RBI likely to revise inflation outlook as it extends rate pause: Economists

 

India's national bank will probably raise its expansion standpoint this week to reflect costlier oil, however leave acquiring costs consistent and tap other strategy apparatuses it's utilized before to help an economy confronting new dangers to recuperation.
All financial analysts reviewed by Bloomberg expect the Reserve Bank of India's six-part money related strategy board of trustees to hold the benchmark repurchase rate at 4% Friday, while only three out of 27 surveyed as of Wednesday see a climb in the opposite repurchase rate.

That will move the concentration to any changes in language in the strategy explanation, as financial backers search for indications of normalizing money related settings.

This is what to look for in Governor Shaktikanta Das' discourse after the MPC meeting at 10 a.m. in Mumbai on Friday:

The critical important point from Das will be on how the RBI intends to help the public authority's 14.31 trillion rupee ($189 billion) obligation program, while holding the sovereign's acquiring costs under wraps when quicker worldwide approach standardization is pushing yields higher.

Keeping a top on costs is urgent for Prime Minister Narendra Modi's administration as it tries to support spending on framework, making position and expanding usefulness in the economy.

Assumptions are for the RBI to restore open-market activities or resort to Operation Twists, wherein it purchases longer securities and sells more limited dated notes, to supply support the market in the midst of record obligation. The two measures were utilized by the bank during the stature of the pandemic, in spite of the fact that merchants aren't expecting a declared buy plan.

Top headlines: Feb inflation rises to 6.07%; Chandra named AI chairman

 

Retail inflation inched up to 6.07% in February mainly due to an uptick in food prices, remaining above the tolerance limit of the central bank for a second month in a row, showed the government data released on Monday. The Consumer Price Index (CPI) based retail inflation was 5.03% in February 2021 and 6.01% in January this year. According to the data released by the National Statistical Office (NSO), the rate of price rise in the food basket was 5.89% in February, up from 5.43% in the preceding month. The Reserve Bank of India mainly factors in the CPI-based inflation while arriving at its bi-monthly monetary policy.

Inflation printed at 6.07% in February, slightly higher than our estimates. This print, although does not reflect the increase in commodity prices due to Russia-Ukraine crisis. We expect inflation to rise further above 6% in March. For FY23, if oil prices average at $110 pbl in Q1 and moderate thereafter, inflation could still average at 5.7% in the year, taking into account the direct and indirect impact. That said, we do not expect the RBI to change its stance or policy rate at its April meeting," said Sakshi Gupta, senior economist, HDFC Bank. Asia's third-largest economy expanded 5.4% in the October-December quarter, slower than the 6% predicted by economists in a separate Reuters poll. Focusing on growth, not inflation, the Reserve Bank of India has held its interest rates steady at record lows for nearly two years but is due to increase borrowing costs next quarter. ndustrial production expanded by 1.3% in January on an annual basis, mainly on account of improved performance of mining and manufacturing sectors, official data showed on Friday. The Index of Industrial Production (IIP) had contracted by 0.6% in January 2021.

India's GDP grows 5.4% in Q3, estimated to rise 8.9% in FY22

India's economy grew 5.4% year-on-year in the October-December quarter, slower than previous two quarters, government data on Monday showed, amid rising risks from higher prices of crude oil and commodities after Russia's invasion of Ukraine. The gross domestic product (GDP) expanded 20.1% in the April-June quarter and 8.4% in July-September, mostly because of weak performances in the same quarters in 2020 when the pandemic took hold. The National Statistical Office’s (NSO’s) second advance estimates for FY22 pegged the current fiscal year’s real gross domestic product (real GDP) growth at 8.9%, compared with 9.2% projected in the first advance estimates. "Real GDP or Gross Domestic Product (GDP) at Constant (2011-12) Prices in the year 2021-22 is estimated to attain a level of Rs 147.72 trillion, as against the First Revised Estimate of GDP for the year 2020-21 of Rs 135.58 trillion, released on 31.01.2022," said MoSPI.

MTaI seeks reduction in GST on medical devices, cold chain units

 

The Medical Technology Association of India (MTaI) has urged the government to reduce GST and customs duties on medical devices, cold chain units and spare parts used in the healthcare appliances in the upcoming Union Budget.

The organisation noted that the reduction of GST on medical devices and medical cold chain from 12 per cent to 5 per cent would lead to the expansion of the healthcare sector through reduced costs improving patient accessibility, MTaI said in a statement.

