Today's top business news: Finance Minister announces stimulus for migrant workers, shares slide after initial stimulus fails to excite, fiscal deficit to swell to 7.9% in FY21, and more

An employee of a stock broking firm looking at a screen as Sensex goes down. File   | Photo Credit: Vivek Bendre

Investors weren't enthused this morning by the government's stimulus package with the benchmark indices down more than 2% at open.

Join us as we follow the top business news through the day.

4:30 PM

Finance Minister announces 2nd tranche of economic stimulus

Highlights from FM Nirmala Sitharaman's address to the media that is currently underway.

PTI reports: "Finance Minister Nirmala Sitharaman on Thursday said the second tranche of economic stimulus package will be for the benefit of migrant workers, street vendors and small farmers.

At a press conference, she said 3 crore marginal farmers have already availed Rs 4 lakh crore of loans on concessional rates.

Prime Minister Narendra Modi had on Tuesday announced a cumulative package of Rs 20 lakh crore (nearly 10 per cent of GDP) to provide relief to various segments of the economy. This included Rs 1.7 lakh crore package comprising of free foodgrains and cash to poor for three months announced in March, and Rs 5.6 lakh crore stimulus provided through various monetary policy measures by the Reserve Bank of India (RBI).

The remaining of the Rs 20 lakh crore package is being announced in tranches -- Sitharman had in the first tranche on Wednesday unveiled a Rs 5.94 lakh crore plan that mostly comprises off-budget items such as Rs 3 lakh crore of credit line to small businesses as support to shadow banks and electricity distributors.

Off-budget items do not result in any outgo from the government exchequer but these will aid in easing liquidity constrains for businesses once the lockdown is lifted."

4:10 PM

Organised private sector plans layoff, salary cut amid COVID-19 crisis

PTI reports: "The organised private sector in India is planning to have major job cuts/layoffs due to the coronavirus pandemic and lockdown that have significantly impacted the economic activities, says a report.

According to the latest results of MyHiringClub.com and Sarkari-Naukri.info Layoff Survey 2020, 68 per cent of the employers surveyed have either started the layoff process or are planning to.

The online survey covered 1,124 companies across 11 industry sectors in 25 major cities. The survey was conducted between May 1 to May 10, 2020.

Among the surveyed organizations, 73 per cent said they have plans to decrease the salary of employees, 57 per cent said this layoff is temporary, while 21 per cent said they are doing permanent layoffs for at least 2 years.

Interestingly, 32 per cent employers did not have any job cut/layoff plans.

The survey noted that the percentage of layoff is highest in Retail & FMCG sector at 49 per cent, followed by Hospitality / Aviation / Travel (48 per cent), Automobile / Manufacturing & Engineering (41 per cent), Real Estate (39 per cent), Power Sector (38 per cent)."

4:00 PM

Sensex plummets 886 points; Nifty cracks below 9,200

The benchmark stock indices fell sharply today as the government's stimulus package failed to impress investors.

PTI reports: "Equity benchmark Sensex plunged 886 points on Thursday, tracking heavy losses in index heavyweights Reliance Industries, HDFC twins, Infosys and ICICI Bank amid a selloff in global markets.

Further, market players were disappointed as the immediate spend out of the government’s Rs 20 lakh crore fiscal stimulus package was seen to be relatively small, raising doubts about the revival of growth any time soon, experts said.

After crashing over 955 points during the day, the 30-share index settled 885.72 points or 2.77 per cent lower at 31,122.89.

Similarly, the broader NSE Nifty tanked 240.80 points, or 2.57 per cent, to 9,142.75.

Tech Mahindra was the top laggard in the Sensex pack, cracking over 5 per cent, followed by Infosys, HDFC, IndusInd Bank, Reliance Industries and NTPC.

On the other hand, Hero MotoCorp, L&T, Maruti, UltraTech Cement and Sun Pharma led the gainers’ chart.

Indian market opened on a negative note following overnight negative close in US markets as the Fed warned that the coronavirus crisis raises longer-term growth concerns and could result in an extended period of low productivity growth and stagnant incomes, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi.

Further, investor reaction to the first set of measures in the relief package announcement by Finance Minister Nirmala Sitharaman was mixed and traders await follow up announcements, he noted."

3:30 PM

Fiscal deficit to balloon to 7.9% in FY21

The Centre's plan to spend big is set to cause some huge fiscal slippage.

