Daily Financial News Analysis – 7th May’20

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India Inc now wants India to fully get back to work
Central focus: economy and jobs
Stop alarmism about Covid-19
The country will have to live with and work around the spread of infection.
The virus is not going to disappear until a vaccine is found.
India’s mortality rate is lower.
Younger population means health risks can be handled better.
Economic growth in FY21 can be negative.
14 crore jobs may be lost already.
Lost economic output may range from Rs 8 lakh crore to Rs 15 lakh crore even before the lockdown extension to May 17.
Lives + Livelihood: figure out a way to co-exist
Lockdown is not the long-term answer to the health crisis.

Surat Diamond Trade

There are 5,000 units in Surat that are engaged in diamond polishing and cutting.
The diamond cutting and polishing hub of Surat will lose business to rivals China, Thailand and African countries.
Surat has to exit lockdown and get back to work.
Industry bodies have decided to stop importing rough diamonds for a month in view of business uncertainty.
Nearly 500,000-600,000 workers are leaving Surat for their home towns.

Services Activity

India’s services sector collapsed in April.
The IHS Markit India Services Business Activity Index plunged to 5.4 in April from 49.3 in March.
An unprecedented contraction since the survey started over 14 years ago.
The extreme slide in the headline index, which fell by over 40 points, shows us that the strict lockdown measures have led to the sector essentially grinding to a complete standstill,” said Joe Hayes, an economist at IHS Markit.
However, Hayes said the hope is that the economy has endured the worst and things will begin to improve as lockdown measures are gradually lifted.
The Purchasing Managers’ Index (PMI) survey, also known as Services PMI, was based responses from about 400 service sector companies collected from April 7 to 28.

Public Transport

The Indian government will soon issue guidelines to allow operation of public transport.
There is also a need to start airlines, railways, car and bus transport at some level, because people are still stuck here and there.
Gadkari also said that economic activity will have to be restarted to retain migrant labourers in the cities.
Members of the confederation made suggestions for improving the condition of public transport which include extending interest payment exemptions, restarting public transport, extending age life limit, deferring state taxes, extending MSME benefits, extending insurance policy validity.

Moratorium to NBFCs

The executive committee of the SBI board has finally approved extending the central bank moratorium to shadow lenders, which will have to individually apply to avail the benefit.
It is not being offered by default.
Those eligible for the benefit will have to show a cash shortage to prove that they will not use the relief to divert funds for other purposes.
SBI’s decision could open the door for other public sector banks to also extend similar benefits to these lenders.

Hire & Fire

Madhya Pradesh government allowed companies the flexibility to hire and fire workers.
Exempted firms from inspections by the labour department.
No need to maintain registers
More flexibility in extending the shift hours.
The state government is keen to provide concessions to the industries for next 1,000 days to help them get their business back on track.
Purpose: increasing investment and providing employment opportunities to the workers in today’s competitive era.
Under the amended Industrial Disputes Act 1947, new establishments in the state will be exempt from several provisions under the Industrial Disputes Act for 1,000 days.
The state government has also issued an ordinance to the Madhya Pradesh Labour Welfare Fund Act, 1982, exempting all newly established factories from filing annual returns and paying Rs 80 per labourer per year to the Madhya Pradesh Labour Welfare Board for the next 1,000 days.

Farm

Last quarter of 2019 was looking good for farmers.
Food prices were slowly creeping up.
1. Milk prices had risen 30%
2. Maize prices: Rs 2,400 a quintal in December
Initially, when lockdown was announced, farmers were left to fend for themselves.
Eggs had to be thrown away, chicken allowed to die, feed was reduced for cattle, perishables like oranges, grapes, mangoes and tomatoes were left to rot in the field.
When the lockdown eases, this price will dip further as fresh harvest arrives.
Farmers are now reluctant to invest and, hence, will plant a reduced acreage under perishables.
An expected good monsoon should significantly boost agriculture production this year.
Good production means rural prosperity.
Trust has been eroded, and migrants will not return easily to their urban places of work.
The cost of transplanting paddy in Punjab is expected to rise from Rs 3,000 per acre to over Rs 6,000, while daily wage rates in UP are falling from Rs 250 to Rs 150.
Remittances families received from migrants working in cities, or in West Asia, will drop significantly.
Millions of households across rural India will be at a loss for options.
GoI must provide the states with finances and the leeway to design state-specific programmes.
Additionally, if the states would follow the central government’s notifications in letter and spirit, things would normalise faster.
GoI is dithering to infuse cash into the economy and releasing foodgrain for those without documents.
The ministries genuinely believe they know better, and over the last two decades, innumerable programmes have been rolled out ‘to end the farm crisis’.
To ensure positive outcomes, stakeholders for whom the reforms are intended, should be part of the process to decide strategy and design.