Covid-19 impact on GDP to be felt for years in advanced economies: Fitch

The effect of coronavirus will proceed for quite a long time as GDP levels in the biggest propelled economies stay around 3 to 4 percent underneath their pre-infection pattern way by the center of this decade, Fitch Ratings has said in another report.
"There will be enduring harm to gracefully side beneficial potential from the coronavirus stun as long haul joblessness rises, working hours fall, and speculation and capital gathering moderate," said Maxime Darmet, Director in Fitch's Economics group.
Immense vulnerabilities encompass the financial viewpoint in result of the huge stun in H1 2020. The way that the coronavirus flare-up will take is obscure.
"Rehashed rushes of new contaminations and recharged across the country lockdowns could see a drowsy recuperation while clinical forward leaps could bring about a fast standardization of financial movement," said Fitch in the report.
A sensible base-case working presumption with the end goal of financial investigation is that the wellbeing emergency slowly facilitates after some time, with recharged across the country lockdowns maintained a strategic distance from and infection regulation looked for through more focused on reactions.
Fitch said US profitable potential development has been changed to 1.4 percent from 1.9 percent, the UK to 0.9 percent from 1.6 percent and the eurozone (weighted normal of Germany, France, Italy and Spain) to 0.7 percent from 1.2 percent.
These corrections mostly mirror the desire for an ascent in long haul joblessness in outcome of the stun.

"The occupations stun is probably going to see numerous specialists - especially in the most unfavorably influenced and work escalated travel, the travel industry and recreation parts - battle to discover re-business rapidly, bringing about separation from the work advertise," said Fitch.

Tax-burden on India's GDP to rise further, hitting consumption and savings

The latest increase in indirect taxes on commodities like diesel, petrol and alcohol by the central and various state governments is likely to lead to a further rise in the tax burden on India's Gross Domestic Product (GDP). In FY19, indirect taxes (net of subsidies) accounted for nearly 10 per cent of GDP, up from 9.3 per cent a year ago and a low of 6.1 per cent in FY10. This, say economists, will negatively impact household disposable income and may hit consumer demand and savings and investments by the household.
According to the Organisation of Economic Co-operation and Development (OECD), disposable income is closest to the concept of income as generally understood in economics. It measures the income of households (wages and salaries, self-employed income, income from unincorporated enterprises, social benefits, etc.), after taking into account net interest and dividends received and the payment of taxes and social contributions.
"Disposable income is the portion of GDP that accrues to households that they consume, save or invest. If it grows slower than the overall GDP or declines, households will either cut back on consumption, or savings & investments, or both," says Devendra Pant, head economist India Ratings.
According to various estimates central government can earn up Rs 1.7 trillion in additional tax revenues from diesel and petrol in FY12 besides additional revenue mop-up by state governments.
Against this, India’s GDP is expected to either decline marginally or stay stagnant according to various estimates depending on the extent of the Covid-19 lockdown.
In the last five-years, indirect taxes such as excise, customs and Goods & Service tax net of subsidies has grown at a much faster pace than the growth the country's Gross Domestic Product (GDP). The trend is similar in case of direct taxes such as personal income tax and corporate income tax.

For example, in the last five-years net indirect tax grew at compounded annual growth rate (CAGR) of 16 per cent growing from Rs 8.7 trillion in FY4 to around Rs 19 trillion in FY19. Direct Taxes during the period grew at a CAGR of 13.1 per cent from Rs 6.5 trillion in FY14 to Rs 13.5 trillion in FY19 according to figures from Reserve Bank of India.