PTI reports: "With the government’s Rs 20 lakh crore stimulus package, the country’s fiscal deficit is likely to be more than double to 7.9 per cent in the current financial year, according to an SBI research report.

The report had earlier estimated the fiscal deficit to be 3.5 per cent of GDP this fiscal.

The government has announced a cumulative package of Rs 20 lakh crore, which is nearly 10 per cent of GDP to provide relief to various segments of the coronavirus-hit economy.

“After taking into account cash outflow of these measures as well as the previous and the recent excise duty hike and DA freeze (amounting to around 0.8 per cent of GDP), we now revise our baseline fiscal deficit (excluding extra budgetary resources (EBR)) to 7.9 per cent of the revised GDP in FY21 from 3.5 per cent earlier, owing to lower revenues and higher expenditure against the backdrop of COVID-19 pandemic,” the SBI’s research report Ecowrap. said.

Baseline fiscal deficit based on CSO’s earlier estimates of GDP is around 7.1 per cent of GDP, it added.

“We estimate a 4.5 per cent direct impact on fiscal deficit purely because of revenue shortfall / automatic fiscal stabilizer and a 0.9 per cent indirect effect because of GDP change,” the report said.

The government Rs 20 lakh crore package includes Rs 1.7 lakh crore of fiscal stimulus announced in the first phase, Rs 5.6 lakh crore stimulus provided through various monetary policy measures and Rs 5.94 lakh crore through the second phase, implying Rs 6.70 lakh crore package is still to be announced.

“The cumulative actual fiscal impact is only around Rs 1.14 lakh crores or 0.6 per cent of GDP,” the report said."

 

3:00 PM

Rupee settles 10 paise lower at 75.56 against US dollar

The negative sentiment in domestic equities weighed on the rupee today.

PTI reports: "The rupee slipped 10 paise to close at 75.56 (provisional) against the US dollar on Thursday, tracking weak domestic equities.

Forex traders said market participants were concerned about the fiscal deficit concerns over the Rs 20-lakh-crore economic stimulus package as there is still no clarity on how the package would be financed.

Moreover, investors are concerned over foreign fund outflows and the impact of coronavirus cases on the economy.

The local unit opened weak at 75.57, and finally settled at 75.56 against the US dollar, down 10 paise over its previous close.

It had settled at 75.46 against the US dollar on Wednesday.

Domestic bourses were trading on a negative note with the benchmark Sensex falling 898.94 points to 31,109.67 and the broader Nifty down 228.15 points at 9,155.40.

Foreign institutional investors were net sellers in the capital market, as they sold equity shares worth Rs 283.43 crore on Wednesday, according to provisional exchange data."

2:30 PM

Australia unemployment rate at 5-year high

Australian jobs plunged by the most on record in April as employers laid off hundreds of thousands of staff in response to the economy-wide shutdowns to curb the spread of the coronavirus.

Thursday's data from the Australian Bureau of Statistics (ABS) showed employment in April decreased 594,300, the largest fall on record.

The unemployment rate shot up to 6.2%, the highest since September 2015, from 5.2% in March but lower than the 8.3% forecast by economists in a Reuters poll.

The main reason unemployment did not fall as much as expected was the significant decline in the number of people looking for work, which meant fewer people than expected were counted among the unemployed.

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2:00 PM

IEA still sees record 2020 oil demand fall but easing lockdowns helping

The record cut in production, it seems, may not enough to prop up oil price amid dropping demand.

Reuters reports: "Oil demand is still set for a record fall in 2020, the International Energy Agency (IEA) said on Thursday, but it trimmed its forecast for the drop citing easing lockdown measures.

Demand is expected to fall by 8.6 million barrels per day (bpd), the IEA said in its monthly report, trimming its estimate by 690,000 bpd.

Around 2.8 billion people will be living under confinement measures aimed at containing the coronavirus at the end of May, down from 4 billion in April, the Paris-based IEA said.

In trimming its forecast it also cited stronger-than-expected mobility in some European countries and the United States as well as higher Chinese demand as it recovers from the virus outbreak.

“Economic activity is beginning a gradual-but-fragile recovery. However, major uncertainties remain. The biggest is whether governments can ease the lockdown measures without sparking a resurgence of COVID-19 outbreaks,” it said."