The organisation, which represents research-based medical technology companies, also sought streamlining of Customs Duty and GST on spare parts.

Currently, the custom duty and GST on spare parts of medical equipment are currently charged at a higher rate than the equipment itself, it added.

MTaI has also suggested amendment in the Health Cess ad valorem imposition by removing the word 'Ad-valorem' so that the cess is implemented on Basic Customs duty (BCD) rate only.

Read More on Budget 2021

As worldwide assets disregard India, rupee transforms into most noticeably terrible cash in Asia

 The cash declined 2.2% this quarter as worldwide assets pulled $4 billion of capital out of the nation's securities exchange, the most among provincial business sectors where information is accessible.

 

Finance News:

The Indian rupee is set to end a wild year as Asia's most exceedingly terrible performing cash with unfamiliar assets escaping the country's stocks.

The cash declined 2.2% this quarter as worldwide assets pulled $4 billion of capital out of the nation's financial exchange, the most among local business sectors where information is accessible.

Outsiders sold Indian stocks as Goldman Sachs Group Inc. what's more Nomura Holdings Inc. as of late brought down their standpoint for values, refering to elevated valuations, when worries about the omicron infection variation are irritating the worldwide business sectors. Record-high import/export imbalance and the national bank's arrangement uniqueness with the Federal Reserve have likewise encroached on the rupee's convey advance.

"The financial arrangement dissimilarity and extending current record hole have set devaluation in the rupee in the close to term," said B. Prasanna, head of worldwide business sectors, deals, exchanging and research at ICICI Bank Ltd in Mumbai. Know More

Second Covid-19 wave may derail India's strong economic recovery: S&P

 

The second Covid wave may derail a strong recovery in the economy and credit conditions in India, according to rating agency Standard & Poor's.

The economic expansion could take a hit of 1.2 per cent under a moderate state, leading to Gross Domestic Product (GDP) growth of 9.8 per cent for fiscal year ended March 2022. Under severe conditions, hit could be 2.8 per cent, resulting in GDP growth of 8.2 per cent in Fy22. Its baseline growth estimate is 11 per cent for Fy 22.

The depth of the Indian economy's deceleration will determine the hit on its sovereign credit profile, S&P said in a statement.

The country's rate of daily new infections keeps spiraling upward, accounting for almost half of the world's cases, overwhelming the Indian health system.

S&P said the possibility the government will impose more local lockdowns may thwart what was looking like a robust rebound in corporate profits, liquidity, funding access, government revenues, and banking system profitability.

"The Indian recovery had been so vigorous across many measures, particularly in the last quarter of fiscal 2021, and yet the latest outbreak has escalated rapidly," said S&P Global Ratings credit analyst Eunice Tan.

Despite being the largest vaccine manufacturer in the world, India's vaccination rollout to the country's very large and largely rural population has proven challenging.

The central government has avoided rolling out another nationwide lockdown, given this would be unpopular and economically costly. However, authorities have already imposed local lockdowns that cover much of the country, including Mumbai, New Delhi, and Bengaluru.

The scope of lockdowns affects mobility, and is indicative of the strength of India's recovery. The agency said under severe scenario new infections may peak in late June 2021. And, under moderate scenario posits that infections peak in May, it added.

The initial shocks to private consumption and investment filter through to the rest of the economy. For example, lower consumption will mean less hiring, lower wages, and a second hit to consumption.

Asia's unequal recovery sounds warning bells for global economic rebound

 

Asia's head start in the monetary recuperation from Covid-19 is sending an admonition to the remainder of the world: imbalances exacerbated by the infection are probably not going to be turned around any time soon.

Indeed, even as the area's bounce back assembles pace, numerous specialists who lost their positions from the get-go in the emergency wind up stuck in new situations with less compensation. Financial analysts alert that while an enduring movement toward the advanced economy will make openings, it hazards stirring divisions except if governments empty greater interest into the labor force. The Asian Development Bank and International Labor Organization state upwards of 15 million positions for youngsters and youthful grown-ups in the district could be lost for the current year.

Asia is a significant gauge for the world economy since it represented more than 66% of worldwide development in 2019 and is home to a lion's share of those between the ages of 15-24. It additionally started recuperating from the most exceedingly awful monetary emergency since the Great Depression sooner than a significant part of the West, energized by a fast snap back in China.