Govts tend to suppress data when it is on shaky grounds: Joseph Stiglitz

International News
Joseph Stiglitz, 76, gently placed his walking stick beside the sofa and a stack of papers on the table as he settled in to savour some South Indian breakfast. He was in the city to deliver a lecture organised by a university.
It has been almost three decades since India liberalised and integrated with the global economy. It was the seventh largest economy in the world by gross domestic product (GDP) in 2018. But this growth has slowed, and is expected to shrink further in 2019-20, according to multiple global institutions.
“The data that I have seen reinforces very strong concerns [about the economy],” Stiglitz told IndiaSpend in the course of an interview. “I do not know anybody who is not in the government who is not worried.” Governments tend to “suppress data when it is on shaky grounds”, he added.
While India has been able to benefit from globalisation, there is a view that is “not an uncommon view but an unpleasant one”, that in a regulated market like India foreign players “have a disadvantage because the insiders know how to play the game”.Stiglitz won the 2001 Nobel Prize in economics for his analyses of markets with asymmetric information. He was a member of the Council of Economic Advisers in the US from 1993-95, during the Bill Clinton administration, and its chairperson from 1995-97. Between 1997 and 2000, he served as chief economist and senior vice-president of the World Bank.

Stiglitz has authored multiple books on economics including People, Power, and Profits: Progressive Capitalism for an Age of Discontent; Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump; and The Price of Inequality: How Today's Divided Society Endangers Our Future. In 2011, he was among Time magazine’s 100 most influential people in the world. He is a professor in the department of economics at Columbia University and founder and president of the Initiative for Policy Dialogue, a think-tank on international development based at the university...READ MORE

ADB paints gloomy picture; cuts India FY20 GDP growth forecast to 6.5%

International News

The Asian Development Bank on Wednesday sharply cut India's growth forecast to 6.5 per cent for the current financial year, weighed down by the GDP growth rate dipping to a six-year low in the first quarter.
"India's growth forecast for financial year 2019 (FY20) is lowered to 6.5 per cent after growth slowed markedly to 5 per cent in the first quarter, April–June," said the Asian Development Outlook (ADO) 2019 Update.
In its supplement to the ADO in July, the Manila-headquartered multi-lateral funding agency cut the country's GDP growth estimate to 7 per cent for 2019-20 on the back of fiscal shortfall concerns.
Abrupt declines in manufacturing and investment reflect uncertainty ahead of general elections, subdued lending by banks and other financial institutions, stress in the rural economy, and a weakening external outlook, it said.
"India is expected to rebound to 7.2 per cent growth in the financial year 2020 (FY21) and join most other subregional countries in performing at or near their ADO 2019 growth forecasts for next year," the ADB Outlook said.
As per the latest ADO, South Asia's growth momentum has softened.

 For the region, the growth forecasts are lowered to 6.2 per cent for 2019 and 6.7 per cent for 2020, it said.

Cyclical or structural? Decoding the nature of India's economic slowdown

Current Affairs

India’s real or inflation-adjusted gross domestic product (GDP) grew at 5 per cent in the June 2019 quarter of financial year 2019-20 (Q1FY20), the slowest growth in six years (25 quarters). In nominal terms, the growth stood at 7.99 per cent, lowest since December 2002.
With this, fears of the slowdown being a more structural one than a cyclical one have surfaced.
What is a cyclical slowdown?
A cyclical slowdown is a period of lean economic activity that occurs at regular intervals. Such slowdowns last over the short-to-medium term, and are based on the changes in the business cycle.
Generally, interim fiscal and monetary measures, temporary recapitalisation of credit markets, and need-based regulatory changes are required to revive the economy.
What is a structural slowdown?
A structural slowdown, on the other hand, is a more deep-rooted phenomenon that occurs due to a one-off shift from an existing paradigm. The changes, which last over a long-term, are driven by disruptive technologies, changing demographics, and/or change in consumer behaviour.
Dissecting India’s slowdown

 A slowdown in consumption demand, decline in manufacturing, inability of the Insolvency and Bankruptcy Code (IBC) to resolve cases in a time-bound manner, and rising global trade tension...Read More

