Today's top business news: FM announces 3rd tranche of economic stimulus, World Bank approves $1 billion loan to India, analysts unimpressed by fiscal stimulus, and more

Package deal: Nirmala Sitharaman with Anurag Thakur addressing a press meet on Thursday. Shiv Kumar Pushpakar

Package deal: Nirmala Sitharaman with Anurag Thakur addressing a press meet on Thursday. Shiv Kumar Pushpakar  

Updates from the world of economy, markets, and finance

Uncertainty over the easing of the lockdown and the effectiveness of the stimulus package announced by the government weighed on stocks this morning.

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

4:30 PM

US labor force participation plunges to lowest since 1973

4:10 PM

Sensex ends marginally lower; bank stocks tumble

The benchmark stock indices managed to trim losses after being down close to 1% in the morning.

PTI reports: "Equity benchmark Sensex ended marginally lower after a choppy session on Friday as investors weighed the fiscal impact of the government’s economic stimulus.

According to market experts, participants fear that the Rs 20 lakh crore package may not result in direct and immediate boost to demand, raising doubts over the country’s economic revival in the near term.

After slumping over 350 points during the day, the 30-share index pared most losses to settle 25.16 points or 0.08 per cent lower at 31,097.73.

Similarly, NSE Nifty slipped 5.90 points, or 0.06 per cent, to close at 9,136.85.

M&M was the top laggard in the Sensex pack, cracking over 4 per cent, followed by Axis Bank, IndusInd Bank, Hero MotoCorp, Sun Pharma and ICICI Bank.

On the other hand, Bharti Airtel, Asian Paints, Tata Steel, NTPC, HUL and Reliance ended with gains.

Besides uncertainty over the effectiveness of the fiscal stimulus package, the spike in COVID-19 cases in the country is weighing on investor sentiment, experts noted."

3:50 PM

World Bank approves USD 1 billion loan to support India’s fight against COVID-19

Some international help for the government which has been finding it hard to gather sufficient funds to deal with the crisis.

PTI reports: "The World Bank on Friday approved a USD 1 billion loan to support India’s efforts for providing social assistance to the poor and vulnerable households, severely impacted by the COVID-19 pandemic.

The “Accelerating India’s COVID-19 Social Protection Response Program” will support the government’s efforts towards a more consolidated delivery platform — accessible to both rural and urban populations across state boundaries.

This takes the total commitment from the World Bank towards emergency COVID-19 response in India to USD 2 billion.

A USD 1 billion support was announced last month towards immediate support to India’s health sector.

The multilateral lending agency is also in discussions with the government to provide assistance to the country’s micro, small and medium enterprises, said World Bank Country Director in India Junaid Ahmad in a webinar with media.

Of the USD 1 billion commitment, USD 550 million will be financed by a credit from the International Development Association (IDA) — the World Bank’s concessionary lending arm and USD 200 million will be a loan from the International Bank for Reconstruction and Development (IBRD), with a final maturity of 18.5 years including a grace period of five years.

The remaining USD 250 million will be made available after June 30, 2020.

The program will be implemented by the Union Ministry of Finance."

3:30 PM

Zomato to lay off 13% workforce

Online food-delivery platform Zomato on Friday said it will reduce its workforce by 13%, while also implementing a temporary pay cut of up to 50% for remaining employees as nationwide lockdown to prevent spread of COVID-19 severely affected its business.

In an email to employees, Zomato Founder & CEO Deepinder Goyal said that the workers affected by the layoffs will continue to get half of their salaries, in addition to health insurance and outplacement support, for the next six months or till they find another job, whichever is earlier.

The company is also looking at making “partial or full work from home” a permanent feature to reduce real estate costs.

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3:00 PM

Affordable housing to cement a place in realty sector

The announcements by Finance Minister Nirmala Sitharaman for providing rental housing facility for urban poor and migrant labourers as well as extending the credit linked subsidy scheme (CLSS) under PMAY by one more year will give impetus to affordable housing and kick-start consumption of construction materials, according to analysts and developers.

Ashok Mohanani, chairman, Ekta World and president (elect) NAREDCO, Maharashtra, said “The announcement whereby the Centre would be providing ₹11,000 crore to the States that will help provide basic necessities such as food, water and shelter will give a temporary relief to the migrant workers. This measure will stop 60 to 65% of reverse migration which, in turn, will revive the construction activities. The extension of CLSS with the infusion of ₹70,000 crore will help in boosting the housing sector.”

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2:30 PM

Most of the stimulus package done, nothing substantial: Analysts

Analysts don't seem too excited by the Centre's Rs 20 lakh crore stimulus package.

IANS reports: "Only about 1 per cent of GDP or Rs 1.9 lakh crore of relief measures remain to be announced by the Centre in the coming days as calculations show that most of the allocated amount which added up to 10 per cent of GDP has already been exhausted.