"The large danger is that at the present time, particularly when you collaborate the emergency with innovative change, there's a genuine danger that imbalance deteriorates," said Aaditya Mattoo, the World Bank's central financial analyst for the East Asia and Pacific area.

Indeed, even the individuals who have had the option to adjust are unsure about what's to come. In Jakarta, Fanny Febyanti, 38, made an improbable move to catfish cultivating as she battled to keep above water an advertising business that she runs with her better half. It's now obvious to her that the recuperation will require some investment.

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"We are not, at this point ready to give a fixed cost for our administrations, rather we tell our imminent customers: how much cash do you have and we'll help you," she says. "Endurance is the thing that issues now."

A degree in hydroponics implied she could go to the catfish business to acquire cash for food and educational cost. She beat up that pay by selling food on the web, at the same time overseeing three children at home. Two full-time staff individuals have been supplanted by three assistants.

"Life has transformed," she said. "We have needed to slice our costs."

Stories like Febyanti's are being duplicated across Asia. Youthful laborers, particularly ladies and the most unfortunate, have been hardest hit. The World Bank has cautioned that the Covid-19 stun is making a class of "new poor" across East Asia and the Pacific with an extra 38 million individuals expected to fall underneath the neediness line.

Atmanirbhar Bharat 3.0: FM announces measures to boost employment

 

Account Minister Nirmala Sitharaman on Thursday declared another arrangement of improvement measures to help work under Atmanirbhar Bharat Rozgar Yojna to boost the formation of new business openings. The new declarations target profiting organizations and people, who lost their positions because of Covid-19 instigated lockdown.

Under the plan, if organizations acquire workers who had lost their positions between March 1, 2020 and September 30 or new representatives who get enrolled in EPFO they will be qualified for benefits under the new declaration. To profit of befits under this plan, the associations with less than 50 representatives should recruit in any event two workers, and those with in excess of 50 representatives should employ at least 5.

Here are the other significant declarations made by the Finance Minister

1. Expansion of Rs 3 trillion Emergency Credit Line Guarantee Scheme till March 31, 2020
2. Declaration of ECLGS 2.0 for 26 focused on areas distinguished by Kamath Committee
3. Rs 1.46 trillion lift for assembling Production Linked Incentives (PLI) for 10 boss areas
4. Rs 18,000 crore extra cost endorsed for PM Awas Yojna
5. Unwinding of execution security on contracts from 3% to 5% to help land and foundation

The FM began the public interview by citing the most recent monetary information. "A solid recuperation is arising in the economy and the Covid-19 cases have descended. A few markers hint that the economy is improving with energy utilization developing at 12 percent year-on-year, GST assortment has contacted 1.05 trillion, every day railroad cargo weight has grown 20% year-on-year among others," the account serve said.

The pastor additionally said that the FDI inflow among April and August was at $35.37 billion, a 13 percent rise year-on-year. Markets are at a record high while market capitalisation is likewise at record levels, added the FM.

The FM advised about advancement made under the Atmanirbhar Bharat activity. The One Nation - One Ration Card conspire has seen interstate conveyability and been executed in 28 states, said the FM. In the interim, over 2.6 million credit applications have been gotten under PM Street Vendor Atmanirbhar Bharat Nidhi and Rs 1373.33 crore advances endorsed in 30 states and six association domains. Work has additionally started on the entrance for transient specialists.

Capex measures to deliver the goods rather than the consumption booster

 

The financial declarations made by the Finance Minister (FM) on Monday are a mix of frontloading of utilization use with some positive capex spending by both the focal and state governments. The methods being utilized for the two targets are very unique, accordingly dilutedly affecting the monetary adjusts. Generally the effect will be positive, however the degree will be restricted.

The more forceful move is on the capex where the states and focus would spend more on ventures that have been sketched out in explicit territories like streets, metropolitan turn of events, guard and water flexibly. States have been the given alternative of utilizing these assets to make installments for existing tasks, just as for speeding up the equivalent. Consequently the Rs 12,000 crore that is distributed to them to be reimbursed more than 50 years with no premium may not really go in for new activities – however would add to the venture stream. Likewise, the per capita state portion may not be enormous to change the speculation structure in many states, and such assets might be exceptionally helpful in finishing slowed down undertakings by virtue of absence of assets. As it is connected to consummation before March 2021, a littler extent may stream to new undertakings.

