Daily Financial News Analysis – 2nd May’20

Table of Contents

Travel and tourism

It is one of the world’s largest industry.
One in every 10 jobs (330 million) globally
Almost 10% of global GDP
UN World Tourism Organisation: tourism growth could be down by 20-30%, and loss to the industry could be $30-50 billion.
About 30 other activities and service providers closely associated with the travel and tourism economy are difficult to account for.
The ripple effects of tourism in shambles are deep and wide.
One can reasonably presume that return to normalcy will be slower for the travel and tourism sector than others.
A McKinsey report shows that airlines and hotels together (making only a fragment of the tourism economy) are likely to suffer the highest compression among sectors — of 70-75%.
Globally, including in India, almost 80% of the travel and tourism industry is composed of small and medium enterprises (SMEs).
In most countries, ‘payroll support’ and ‘liquidity and credit guarantee’ are priority considerations in this sector.
Providing industry status may ease many problems of liquidity and credit.
The industry should also look at cost-cutting innovations and use IT for increased efficiency.
Fortunately, with international oil prices having fallen, this is an opportune time for the cost of aviation fuel to be reviewed and, in conjunction, ground-handling costs at airports.
Time to prepare for domestic tourism.
Before Covid-19, India had close to 1,500 million visits by domestic tourists.
A tourism recovery plan must start with investments to create world-class infrastructure in a ‘Swadesh Darshan’ scheme.
Most tourism activities are within the purview of state governments.
So, each state should prepare a state specific revival plan in association with the private sector in conformity with the national plan.
This is also a time to bring the concept of ‘responsible tourism’ to the forefront of tourism revival plans.
The flagship PRASAD (Pilgrimage Rejuvenation and Spiritual Augmentation Drive) scheme for pilgrim tourism can lead the way.
The ‘Buddhist circuit’, for instance, should be spruced up imaginatively, so that when the time is right, regional tourists can be attracted.
That, in turn, will be a stepping stone for large scale international tourist arrivals.

Post Lockdown Strategy

Prime Minister Narendra Modi reviewed the state of affairs in the civil aviation, power and labour sectors and strategies to improve their efficiencies.
PM was keen for all such sectors to be revved up for action as soon as the lockdown is relaxed.
Home minister Amit Shah, finance minister Nirmala Sitharaman, cabinet secretary Rajiv Gauba and senior officials from the Prime Minister’s Office (PMO) attended the meetings.
Ministers of civil aviation, power and labour attended the meetings over their respective sectors.
The daylong review meetings, which started on Thursday, are expected to continue over the weekend.
Modi had reviewed the sectors of defence & aerospace and coal & mining, and investment areas on Thursday.
He had earlier this month asked each ministry to draw up a business continuity plan, identify ten priority areas for action and implement all the pending reforms in the sectors that come under them.
On Friday, the PM discussed strategies that could help in making the civil aviation sector more efficient.
“It was decided that the Indian air space should be effectively used in such a manner that the flying time is reduced, benefiting the travelling public and also helping the airlines to save costs in close cooperation with the Department of Military Affairs,” the PMO said in a statement.
This could mean commercial airlines could fly in zones which are reserved for military use.
The PM has also directed that to generate more revenue and bring in more efficiency at airports, the Ministry of Civil Aviation expedite the process of handing over of six more airports on a public-private partnership basis, by commencing the tender process within three months, the PMO said.
Modi took stock of the impact of Covid-19 as power demand had plummeted during the lockdown.
The PM underlined the significance of the sector in propelling the economy, and the need for effective enforcement of contracts for attracting private investments was discussed.
“He emphasised the importance of consumer centricity and directed to work towards the goal of supplying 24X7 quality and reliable power to all consumers.”
Various long-term reforms for enhancing sustainability, resilience and efficiency of the sector, ease of doing business, propagation of renewables, flexibility in supply of coal, role of public-private partnerships, and boosting investment sector were also discussed at the meeting, the PMO statement said.
Other topics included measures for improving viability of distribution companies, including tariff rationalisation and timely release of subsidies along with improved governance.

RBI-Bankers Meeting

The Reserve Bank of India (RBI) has called a meeting with the country’s top banks.
Aim: extending the benefits of payments moratorium to non-bank lenders
The move comes after an apex court direction to the regulator that the intended beneficiaries get their due.
Several lenders, including State Bank of India and Punjab National Bank, which were earlier not in favour of extending the three-month payment holiday to non-banking finance companies and microfinance firms, may now need to review their decision.

e-commerce

Restriction on ecommerce deliveries imposed by India
Amazon cited it as the reason for its business in the world’s fifth largest economy being the most impacted by the pandemic.
American giant recorded a sharp spike in its overall revenue for the first quarter of 2020.
The Indian government’s mandate that ecommerce companies only fulfil orders of essential goods such as groceries during the past five weeks has led to Amazon cutting back on a lot of its offerings in the country.

Meanwhile, on Friday, ministry of home affairs revised its guidelines and said ecommerce firms would be allowed to resume full operations in parts of the country designated as green (virus-free) and orange ( with low levels of infection) zones starting from May 4.
However, deliveries will continue to be limited only to essential items in red zones with high levels of infection, including the top metros — Mumbai, Delhi and Bengaluru.

Rural EMIs

About 20-25% of the farming community hasn’t opted for the moratorium on loan repayments announced by Reserve Bank of India, according to finance companies.
Cholamandalam, Mahindra Finance, HDFC Bank and L&T Finance said they were witnessing better collections at their rural branches than in urban centres.
A good harvest as well as the possibility of a faster economic recovery in rural India, much of which has remained free of Covid-19, are giving borrowers the confidence to repay.
In urban centres, however, a “sizeable chunk” of borrowers are using the moratorium to conserve cash amid uncertainties over salary cuts and job losses, said an executive.
Most of the farmers do not want to avail of the moratorium, as they prefer to clear their liabilities, have a clean record without debt.
The farming community takes loan primarily to buy tractors and pick-up vehicles.
Mahindra Finance has reached out to an estimated 15 lakh customers and 20% of them did not want to avail of the moratorium.
Many rural customers who typically made repayments physically are now opting for digital payments because of the lockdown and social distancing norms.

200 more mandis added to eNAM

The government has connected 200 new mandis across seven states to its national digital agricultural trading platform — eNAM — taking the total tally of eNAM enabled mandis to 785.
By the end of the month, 1,000 mandis would be connected with the platform, Agriculture Minister Narendra Singh Tomar said while launching the services on Friday.
“Farmers have been immensely benefitted from eNAM during lock down when physical mandis were not fully operational. We provided farmers a market where they traded their produce at competitive prices without visiting mandis.
eNAM will fulfill government’s objective of “one nation one market,” he said.
Launched in April 2016, eNAM started with just 21 mandis.
The number of registered farmers have risen to 1.66 crore while 1.28 lakh traders transact on this platform.
More than 1000 Farmer Producer Organisations (FPOs) have also been enrolled to this platform.
eNAM will fulfill government’s objective of “one nation one market”
Tomar also announced integration of e-NAM with the Unified Market Platform (UMP) of Karnataka’s Rashtriya e-Market Services (ReMS), an e-trading platform promoted by the Karnataka State Agriculture Marketing Board.