Daily Financial News Analysis – 27th Mar’20

Table of Contents

Relief Package

Government announced a ₹1.7 lakh crore relief package
Pradhan Mantri Garib Kalyan Yojana
Aim: providing a safety net for those hit the hardest
₹1,000 ex-gratia payment to nearly 30 million poor senior citizens, widows and disabled
About 800 million people will get free cereals and cooking gas apart from cash through direct transfers for three months.
₹50 lakh insurance cover for frontline medical personnel
First installment of ₹2,000 under the Pradhan Mantri Kisan Yojana will be frontloaded to reach 87 million farmers in April
“We will think about the others… will gradually address if there’s more to attend to,” FinMin said, when asked about a stimulus plan for companies, many of which have had to cease production, cut salaries or lay off employees because of the economic pain.
“It’s a very well-defined package, reinforcing government’s intent that no one should be deprived of basic facilities in today’s stressed times,” said State Bank of India chairman Rajnish Kumar.
Under the package, the government will provide 5 kg of wheat or rice and 1 kg of pulses free every month for the next three months.
Besides, 204 million women Jan Dhan account holders will get Rs 500 per month for the next three months.
MGNREGA wages will rise to Rs 202 a day from Rs 182 to benefit 136.2 million families.
These timely measures… will go a long way in providing support to farmers, daily wage earners, SHG (self-help group) women and poor senior citizens during such an unprecedented situation.

ORGANISED SECTOR

Government will pay the entire provident fund contribution of those who earn less than Rs 15,000 per month in companies having less than 100 workers as they are at risk of losing their jobs.
That amounts to 24% of basic pay–12% from the employee and 12% from the employer. This will be paid by the government for three months.
“Other segments of society, who are also looking forward to measures such as EMI waivers, as also extension of loan scheme tenures among others, economic package shall be on wait and watch mode,” said Niranjan Hiranandani, president of Assocham.

INDUSTRY DEMAND

India Inc sought help for distressed businesses across sectors such as tourism, hospitality, automobiles and aviation, besides micro, small and medium enterprises (MSMEs), where cash flows are down to a trickle amid mandatory adherence to tax and statutory payments.

Farmers

Farmers across the country are in panic because ripening fruit and vegetables will rot
- mandi operations have almost stopped
- abour cannot reach farms and orchards
- transport bottlenecks
Many private dairies have halved the price they pay farmers.
Tomato growers in Maharashtra are not finding buyers for ₹2/kg or less.
Farmer leaders said the situation is worse than demonetisation, which only delayed payments and did not damage the crop.
Losses will mount because it is harvest time for grapes, watermelons, bananas, muskmelon, chana, cotton, chillies, turmeric, jeera, coriander, onion and potato.
Grape growers said the industry faces losses of Rs 1,000 crore as the harvest will continue for a few weeks and the main buyers are in big buyers far away.
Many in Punjab say that green peas are ready to be harvested
Wheat farmers are also worried about the harvest that begins in April
Apart from it being the harvest time, the weather has also been bad.
“The Centre is again and again saying that essential services will be provided. However states are not allowing farmers to harvest, go to market yards and preventing buyers to buy,” said P Chengal Reddy, chief adviser to Consortium of Indian Farmers’ Associations.
Truckers said they are themselves facing a humanitarian crisis as lakhs of drivers are stranded across the country without access to food or money.

Venki Ramakrishnan on COVID-19

Nobel Prize in chemistry in 2009 & current president of Britain’s Royal Society
I am not an immunologist or an infectious disease expert, but most experts, including people I have talked to, seem to be unanimous about the importance of extensive testing to tackle the Covid-19 pandemic.
This is cheaper than having to treat serious infections.
India has a biotech industry that could rise to the occasion and produce cheap kits in large numbers, and the government could be a guaranteed customer.
There are two tests.
1. To determine whether you currently are infected with coronavirus. It tests for the presence of virus in your blood.
2. A neutralising antibody test —to determine whether after being infected earlier, one has recovered or not.
This can be a big gamechanger because those who have had the infection, and are presumably immune to it — although this is not 100% certain — can be allowed to rejoin the workforce without any fear of spreading the virus.
To attack the coronavirus epidemic, you need both tests
G20
Prime Minister Narendra Modi: told G20 leaders that while the powerful economies account for 80% of the world’s GDP, “they have 90% of the global Covid-19 cases and 88% of the deaths caused by it”.
“Our economies may be strong, but clearly, our systems are fragile.”
The G20 emerged as the leading forum to mitigate the 2008 global financial crisis.
It has promoted financial stability and growth.
However, in the process, we have allowed a purely economic agenda to define globalisation.
The G20 states decided to inject over $5 trillion into the global economy as part of targeted fiscal policy, economic measures and guarantee schemes to counteract the social, economic and financial impacts of the Covid-19 pandemic.
It was decided that the leaders will meet yet again ahead of G20 annual summit in Riyadh in November.
The G20 leaders also decided to ask finance ministers and central bank governors to coordinate on a regular basis to develop a G20 action plan in response to Covid-19 outbreak and work closely with international organisations to swiftly deliver the appropriate international financial assistance.

Reverse Repo Auction

India’s central bank stepped up its liquidity management efforts with a record ₹3.5 lakh crore reverse repo exercise scheduled for Friday, aiming to correct the anomalies between two overnight interest rates.
The Reserve Bank of India (RBI) will conduct a variable reverse repo auction where banks can park their excess cash in the system that is sloshing about with ₹2.60 lakh crore of liquidity.
The tenor of these auctions will be 13 days. So, banks will earn interest on parked money for the period.
Through various repo measures, the central bank proposed to inject up to ₹3.80 lakh crore into the system.