The middle is to spend Rs 25,000 crore on venture, which would be more straightforward and help the related businesses. In the event that the middle builds its capex from Rs 4.12 trillion to Rs 4.37 trillion, there could be positive effect on ventures like steel, concrete, capital merchandise and so on. The joined effect would be around 0.2 percent of the (GDP) and to this degree the financial shortage would increment.

The utilization push isn't generally any new cash in the framework, however a situation where government or public segment undertaking (PSU) workers are being boosted to spend their leave travel concession (LTC) on purchaser products with specific conditions. It is a current advantage which is being channelised to utilization, which again is a choice and not required. Workers could want to utilize the office for movement as and when it would be conceivable – perhaps a year down the line as opposed to go through the cash now.

Indian Railways logs higher freight loading in a first for FY21

In an indication of monetary recovery, the Indian Railways on Monday posted higher cargo stacking without precedent for this money related year.
The national carrier took care of 3.13 million tons (mt) cargo on July 27, up 0.3 percent contrasted with 3.12 mt around the same time last monetary year.
This ascent comes after a calm time of over five months in the cargo section inferable from the Covid-19 pandemic.
Then again, for the current monetary year, the cargo traffic took care of between April 1 and July 27 remained at 322.69 mt, down 18 percent, contrasted with a similar period a year ago.
"This is an indication of financial restoration. We have made such a significant number of strides during this emergency time to accomplish this. This incorporates fulfillment of 200 framework works that were stuck during this time. Likewise, the normal speed of cargo trains expanded to a normal of 45 kmph this month, contrasted with 23 kmph before the lockdown," Railway Board Chairman V K Yadav told the media on Tuesday.
He said the Railways was focusing in any event 50 percent higher stacking, contrasted with a year ago.

In 2019-20, Railways had detailed a decrease in cargo traffic without precedent for a long time to 1,210.46 mt, down 1 percent more than 2018-19.

Unlock 2.0 opens a small window; PM to address the nation at 4 pm today

The Center on Monday gave rules for "open 2.0", however the fast increment in Covid-19 cases in a few pieces of the nation implied it avoided reviving schools, universities, and instructing organizations.
Universal air travel and metro rail administrations will likewise keep on staying shut at any rate till July 31, and huge gatherings remain restricted. Tamil Nadu and Maharashtra chose to broaden the lockdown in a few pieces of the states until July 31.
"Open 2.0" will come into power on Wednesday, July 1. PM Narendra Modi is scheduled to address the country at 4pm on Tuesday.
The new rules, gave by Union Home Secretary Ajay Bhalla, expressed residential flights and train administrations, as of now permitted, would be additionally extended in an adjusted way.
Under the new rules, night time limit has been loose. Night check in time will currently be from 10 pm to 5 am, rather than 9 pm to 5 am. Shops have been permitted to have, space allowing, in excess of five individuals one after another.

"Open 1" rules, gave on May 30, had requested reviving strict spots, shopping centers, inns, and cafés from June 8. It had likewise expressed the choice on reviving schools and other instructive establishments would be taken in July after input from guardians and different partners.

Tamil Nadu signs MoUs worth over Rs 15,000 crore to generate 47,000 jobs

Tamil Nadu has marked 17 notice of understandings (MOUs) worth Rs 15,128 crore to create 47,150 employments in the state.
Daimler India, Salcomp and different organizations would put over Rs 15,000 crore in Tamil Nadu.
Daimler India Commercial Vehicle would contribute Rs 2,277 crore and create 400 employments.
The proposed venture will be towards organization's proposed brownfield extension at organization's Oragadam office close to Chennai.
Other significant auto task will be by BYD India. The organization will contribute Rs 50 crore to produce electric vehicles. The proposed office will come at Sriperumbudur and will create employments for 130 individuals.
Mahindra Origins will contribute Rs 46 crore.
Finland-based Salcomp has marked MoU to contribute Rs 1,300 crore, which will make 10,000 occupations. The organization has obtained significant segment of Nokia's office at Sriperumbudur, close to Chennai, which was shut because of personal duty contest. In 2019, the organization had marked a MoU worth Rs 500 crore with the Tamil Nadu Government.
Japan-based Polymatech Electronics will contribute Rs 900 crore to make semiconductor chips.
Chennai Power Generation Ltd, an India-UK co-activity, will contribute around Rs 3,000 crore to set up a 750 uber watt (MW) power plant, which will be founded on sustainable power source.
Taiwan-based Chung Jye Company alongside Aston Shoes Pvt Ltd will contribute around Rs 350 crore which would create 25,000 employments to manufacure footwears.
Lai Investment Manager Pvt Ltd (Logos) would contribute Rs 400 crore to set up a modern park in Kanchipuram region.

