Daily Financial News Analysis – 27th Apr’20

Table of Contents

GST Relief Package

GoI is considering a GST Relief Package
6 month suspension of GST payments for the worst-hit sectors such as restaurants, aviation and hospitality as well as a lower rate for the real estate sector.
Aim: to ease the liquidity pressure on businesses
Exempting a sector from tax would mean breaking the credit chain, leading to further problems down the line.
Most service providers are facing delays in payments from clients but are saddled with GST liabilities.

Over the past few days, banks have been trying to assess the liquidity gap their MF clients could face this week amid fears of a surge in redemptions following Franklin Templeton’s decision to close six debt schemes.
The overdraft facilities are intra-day loan lines from banks that help MFs tide over temporary liquidity mismatches in the face of redemption pressure.
Larger the redemption a fund has to handle, higher the overdraft requirement in the absence of fresh inflows from investors.
Banks are reluctant to let intraday loans become overnight or short-term loans.

The Indian automobile industry is set to post almost zero sales in April.
Companies likely working with lean inventory as was the practice in the olden days.
Automakers’ troubles will weigh on the overall economy as well.

Prolonged lockdown + rain and hailstorm = heightened rural distress
Farm leaders say it can trigger agitations and suicides unless farmers get quick relief.
Farmers are chopping orchards, ploughing blooming fields of flowers and selling produce at throwaway prices.
For flower growers, demand has vanished as temples are shut and there are no weddings.
The absence of field-level assessment by insurance companies is making compensation difficult.
About 70% of the output, which is transported to other states, is stranded because of transportation hurdles and shortage of packaging material.
Farmers have a fixed periodicity of earning twice in a year — after selling the summer crop and the winter crop.
But a farmer spends every day.
The rotating credit system with local kirana stores helps him survive.
Daily wagers are going to moneylenders.

Large and small retail stores stayed shut in most parts of the country.
Some states refused to relax the shutdown and retailers said there was lack of clarity on what constituted ‘neighbourhood’ and ‘standalone’ stores, which are allowed to operate according to the ministry, creating confusion among local authorities.
States such as Maharashtra, Tamil Nadu, Andhra Pradesh and Telangana have clearly specified no shops or industrial activities will be allowed till the lockdown ends.

India has approached multilateral agencies including the International Monetary Fund and World Bank to ascertain the practices elsewhere in the world to prepare economic indicators such as industrial production, retail inflation and economic growth.
Experts said deficiencies in data collection could affect the accuracy and reliability of the indicators.
Data inadequacy has become a global phenomenon in the wake of Covid-19 and the Ministry of Statistics and Programme Implementation (MoSPI) is collaborating with global institutions on data collection practices and to learn from the experiences of other countries facing the same issues.
For CPI data, it is definitely going to be very challenging.
Almost 50% of CPI is from food items.
The CPI is based on the prices collected from 1,114 markets in 310 towns and 1,181 villages.
The NSO is collecting data through telephonic surveys wherever shops are open and has also asked its officers and enumerators about prices so as to come out with data on essential products.