Daily Financial News Analysis – 28th Sep’20

Table of Contents

GDP Contraction

In September quarter – India’s economy may have contracted at a slower pace.
Economists – pegging it a median 11.95%.
Compared to July quarter – shrank 23.9%
Recovery will be patchy and uncertain though the worst may be over.
Strong fiscal package to boost demand
Monetisation if the bond market could not support a borrowings-funded stimulus
High Covid-19 cases and localised lockdowns to contain the spread are dampening demand.
There is a reasonable bounce back with consumer durables, electricity, trade and transport, and some subsectors of manufacturing doing well
The country is on course for the first full-year contraction of GDP in over four decades in FY21 even though the economy may do better in the second half.
Agriculture had grown 3.4% in April-June against 39.3% and 50.3% contraction in manufacturing and construction, respectively.
High-frequency indicators such as the index of industrial production (IIP), fuel demand, mobility, and e-way bills improved on a monthly basis but are still far below last year’s levels.
Passenger vehicle sales returned to positive territory in August after nine straight months of decline, rising 14.16%.
Manufacturing and some part of services have normalised faster than others

Over a hundred of investment applications, primarily from Chinese origin investors looking to pump capital into the Indian startup ecosystem, are stuck in regulatory quagmire.
These proposals, ranging from early to growth-stage investments, are on hold or are being moved between various departments and ministries as the government continues to maintain strict curbs on capital inflow from Beijing and Hong Kong.
Stakeholders said they did not expect clearances anytime soon, till the geopolitical situation between the two countries improved.
There has been a steep increase in the number of follow-up questions and demand for additional information by the DPIIT.
The Reserve Bank of India is anyway empowered to ask these questions, now the government agency is becoming the frontal agency.
An approval can now take up to 3 months.
Investment applications are also being examined by the MHA.
“Unless (MHA clearance) is issued, approvals might not be given,” said a lawyer who estimates that clearances could take 4-5 months.
Chinese investors have poured in close to $6 billion into India’s digital ecosystem over the last two year.

Prime Minister Narendra Modi in his Mann Ki Baat
Farmers now “have the power and freedom to sell their produce anywhere and to anyone”.
Modi cited the example of a farmer from Haryana who was selling fruit and vegetables outside the mandi after they were excluded from the APMC Act.
The farmer had formed a “Farmer Producer’s Organisation with fellow farmers to earn ₹2.5-3 lakh per acre annually by cultivating sweet corn and baby corn and supplying them directly to Azadpur Mandi in Delhi, big retail chains and five-star Hotels.
Whatever they are producing or cultivating in their fields…whatever they are growing, they now have the freedom to sell where they can get a higher price.
The interesting fact is that due to the absence of middlemen, not only the farmer benefitted but also the consumer.
He also spoke about one Ismail Bhai of Banaskantha in Gujarat who used “drip irrigation to cultivate potatoes of high quality.
Ismail Bhai directly sells these potatoes to large companies, middlemen are just out of the question. And the result is that he is earning handsome profits. He now has repaid all the debts of his father.”

The National Cooperative Development Corporation (NCDC) has sanctioned Rs 19,444 crore as the first instalment to Haryana, Telangana and Chhattisgarh for carrying out kharif paddy procurement operation at the minimum support price.
NCDC is the apex financing organization of Union Agriculture Ministry.
The timely step will help the state agencies start procurement operations immediately.
Chhattisgarh gets the highest amount to the tune of Rs 9,000 crore. Haryana has been sanctioned Rs 5,444 crore and Telangana Rs 5,500 crore.
The amount has been sanctioned to assist the States/State Marketing Federations in undertaking paddy procurement operations in a timely manner through their respective cooperative organisations.
This proactive step by the NCDC during the COVID pandemic will give the much needed financial support to farmers of these three state who account for nearly 75 per cent of production of paddy in the country.
NCDC Managing Director Sundeep Nayak said the company is ready to assist more States in carrying out MSP operations for giving fair value to farmers in the light of historic farm related legislations.