Other than the abovementioned, the State Government marked MoUs for different sustainable power source ventures.

Govt should have acted like a driver to pull the economy out of the mess

The government’s stimulus measures have been a mixed bag, with possibly more disappointments than meeting expectations, especially where people had expected direct sops to flow into the business accounts, interest waivers, etc.
Among notable announcements on Sunday – the fifth and final tranche – was to hike the borrowing limit for the states from 3 per cent to 5 per cent, which thankfully comes with performance riders. MNREGA scheme has been allocated an additional Rs 40,000 crore to facilitate migrants who have returned to their home states to secure livelihood. Though it’s beneficial to the migrants, most of whom would have been reduced to penury in their efforts of reverse migration, it will also delay their return resulting in labour shortage at various industrial hubs and construction sites.
The stimulus package which was meant to cushion the economy from Covid-19 hit would not be complete without a specific package for the root problem – which is the state of the health facilities. The Finance Minister announced that health sector reforms will be taken up and investments at the grass-root level will be ramped up through clinics and wellness centres, which would be prepared for future epidemics. All the districts will have infectious diseases block in their hospitals. However, since the quantum of allocation was not announced, we assume it’s more intent than an executable plan. The central government currently spends 1.3 per cent of gross domestic product (GDP) on health, which is among the lowest globally. The earlier plan was to increase this to 2.5 per cent by 2025, but now it seems that the target should be steeply increased and the time-lines be crashed.

The decriminalisation of Companies Act and ease of doing business are the small mercies bestowed on Corporate India. Seven compoundable offences to be dropped and five to be dealt with under an alternative framework is in line with The Companies (Amendment) Bill, 2020, so there is nothing new. However, the suspension of fresh insolvency proceedings up to one year would be beneficial for many businesses that would have otherwise fallen into that category due to Covid-19 related slowdown.

Unsure whether India gains if businesses shift from China: Abhijit Banerjee

Nobel laureate Abhijit Banerjee has said that there is no certainty that India will gain from shifting of businesses from China in the wake of the coronavirus pandemic.
Speaking to a Bengali news channel ABP Ananda on Monday evening, Banerjee said that everyone is blaming China for the Covid-19 outbreak as it has origin there. "China is being blamed now for the coronavirus outbreak. Even people are saying that India stands to benefit as businesses will shift from China and come to India. But that may not be true," the economist said.
Banerjee, who is also a member of the Global Advisory Board formed by the West Bengal government to prepare a roadmap for Covid-19 response in the state, said, "What happens if China depreciates its currency. In that case, Chinese products will be cheaper and people will continue to buy their products".
Talking about the proportion of Gross Domestic Product (GDP) planned to be spent by the Centre for a relief package, Banerjee said countries like the US, UK and Japan are spending a high share of their respective GDPs. "India plans to spend less than one per cent of its GDP at Rs 1.70 trillion. We should spend a much-increased proportion of GDP," he said.

The Centre had announced a more than Rs 1.70 trillion package to alleviate the hardship of the poor hit by economic disruption due to coronavirus outbreak. The Economics Nobel Prize winner said that the main problem is that people of the country do not have high purchasing power.

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.

Lockdown 2.0: Coronavirus-hit units get Rs 10,000 crore from banks

Ahead of finalising the package for industries hit by Covid-19, the Union finance ministry reviewed support extended by large public sector banks (PSBs), including via the emergency credit line, to affected firms.

 State Bank of India (SBI) and Bank of Baroda (BoB) have together sanctioned close to Rs 10,000 crore as immediate credit assistance to the affected units.

PSB executives said this was a regular review with top officials of large banks, including SBI. There was also discussion on working capital re-assessment.

Banks have built internal capacities for assisting companies, including micro, small & medium enterprises (MSMEs). Feedback from interactions is expected to act as an input for policies that are in works.

However, it is not clear when the package would be finalised, officials said. A SBI executive said the bank is giving these emergency loans to those in need. It does not involve elaborate scrutiny. Only thing is that borrowers have to establish the Covid impact.

