Daily Financial News Analysis – 18th May’20

Table of Contents

LOCKDOWN 4.0

Centre extended Lockdown for 2 more weeks till 31|May|2020.
Centre has significantly eased restrictions outside containment zones.
It has left it for states to demarcate containment zones based on guidelines issued by the health ministry.
Intent is to open up economic activities.
In containment zones the Centre has stated that there will be “intensive contact tracing” with “house-to-house surveillance”.

Air travel and metro services remain prohibited as most states opposed their resumption.
Educational institutions, religious places, hotels, restaurants, cinema halls and shopping malls will remain closed.
The states and UTs, based on their assessments of the situation, may prohibit certain other activities in various zones, or impose such restrictions as deemed necessary.
The new guidelines also make it clear that no state can stop doctors, paramedics and nursing staff from crossing the border.

Ecommerce firms such as Flipkart, Amazon and Snapdeal, as well as specialised etailers including Lenskart, Nykaa and Firstcry, are expected to resume full-fledged operations from Monday after the Centre removed restrictions on online retail as part of its Lockdown 4.0 plan.
In red zones, however, they were permitted to sell only essential items such as food and groceries.
Cab-hailing services Uber and Ola are also not in the current list of prohibited activities.

Finance minister Nirmala Sitharaman said the government will amend the Insolvency and Bankruptcy Code (IBC) to exclude debt taken during the Covid-19 outbreak and suspend any fresh resolution filings for up to one year.
The government will provide an additional ₹40,000 crore allocation for the MGNREGA for FY21.
Allow states to borrow up to 5% of GSDP from 3% now.
Privatise public sector enterprises (PSEs) in non-strategic sectors under a new policy for such units.

Sitharaman: In order to prove the resolve of Atmanirbhar Bharat (self-reliant India), land, labour, liquidity and laws have all been emphasised in (the) package.
Industry said the package was progressive and will boost the rural economy and create jobs besides boosting healthcare facilities across the country.
The quantum jump in MGNREGA will add to relief for workers and also sustain demand for the economy and is a very positive step in the current situation.

Grassroots investment will be stepped up through the establishment of health and wellness centres, the minister said.
All districts will have infectious disease hospitals.
Public health diagnostic and testing laboratories will be set up at all block levels.
The government is introducing a technology driven education strategy by launching PM eVidya for enabling multi-mode, online education.
This will include ‘one nation, one digital platform’ under the Diksha program for e-education and dedicated TV channels will be introduced for each class from 1 to 12.

India’s largest consumer-facing companies including ITC, Parle Products, Amul, Dabur, Bisleri, Godrej, Marico and Voltas have begun pushing ‘vocal for local’ themes across all advertising and marketing campaigns and last-mile sales pitches.
This follows Prime Minister Narendra Modi’s exhortation to this effect in his address to the nation on May 12.
Made in India will be a key factor likely to influence purchase decision and the vocal for local campaign has the potential of harnessing India’s traditional knowledge like ayurveda.
PM: “local is not merely a need but a responsibility.”
Cigarettes-to-consumer goods maker ITC, which makes Aashirvaad atta, Sunfeast biscuits and Vivel soap and is aiming to achieve ₹1 lakh crore in sales from its non-cigarette consumer businesses, said it will continue to strengthen its Make in India pitch.
Global companies headquartered in the US, Europe and China have a large footprint in India with heavy investments in manufacturing and raw material sourcing across all sectors, from consumer goods to appliances to apparel.
Market share is evenly split between these and domestic brands.
India’s largest diary brand Amul said it will increase its emphasis on the theme, something it has been doing for three decades.

The Centre increased the borrowing limit of states to 5% of gross state domestic product (GSDP) in 2020-21 from 3%, a move that will make an additional ₹4.28 lakh crore available to them.
However, incremental borrowing beyond 3.5% of GSDP will be linked to reforms undertaken by the states, including universalisation of ‘One Nation, One Ration card,’ ease of doing business and power distribution reforms, besides steps recommended by the 15th Finance Commission.
Nirmala Sitharaman: To promote state-level reforms, part of the borrowing will be linked to specific reforms like increasing job creation through investment and promoting urban development, health and sanitation.
Total borrowing by states can climb to over ₹10 lakh crore with net borrowing for 2020-21 at ₹6.41lakh crore, based on 3% of GSDP.
Of the additional borrowing, the first 0.5% will be unconditional, while the next 1% will be in four equal tranches, each linked to clearly specified and measurable reform action.
The remaining 0.5% will be given if milestones are achieved in at least three out of four reform areas.
The Centre has already hiked its planned borrowing for 2020-21 by 54%.