“We expect the government to announce the remaining Rs 1.9 trillion of measures (1 per cent of GDP) over the next few days,” Prachi Misha of Goldman Sachs wrote in a research.

Goldman Sachs noted that including the measures announced on Thusday, Rs 8.4 trillion worth of relief measures have been announced during the last two days.

Taking into account the Phase 1 stimulus package of Rs 1.7 trillion announced in March, as well as the measures taken by the RBI to infuse liquidity into the system between February and April, which based on calculations amount to Rs 8 trillion and are likely to be included in the Rs 20 trillion figure, we expect the government to announce the remaining Rs 1.9 trillion of measures (1 per cent of GDP) over the next few days, Goldman Sachs said.

Following up on Wednesday’s announcement of Rs 5.9 trillion relief measures, the Finance Minister on Thursday unveiled another round of details on the Rs 20 trillion fiscal package, amounting to a total of Rs 2.5 trillion or 1.2 per cent of GDP. The measures particularly focused on migrant workers, small farmers, street vendors, and small traders.

Brokerage firm, Jefferies said in a research that the fiscal package 2 has nothing substantial. The Rs 3.2 trillion package announcement on Thursday was unexciting. The details for Rs 16-18 trilion (8-9 per cent of GDP) are now known and the net hit to the central government fiscal is 1 per cent of GDP."

2:00 PM

With very limited fiscal space govt may have just Rs 20,000 crore for stimulus: Report

Some bad news for anyone who hoped that the government could loosen its purse strings to help revive the economy.

PTI reports: "There is very limited space for fiscal stimulus as the government’s revised market borrowing of Rs 12 lakh crore, is expected to be used largely for meeting revenue shortfall, India Ratings & Research said on Friday.

The government had budgeted Rs 7.8 lakh crore in gross market borrowing, in the current fiscal, but following COVID-19 disruptions, it had last week announced an additional borrowing of Rs 4.2 lakh crore, taking the total to Rs 12 lakh crore, primarily to meet the likely revenue shortfall.

According to India Ratings chief economist Devendra Kumar Pant, the enhanced gross borrowings of Rs 12 lakh crore will largely take care of the revenue shortfall, leaving little space for fiscal stimulus, “unless the Centre sharply cuts the budgeted capex and reprioritises expenditure“.

“This leaves very limited fiscal space for the government as the revenue shortfall accounts for as much as 95.1 per cent of the increased borrowings, leaving as little as Rs 20,000 crore for the government to provide fiscal stimulus,” India Ratings & Research said.

Due to the lockdown-induced weak economic activities and the resultant impact on non-tax revenue, he expects dividend and profit and other non-tax revenue to decline by Rs 1.48 lakh crore from the FY21 budget estimate.

“This means the government is staring at a revenue shortfall of Rs 4 lakh crore from the FY21 budget estimate,” Pants said, and warned that the government is unlikely to meet even the revised revenue estimate of FY20 due to the country-wide lockdown.

This is too small an amount to make any difference to the sagging economic activity and demand. Clearly, the challenge is huge with hardly any fiscal space, despite an increase of gross borrowing by Rs 4.2 lakh crore,” he said."

1:30 PM

Negative rates unlikely tool for central banks combating pandemic

A former Bank of Japan official explains why negative interest rates may not work when it comes to stimulating economies.

Reuters reports: "Adopting or deepening negative interest rates is an unlikely option for many central banks, including in Japan, particularly when they need the help of commercial banks to pump funds to firms hit by the coronavirus pandemic, former Bank of Japan policymaker Sayuri Shirai said.

The BOJ and the European Central Bank have negative interest rates in place to stimulate their economies, though the policy has been criticised as eroding financial institutions' profits and discouraging them from lending.

Markets have also recently priced in a small chance the U.S. Federal Reserve might resort to a negative rate policy, which its Chair Jerome Powell brushed off on Wednesday.

Shirai said it has become a “near-consensus” among global central banks that negative rates have huge drawbacks.

“It doesn't make sense to deepen negative interest rates and hurt banks, when you're actually trying to encourage them to lend more,” she told Reuters on Thursday.

“It's a tool that is very hard to use at a time like now. It runs counter to the BOJ's efforts to prod banks into boosting lending,” said Shirai, who retains close contact with major central bank policymakers."

 

1:00 PM

MFI industry hopes repayments to start from June

Some signs of economic normalcy as the nation-wide lockdown is eased gradually.

PTI reports: "The micro-finance institutions (MFIs), which have been hit severely in the wake of the coronavirus-triggered lockdown, are expecting that the repayments of loans given to the borrowers will actually start from June, an official of the industry body said on Friday.