'Covid-19 hangs over future like spectre': RBI in Monetary Policy Report

The macroeconomic risks held forth by the Covid-19 outbreak would be severe for India, the Reserve Bank of India (RBI) said in its monetary policy report, released on Thursday morning.

The impact of the pandemic came at a time when the economy was just at the turn of a recovery, “but Covid-19 now “hangs over the future, like a spectre,” it said. “While efforts are being mounted on a war footing to arrest its spread, Covid-19 would impact economic activity in India directly through domestic lockdown.”

The second-round effects would operate through a severe slowdown in global trade and growth. “More immediately, spillovers are being transmitted through finance and confidence channels to domestic financial markets.”

These would inevitably accentuate the growth slowdown, which started in the first quarter of the 2018-19 financial year and continued through the second half of 2019-20.

ALSO READ: PM hints at lockdown extension, says situation like 'social emergency'

The outlook for 2020-21 growth was looking up before the Covid-19 scare. There was a bumper rabi harvest, and higher food prices during 2019-20 provided conducive conditions for the strengthening of rural demand. The transmission of policy rate cuts was also improving, with favourable implications for both consumption and investment demand. Reductions in the goods and services tax (GST) rates, corporation tax rate cuts in September 2019, and measures to boost rural and infrastructure spending were to have a positive impact at boosting domestic demand. But “the Covid-19 pandemic has drastically altered this outlook”, the monetary policy report said.
The central bank now expects the global economy “to slump into recession in 2020, as post-Covid-19 projections indicate”. However, the sharp reduction in international crude oil prices, if sustained, could improve the country’s terms of trade. “But the gain from this channel is not expected to offset the drag from the shutdown and loss of external demand,” the RBI said.

GST collection slips below Rs 1 trillion in March after four months

Goods and services tax (GST) collection fell below the Rs 1-trillion mark in March after a gap of four months, even as disruptions caused by the coronavirus-induced lockdown will get captured only in the coming months.
The numbers pertain to GST paid in February but collected in March, suggesting that collections might turn grimmer going forward.
The GST mop-up in March stood at Rs 97,597 crore, down 8.4 per cent on a year-on-year basis, the data released by the Ministry of Finance showed on Wednesday. The government had targeted a collection of Rs 1.25 trillion in March. GST collection grew by a meagre 3.7 per cent in the full fiscal year 2019-20.
The dismal collection in March is despite the stringent anti-evasion measures introduced by the government, including the blockage of e-way bill and restricting input tax credit to 10 per cent in the case of failure of invoice uploads by suppliers.
Already hit by an economic slowdown, the country went into a 21-day lockdown from March 24 to prevent the spread of Covid-19. All industries that were struggling have become non-operational, which will reflect in the April GST collection figures.
Kerala Finance Minister Thomas Isaac told Business Standard that the April numbers, which would essentially be transactions in March would only be about 15-20 per cent of the March figures.
Pratik Jain, partner, PwC India, said, “It seems that many businesses may not have been able to pay GST because of liquidity issues being faced after the lockdown. As the second half of March 2020 has been significantly impacted due to the Covid-19 outbreak, collections in April are likely to be substantially lower.”
In a major relief for businesses facing lockdown due to coronavirus, the last date for GST return filing for March, April and May 2020 has been extended to June 30, with no interest, late fee and penalty, for companies with up to Rs 5 crore turnover and subsidised interest of 9 per cent, and no penalty or late fees for bigger companies.
M S Mani, partner, Deloitte India, said it was necessary for businesses to conserve cash in order to enable resumption of operations once the lockdown ends. Hence, any deferral of the GST payment timelines by a few months would significantly assist them in this process, Mani said.
Central GST collection for FY20 at Rs 4.95 trillion fell Rs 18,188 crore short of revised estimates for the fiscal year. The finance ministry, in Union Budget 2020-21, had lowered the CGST collection target for FY20 to Rs 5.13 trillion from Rs 5.26 trillion estimated in July.

Of the Rs 97,597-crore revenue in March, the central GST collection stood at Rs 19,183 crore, state GST at Rs 25,601 crore and integrated GST at Rs 44,508 crore, which included Rs 18,056 crore collected on imports, the finance ministry said in a statement.