How fixing female malnutrition can boost India's economy by $15-46 billion

Company News

Afsana Bano is 25, or so her Aadhaar national identity card said. With glee, she confessed that she was born in 2001. That made her 18, her 5’7 frail figure and delicate bones cradling a three-day-old baby that weighed 2.6 kg instead of the ideal 3.3 kg at this stage.
Bano’s levity and ignorance is representative of a cycle that keeps millions of Indian mothers and children, particularly in the most populous, poorest states, undernourished and incapable of learning and earning enough, thus holding back Indian economic progress, according to several research studies.Bano was 18 when she married and was underweight when she conceived, weighing 51 kg in the eighth month of pregnancy, gaining no more than 200 gm by the ninth.
Studying till class 12, Bano had an above-average education in rural Sitapur, where no more than 16.4% of women have had 10 years of education, compared to 32.9% in UP and 35.7% nationwide. But she never got the attention or counselling that the government health system was supposed to give her.
This is particularly important in Sitapur, where 36% of married women are adolescents, according to the 2015-16 National Family Health Survey (NFHS)--or NFHS-4--data, compared to an average of 21% in Uttar Pradesh (UP), India’s most populous and third-poorest state, by per capita income, and 27% nationwide.

 With 4.4 million people, Sitapur is classified as one of 25 “high priority districts” across Uttar Pradesh and 184 across India identified for special attention to pare child marriage and adolescent pregnancies.But the programme to address early marriage and teenage pregnancy, the Rashtriya Kishor Swasthya Karyakram (RKSK), a five-year-old national youth health programme, was given 1% of National Health Mission (NHM) funding in Sitapur, falling over a year from 3% in 2016-17.

World Bank retains projections for India's economic growth at 7.5%

Current Affairs

After the weak gross domestic product (GDP) data, India has something to cheer about. The World Bank has retained projections for India’s economic growth at 7.5 per cent for the current fiscal year even as it cut global economic expansion by 0.3 percentage points.
In its Global Economic Prospects report, the World Bank, however, pegged the growth at the same pace of 7.5 per cent for the next two fiscal years.
For the current fiscal year, the growth is quite high, given the fact that India’s economy grew just 6.8 per cent in 2018-19, a five-year low. Also, the growth plunged to 5.8 per cent in the fourth quarter of the fiscal year, also a five-year bottom. Also, the International Monetary Fund (IMF) had earlier cut economic growth of India to 7.3 per cent from earlier projection of 7.5 per cent. The Asian Development Bank (ADB) pegged the growth at 7.2 per cent.
World Bank retains projections for India's economic growth at 7.5%
Without naming Pulwama terror attack and Balakot strike, the Bank made a reference to these incidents between India and Pakistan. “Skirmishes between India and Pakistan in February are a reminder that latent geopolitical tensions can flare up at any time," the Bank said. The Bank said investment rate in India was expected to grow at a slower pace in 2019 than in 2018. It, however, said investment growth was expected to remain robust as benefits of recent policy reforms further materialised.

 “Private consumption and investment will benefit from strengthening credit growth amid more accommodative monetary policy, with inflation having fallen below the Reserve Bank of India’s target," it said.

How will Indian economy do in 2019? 'Animal spirits' hint to a tame start

Economy & Policy

India’s economy started the New Year still hungover from the sluggish showing in end-2018, stoking expectations for more monetary stimulus from the central bank.
A set of indicators tracked by Bloomberg to measure “animal spirits” -- a term coined by British economist John Maynard Keynes to refer to investors’ confidence in taking action -- showed weaker indicators outnumber stronger ones 4-3 in January. A pullback in exports and business activity weighed on sentiment.

While India’s inflation-targeting central bank cut interest rates earlier this month to prop up economic growth, Governor Shaktikanta Das kept the door open for more when he noted that “growth impulses have weakened and there is a need to spur private investment and strengthen private consumption.”
While a rates review is scheduled for April, a pulse check for the economy is due later Thursday, when the government will release gross domestic product data for the quarter ended December. As of Wednesday, economists forecast expansion to have slowed to 6.8 percent from 7.1 percent in the previous quarter.

Here’s a breakdown of what the indicators suggest:

Business Activity

The seasonally adjusted Nikkei India Composite PMI Index was unchanged at 53.6 in January. While the manufacturing sector was in robust shape, the dominant services sector, which contributes more than 50 percent of GDP, showed signs of cooling.
A key factor that kept a check on services activity was a softer expansion in new work, with companies noting only a moderate increase in sales.

Exports

On a sequential basis, exports declined in January from a month ago. While shipments grew 3.7 percent on an annualized basis, economists doubt the pick up

 will be sustained as the global economy slows...Read More