Most employees of micro lenders have come back to their offices in green zones and have been able to establish contacts with their clients, either over phone or visiting them physically, Microfinance Institutions Network (MFIN) CEO Harsh Shrivastava said.

“No state is disallowing opening of the MFI offices in green zones. The MFI portfolio is spread across the country and a substantial portion of that is in the green zones,” Shrivastava told PTI.

Since May 4, the begining of the third phase of the lockdown, employees of micro lenders have joined their offices in green zones, though collections and disbursements have not been started, he said.

The outlook of the industry is good after the government had announced few measures to prop up the NBFC-MFI sector, he said.

“In the rural areas, the clients have incomes and businesses are taking place. But collections are not happening due to the moratorium on repayment, which will end on May 31, 2020,” he said.

However, he said emergency loans can be given to existing clients with good track record."

12:10 PM

COVID-19 expected to fuel used car sales

Physical distancing norms and the fear of catching COVID-19 infection in public transport is likely to give an impetus to personal mobility which was, of late, discouraged to curb pollution and save resources.

This transition is expected to benefit auto companies and used car dealers, who were impacted by the rise of taxi aggregators and metro rail across the country.

“The COVID-19 pandemic has brought about a significant change in the perspective regarding transportation usage in the minds of consumers. Due to the impact of COVID-19 and the implication of strict physical distancing norms, we anticipate that there will be a considerable decrease in the use of public transport and shared mobility,” said Vivek Srivatsa, head, Marketing, Passenger Vehicle Business Unit (PVBU), Tata Motors.

Read more
 

11:40 AM

Indian shares fall as relief measures fail to impress

Investors haven't been enthused by the first two tranches of the government's economic stimulus package.

Reuters reports: "Indian shares fell on Friday after details on the government's economic package failed to impress investors already worried about rising coronavirus cases and poor corporate earnings reports.

India has been unveiling a series of economic measures as part of a 20-trillion-rupee ($265 billion) fiscal and monetary package, but announcements over the past two days - including loan guarantees for small businesses and free food grains for workers - have fallen short of market expectations.

India's blue-chip NSE Nifty 50 index was set to extend Thursday's 2.6% loss and record another weekly drop as automotive stocks led declines in Mumbai.

Economists have also said the government's measures would have a limited impact on fiscal spending as large parts of funding for migrant workers, farmers and small businesses were through state-run banks and financial institutions.

“There is a feeling that these are more liquidity-boosting measures rather than a proper fiscal stimulus,” said Rusmik Oza, head of fundamental research at Kotak Securities in Mumbai. ”That link of spurring demand is missing.”

Thursday's announcement from the government also included new subsidised bank loans for millions of street vendors in the country, but some analysts said the scheme could have little success because of operational issues.

Still, markets are awaiting more announcements from the government, and Finance Minister Nirmala Sitharaman was set to address the media at 1600 local time (1030 GMT) later on Friday - her third press briefing in as many days."

 

11:20 AM

Rupee rises 6 paise to 75.50 against US dollar in early trade

The rupee has appreciated against the dollar this morning despite the weight of falling domestic stocks.

PTI reports: "The rupee appreciated marginally by 6 paise to 75.50 against the US dollar in early trade on Friday as investors await fresh cues from further announcements on the fiscal stimulus package.

Forex traders said the local currency was trading in a narrow range as appreciation in the unit will be capped amid rising risk-aversion in the broader financial markets and stronger US dollar.

At the interbank foreign exchange, the rupee opened at 75.51, then touched 75.50, registering a rise of 6 paise over its previous close.

On Thursday, the rupee had settled 10 paise lower at 75.56 against the US dollar.

“Investors will look ahead to the press conference from Finance Minister Nirmala Sitharaman on the announcement of further details of economic stimulus package,” Reliance Securities said in a research note, adding that investors will also track the release of trade data by the government for April.

Domestic bourses were trading on a negative note with the benchmark Sensex falling 263.74 points at 30,859.15 and the broader Nifty slipping 57.45 points to 9,085.30.

Foreign institutional investors were net sellers in the capital market, as they sold equity shares worth Rs 2,152.52 crore on Thursday, according to provisional exchange data."

11:00 AM

Gap between high and low valuation stocks largest since tech bubble

 

10:45 AM

Uttar Pradesh to rank districts on ease of doing biz parameters

Uttar Pradesh is experimenting with inter-district competition to improve the state's competitiveness.

PTI reports: "In a bid to attract investments, create jobs and facilitate smooth resumption of businesses, the Uttar Pradesh government has accelerated the implementation of ease of doing business reforms at the district level.

In a government order issued on Thursday, all district magistrates (DMs) have been directed to ensure effective implementation of ease of doing business reforms in their respective districts.

All 75 districts will be ranked every month on the basis of three parameters -- time-bound disposal of applications received on the single window portal Nivesh Mitra for getting approvals or licences, ‘Satisfactory’ feedback of Nivesh Mitra users, and timely grievance redressal status of the district.