Coronavirus spread: Over 600 cases in India, Delhi doctor tests positive

 
The 21-day shutdown announced by the Narendra Modi – led government due to coronavirus (Covid-19) pandemic has put nearly 75 per cent of the Indian economy under lock and key, which is likely to strain the government’s finances and see the fiscal deficit for financial year 2020-21 (FY21) rise by one per cent from the 3.5 per cent target set in the Union Budget presented in February, says the latest report from Nomura.
“Our initial estimates suggest that around 75 per cent of the economy will be shutdown, resulting in a direct output loss of nearly 4.5 per cent. We expect the central government to soon announce a stimulus package of around 0.7-1.1 per cent of gross domestic product (GDP). Along with the growth hit and poor tax collections, we expect the fiscal deficit for FY21 to balloon by over 1 per cent of GDP,” wrote Sonal Varma, managing director and chief India economist at Nomura in a co-authored report with Aurodeep Nandi.
A sensitivity analysis of the adverse impact of lockdown by Motilal Oswal Research suggests that a single day of complete lockdown could shave off 14-19bp/55-75bp from annual/quarterly growth. “With 14 days of complete lockdown in April (assuming things normalize from mid-May'20), GDP could decline 12.2 per cent YoY in 1QFY21, first ever de-growth since the quarterly data became available since late 1990s. With two consecutive quarters of GDP decline, India could see its first recession since 1990s,” said Gautam Duggad, head of institutional research at Motilal Oswal.
Madan Sabnavis, chief economist at CARE Ratings, however, says it may still be a bit too early to say this. “Typically, there is joblessness, drop in production and demand ahead of a recessionary phase. These three ingredients are already there given the 21-day lockdown. Though the lockdown will result in sharp GDP contraction, it is a bit too early to say India is heading into a recessionary phase,” Sabnavis says.
The sectors exempt from this 21-day lockdown – food and pharmaceutical industries, storage, telecom, electricity, banking and capital markets, etc comprise roughly 25 per cent of the economy as per Nomura's estimates, with the activity in the rest of the sectors coming to a grinding halt – at least for the next three weeks.
Recession-1
“On average, every month of lockdown results in output loss of around 8.5 per cent of the annual total. Hence, if 75 per cent of the economy is locked down for a month, then the output loss will around 6.5 per cent. A three week lockdown – as is the case currently – should result in an output loss of close to 4.5 per cent,” Nomura says.
Even when the lockdown period ends, it will take time for the economy to be fully up and running. The public fear factor, analysts feel, will still result in below-normal activity for a few more months. That apart, there will be lingering effects in private consumption and corporate investment demand, all of which will impact the financial sector, especially banks.
“Clearly, for the first time in living memory, many industries/SMEs will be running on zero revenues for close to a month. Even the ‘opening up’ after the lockdown is likely to be measured (lest a ‘second wave’ hits back). This means that there will be a permanent impact of this 21-day shutdown even into the longer-term numbers,” says Sunil Tirumalai, head of research at Emkay Global.
Barclays pegs the 21-day shutdown cost at around $120 billion, or 4 per cent of GDP. “We are shaving down our calendar year 2020 (CY20) GDP forecast from 4.5 per cent to 2.5 per cent and FY20-21 forecast to 3.5 per cent (from 5.2 per cent earlier),” their analysts wrote in a recent report.

World Bank pegs India's FY20 GDP growth at 5% as credit weakness lingers

Current Affairs
he World Bank has projected a five per cent growth rate for India in the 2019-2020 financial year, but said it was likely to recover to 5.8 per cent in the following financial year.
The growth rate for Bangladesh has been projected to remain above seven per cent through the forecast horizon and, in Pakistan, it is projected to languish at three per cent or less through 2020 as macroeconomic stabilisation efforts weigh on economic activity, the bank said in its latest edition of the Global Economic Prospects.
"In India, where weakness in credit from non-bank financial companies is expected to linger, growth is projected to slow to five per cent in fiscal year 2019/20, which ends March 31, and recover to 5.8 per cent the following fiscal year," the World Bank said on Wednesday.The global economic growth is forecast to edge up to 2.5 per cent in 2020 as investment and trade gradually recover from last year's significant weakness, but downward risks persist, it said.

The US' growth is forecast to slow to 1.8 per cent this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty. The Euro area's growth is projected to slip to a downwardly revised one per cent in 2020 amid weak industrial activity, the bank said in the report."With the growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction," World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu, said."Steps to improve the business climate, the rule of law, debt management, and productivity can help achieve sustained growth," Pazarbasioglu said...Read More