Daily Financial News Analysis – 9th May’20

Table of Contents

Labour Laws

Welcome Changes To Labour Laws

We welcome the move by BJP states Uttar Pradesh and Madhya Pradesh — with Gujarat seeking to follow suit via an Ordinance — to temporarily suspend the operation of labour laws, to help production struggle its way out of the hole in which it finds itself in the wake of seven weeks of lockdown.
India had 45 labour laws at the level of the Centre and about 200 labour laws at the level of the states.
Till the Modi government decided to streamline the central laws into 4 codes on industrial relations, wages, social security and occupational safety.
The last three have been legislated into law, while the first one remains a work in progress.
The current move must be seen as an earnest governmental effort to revive the economy and breathe some life into the animal spirits that have gone into a swoon.
Labour is a concurrent subject, in which the Centre and the states can make laws.
Where there is any conflict between a central law and a state law on the same subject, the central law will prevail.
Madhya Pradesh has done well to let shops stay open from 6 am to 12 midnight.
Keeping shops open longer is the only way to prevent crowding of shoppers.

Fresh Air

Lockdown and a dramatic reduction in air pollution.
Air pollution in north India has dropped to a 20-year low.
Harvard University study establishes a correlation between long-term exposure to air pollution and Covid-19 mortality.
The study finds that people living in polluted cities are more likely to have compromised respiratory, cardiac and other systems — and, therefore, are more vulnerable to Covid-19.
Clean air and the right to breathe must be available to all citizens.
ECONOMIC REVIVAL PACKAGE can get India to this Green Frontier.
New investments could be directed towards renewable energy, with larger allocations and subsidies to initiatives like the National Solar Mission.
Large electric battery factories could be established to enable localised energy storage solutions.
Bailouts and incentives to the auto, aviation and construction sectors could encourage green transitions and clean air ambitions.
Global experience suggests that crisis create political opportunities for embracing change.
After the 2008 global financial crisis, China spent nearly a third of its $568 billion stimulus towards projects that addressed environmental goals.
China has since become a global leader in solar, wind and hydropower markets.
Warming climate may well be the single-biggest macro shock the world will have to face.
India is already the third-largest emitter of greenhouse gases (GHGs).
Our emissions will nearly double in the next decade or so.
Public and private funds need to be redirected to green investments.
The battle for clean air requires structural reforms across multiple sectors, institutions and processes.

Govt to Borrow ₹4.2 lakh cr More in FY21

The government has raised its gross market borrowing target for the current financial year to ₹12 lakh crore from ₹7.8 lakh crore estimated in the budget.
Combination of lower tax collections and the fiscal stimulus needed to support the economy.

Moody’s

Moody’s Investors Service had predicted 2.5% growth for India in FY21 in March.
May 2020: India’s economy will not grow in the current financial year.
FY22: bounce-back to 6.6% growth
It reaffirmed India’s Baa2 rating with a negative outlook, indicating a credit upgrade was unlikely in the near term, as it estimated a fiscal slippage of up to two percentage points to 5.5% of GDP against the budgeted 3.5%.

India Inc Panel

A panel led by Mahindra & Mahindra managing director Pawan K Goenka and comprising members from leading business groups, has begun identifying industries to propel India’s manufacturing in a post-pandemic world.
The committee is expected to draw up strategies to boost industrial growth in at least 12 sectors, including steel, agro-chemicals, food processing, aluminium, electronics and textiles.
The special panel, set up with support from DPIIT.
Government moves to put in place a single window for all business activity, in partnership with states.
The panel will look at industries that aid domestic growth with a focus on exports to achieve world dominance.
India’s eight infrastructure sectors contracted the steepest in nearly eight years in March after touching an 11-month high in February.
Independent economists expect industrial production for March to contract by 15-40%.
Various industry chambers will draw up strategies for at least three sectors each and submit the reports, especially as countries seek to replace China-made products with those from other sources.
The CII will submit a report on agrochemicals, steel, food processing and aluminium, while the Federation of Indian Chambers of Commerce and Industry would work on textiles, electronics and furniture.

Corporates Seek ₹15L Cr Stimulus

CII: immediate stimulus of around ₹15 lakh crore
This accounts to 7.5% of India’s GDP
By the time the third phase of the lockdown ends on May 17, the Indian industry would have lost two months of output.
With economic activities being restricted for over 50 days now, the negative impact on the economy is expected to be even more significant than what we had earlier anticipated.
To support the estimated 63 million MSMEs, the industry body has suggested a credit protection scheme for MSMEs, whereby 60-70% of the loan should be guaranteed by the government.