 

1:40 PM

Govt releases truncated April WPI inflation data; reports 10.12% deflation in fuel, power basket

The government on Thursday released truncated data for April wholesale price-based inflation saying there was limited transaction of products in the market due to the outbreak of COVID-19.

As per the data released by the Commerce and Industry Ministry, wholesale price index (WPI) deflation in primary articles was 0.79% in April, as against an inflation of 3.72% in March.

The fuel and power basket saw a deflation of 10.12% in April, against 1.76% deflation in the previous month.

“In view of the limited transactions of products in the wholesale market in April 2020 due to the spread of COVID-19, it has been decided to release the price movement of selected sub-groups/groups of WPI, following the principles of adequacy,” an official statement said.

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1:00 PM

1st instalment of stimulus puts almost no financial burden on exchequer

Here's an observation that has been made by a number of analysts.

IANS reports: "The first instalment of stimulus package announced by government on Wednesday will just put a burden of Rs 2,500 crore on the exchequer as all other measures involve bank loans and guarantees have almost no of negligible fiscal impact, an expert analysis on the stimulus measures has said.

So, besides paying the provident fund on behalf of both employees and employer to 3.67 lakh establishments and for 72.22 lakh employees for another three months involving Rs 2,500 crore expenditure, other measures do not involve any financial outgo for the government.

Government on Wednesday came out with 15 new and some enhanced measures to revive businesses, and support workers via fiscal incentives and regulatory easing under the mega stimulus package —— Self—Reliant India Movement involving an amount of Rs 20 lakh crore.

According to the analysis done by chartered accountant Mihir Modi, the measures in the economic package such as collateral free loan, subordinated debt , fund of funds for msme, all involve support to be provided by banks and other institutions."

 

12:30 PM

US Fed Chair warns of prolonged recession

It looks like US Federal Reserve Chairman Jerome Powell isn't too optimistic about a V-shaped recovery.

IANS reports: "US Federal Reserve Chairman Jerome Powell said the ongoing COVID-19 pandemic raises “long-term concerns”, warning that a prolonged recession and weak recovery could lead to an extended period of low productivity growth and stagnant incomes.

“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” Powell said during a webcast by Washington-based think tank Peterson Institute for International Economics (PIIE) on Wednesday.

The central bank chief said while the economic response has been “both timely and appropriately large”, it may not be the final chapter, given that the path ahead is both “highly uncertain” and subject to “significant downside risks”, reports Xinhua news agency

Powell noted the record shows that deeper and longer recessions can leave behind “lasting damage” to the productive capacity of the economy.

“Avoidable household and business insolvencies can weigh on growth for years to come,” the Fed Chairman said.

“Long stretches of unemployment can damage or end workers’ careers as their skills lose value and professional networks dry up, and leave families in greater debt.

“The loss of thousands of small- and medium-sized businesses across the country would destroy the life’s work and family legacy of many business and community leaders and limit the strength of the recovery when it comes.

“A prolonged recession and weak recovery could also discourage business investment and expansion, further limiting the resurgence of jobs as well as the growth of capital stock and the pace of technological advancement,” he said.

Noting that the result could be an extended period of low productivity growth and stagnant incomes, the Fed chairman said more policy measures might be needed to support the recovery and avoid prolonged recession."

12:00 PM

Gold eases after Powell shuns chances of negative U.S. rates

A drop in inflation fears has led to some easing in the price of gold today.

Reuters reports: "Gold eased on Thursday as U.S. Federal Reserve Chairman Jerome Powell downplayed the possibility of negative interest rates, but his warning of an extended period of weak economic growth capped the metal's losses.

Spot gold was down 0.2% to $1,712.58 per ounce by 0336 GMT, having jumped 0.8% in the previous session on Powell's dour view on the recovery of an economy battered by the coronavirus pandemic. U.S. gold futures rose 0.3% to $1,721.60.

“Powell's comments that he is not keen on negative interest rates have put a damper on (gold's) rally,” said Avtar Sandu, a senior commodities manager at Phillip Futures. However, Sandu said the overall speech was bullish for gold, adding that: “Prices rallied after Powell said economies are not doing well because of the virus and you can expect further stimulus. He's expecting more from the fiscal side.”

On Wednesday, Powell vowed to use the central bank's power as needed, and called for additional fiscal spending to help the virus-hit economy. All eyes are now on the weekly U.S. jobless claims data due at 1230 GMT for more clues about the economic outlook.