In a release issued here, Industrial Development Minister Satish Mahana said the government was confident that on the back of district-level ease of doing business ranking initiative, the state would see impressive entrepreneurs’ facilitation at the grass root level.

“As the State government is gearing up to transform the current challenges into opportunities of bringing in reforms for inclusive development, it is crucial that these reforms are implemented and visible on ground at all levels of governance, including districts,” he added. Infrastructure and Industrial Development Commissioner Alok Tandon said this step would encourage the spirit of business competitiveness amongst the districts, which will further act as a catalyst in improving the doing business ranking for the state."

 

10:20 AM

Most people in favour of easing lockdown: Survey

With the third phase of the nationwide lockdown slated to end on May 17, a survey has revealed that many are in favour of easing the restrictions in districts that do not have high cases of COVID-19.

Over 80% of the respondents were in favour of relaxing the lockdown norms in the over 115 red zone districts that do not have a high case load.

In the survey by online social community platform LocalCircles, 24% of respondents said that the lockdown should be significantly relaxed and all offices, markets, businesses should be allowed to operate with social distancing norms, while 33% respondents said that lockdown should be ‘only somewhat relaxed’ and only offices at 33% capacity and standalone shops should be permitted to open.

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10:05 AM

Sensex drops over 200 points in early trade; Nifty tests 9,100 level

The Indian benchmark stock indices have opened weak this morning despite the overnight rally in US stocks.

PTI reports: "Equity benchmark Sensex dropped over 200 points in opening session on Friday tracking losses in index heavyweights HDFC Bank, ICICI Bank and Reliance Industries amid weak domestic investor sentiment.

According to market experts, investors fear that Finance Minister Nirmala Sitharaman’s recent announcements on the Rs 20-lakh-crore economic package may not boost demand immediately, and hence economic revival would not take place any time soon.

After touching a low of 30,909.36, the 30-share index was trading 127.19 points or 0.41 per cent lower at 30,995.70.

Similarly, NSE Nifty slipped 34.45 points, or 0.38 per cent, to 9,108.30.

M&M was the top laggard in the Sensex pack, cracking over 3 per cent, followed by Maruti, HCL Tech, Hero MotoCorp, Axis Bank, ICICI Bank, ITC and HDFC Bank.

On the other hand, ONGC, Tata Steel, Bharti Airtel, Titan and HDFC were trading with gains.

In the previous session, the BSE barometer settled 885.72 points or 2.77 per cent lower at 31,122.89, while the broader Nifty tanked 240.80 points, or 2.57 per cent, to close at 9,142.75.

Foreign portfolio investors offloaded equities worth Rs 2,152.52 crore in the capital market on Thursday, provisional exchange data showed."

 

9:45 AM

FM’s 2-day stimulus measures to cause ‘actual fiscal impact’ of mere Rs 66,500 crore

Given that most of the Centre's stimulus involves fresh loans offered through banks, the actual fiscal cost may be very little.

PTI reports: "The actual hit to government finances from the measures announced by Finance Minister Nirmala Sitharaman in the last two days was pegged at Rs 66,500 crore or 0.34 per cent of the GDP by a British brokerage on Thursday.

Aggregating all the measures, which also include aspects like credit guarantees, Barclays said the government and the Reserve Bank of India (RBI) cumulatively have so far announced measures of over Rs 15 lakh crore, leaving Rs 4.25 lakh crore worth of announcements remaining to hit the Rs 20 lakh crore mark announced by Prime Minister Narendra Modi.

From an “actual fiscal impact” perspective, the moves announced on Thursday focussing on migrants, urban poor and farmers will cost only Rs 11,000 crore, the brokerage said, adding it has so far taken a hit of Rs 66,500 crore only.

“The actual fiscal impact of today’s steps will only be Rs 11,000 crore, which brings the total cost of additional incentives announced to Rs 66,500 crore (0.34 per cent of GDP), accounting for steps taken yesterday as well,” it said.

“This leaves the government with room for another Rs 1.24 lakh crore of incremental spending, on our estimates. We continue to believe the government may end up with a fiscal deficit of close to 6 per cent GDP during FY21,” its analysts said.

It can be noted that some analysts, including house economists at SBI, have been pegging the fiscal deficit to come in at a higher level of over 7.9 per cent as against the budget target of 3.5 per cent due to the massive spending that the government is undertaking.

From a monetary support perspective, the government and the RBI have made announcements of over Rs 15.75 lakh crore, leaving Rs 4.25 lakh crore more of announcements to be done to achieve the PM’s target, it said."

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Printable version | Jun 4, 2020 1:34:17 AM | https://www.thehindu.com/business/businesslive-15-may-2020/article31588355.ece

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