bigger catastrophe.

Minister of MSMEs ___________ has asked the industry to release payments due MSMEs in the country.
This will help bring liquidity.
The ministry has a definitive plan to clear all legitimate claims more or less within three months.
The MSME ministry is working to increase credit guarantees to the sector to Rs 5 lakh crore from the present level of about Rs 1lakh crore wherein 75% of the advances granted by financial institutions are covered by the government’s Credit Guarantee Scheme.

The government is keen on ecommerce companies tying up with kirana stores to maintain supply of essential goods and ensure that people do not step out of their houses to buy essentials during the extended nationwide lockdown.
While the ecommerce players were already sourcing from cash and carry companies, officials said collaboration with small retail stores is ideal in the current situation.
Moreover, the government will also review the definition of ‘essentials’ and widen it to include work-from-home essentials such as routers, chargers and even stationery, laptops and tablets as students across the country take online classes and need these to support their education.
Flipkart, India’s largest ecommerce company, said it is already in discussion with several kirana aggregators to start such pilots and scale them up for doorstep delivery in affected areas to help with the essential supplies.
“To support consumers’ with access to what they need with doorstep deliveries, we are constantly looking at new and innovative avenues for collaboration and ecosystem partnerships,” a Flipkart spokesperson said.
“As a company, which is already running a robust programme with kiranas, resellers and general trade stores, we support and welcome the government’s thought on this initiative.”