Central banks and governments around the globe have unleashed unprecedented fiscal and monetary support to shield their economies from the pandemic. Gold tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement."

 

11:30 AM

Rupee falls 13 paise to 75.59 against U.S. dollar in early trade

The rupee depreciated 13 paise to 75.59 against the U.S. dollar in opening trade on Thursday amid strengthening American currency overseas and negative opening of domestic equities.

Forex traders said the local unit opened weak against the greenback tracking losses in some of the major Asian currencies and gains in the dollar.

Moreover, market participants are concerned about the fiscal deficit concerns of the ₹20-lakh-crore economic stimulus package as there is still no clarity on how the package would be financed.

The local unit opened at 75.57, then lost further ground and fell to 75.59 against the dollar, down 13 paise over its previous close.

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11:00 AM

Saudi Arabia cuts oil output to 18-year low

 

10:50 AM

Lack of medical investment, healthcare infra big challenges for India’s COVID-19 fight: Fitch

Here's a quick summary of the challenges that India with its poor medical infrastructure faces in its fight against the coronavirus.

PTI reports: "Despite additional funding, the continued lack of medical investment and healthcare infrastructure will present challenges to mounting an effective response in India against COVID-19 pandemic, Fitch Solutions has said.

“The continued lack of medical funding and healthcare infrastructure inform our view for the potential epidemic to be worse in India if it is not adequately contained,” Fitch Solutions Country Risk and Industry Research (a unit of Fitch Group) said in its outlook for India’s pharmaceutical market.

With 8.5 hospital beds per 10,000 citizens and eight physicians per 10,000, the country’s healthcare sector is not equipped for such a crisis.

Moreover, the significant inefficiency, dysfunctioning and acute shortage of the healthcare delivery systems in the public sector do not match up with the growing needs of the population.

In addition, more than 80 per cent of the population still does not have any significant health insurance coverage, and approximately 68 per cent of the Indians have limited or no access to essential medicines.

Furthermore, over the last two decades, the availability of free medicines in public healthcare facilities has declined from 31.2 per cent to 8.9 per cent for inpatient care, and from 17.8 per cent to 5.9 per cent for outpatient care, the rating agency said citing a Public Health Foundation of India study."

10:20 AM

Full guarantee may push banks to lend

Risk-averse banks may now have the appetite to resume lending operations, with the government deciding to provide full guarantee for the loans extended by them to borrowers to kick start the economy paralysed by the COVID-19 lockdown.

Finance Minister Nirmala Sitharaman announced a ₹3 lakh crore emergency working capital facility for businesses, including micro, small and medium enterprises, as part of the ₹20 lakh crore financial package announced by Prime Minister Narendra Modi on Tuesday.

This 100% credit guarantee will mean that banks do not have to make any provision for the loans, that is, they do not have to set aside capital in case the account turns non-performing.

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10:00 AM

Shares slide after initial stimulus fails to excite

Indian shares fell on Thursday after the government's stimulus package for small businesses battered by the coronavirus pandemic was poorly received by investors.

The NSE Nifty 50 index fell 1.45% to 9247.35 by 0400 GMT, while the S&P BSE Sensex was 1.51% lower at 31,522.01.

India's government said on Wednesday it would offer nearly $60 billion of loan guarantees for small businesses, shadow banks and power companies, as part of a 20-trillion-rupee ($266 billion) fiscal and monetary package.

Other Asian stock markets also fell as worries about a second wave of coronavirus infections and a dour warning from the head of the U.S. Federal Reserve dashed hopes for a quick recovery.

 

9:45 AM

India Inc. welcomes FM’s booster dose for industry

Industry captains have welcomed Finance Minister Nirmala Sitharaman’s announcements for the revival of various sectors, on Wednesday.

FICCI president Sangita Reddy said that the greatest takeaway from today’s announcement was the clear focus on getting liquidity flowing into the system. “Besides liquidity, we need to give equal focus on generating consumption demand and propping up investments. We hope that in the next set of announcements, these areas will be taken up in a comprehensive manner as well,” Dr. Reddy said.

TVS Group chairman Venu Srinivasan said the collateral free automatic loan of ₹3 lakh crore for businesses will definitely help the MSME sector, which is facing serious cash crunch. The Centre is listening to grievances of industry and addressing them one by one, he said.

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Printable version | Mar 3, 2021 12:16:06 PM | https://www.thehindu.com/business/businesslive-14-may-2020/article31579568.ece

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