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Economic damage for India from lockdown to be significant: Moody’s

Moody’s estimates that economy is also expected to recover somewhat more strongly in fiscal 2021-22 relative to an earlier forecast of 6.6% growth.



Moodys Revenue rating

New Delhi, May 22 : Moody’s Investors Service said on Friday that economic damage as a result of India’s coronavirus lockdown will likely be extensive and reflect the country’s inherent economic vulnerability and fiscal constraints.

The report pointed out that this will have wide-ranging effects on both public and private sectors.

Moody’s Investors Service has released a report titled “Coronavirus – India: Lockdown compounds economic challenges as credit risks rise in many sectors”.

“We expect the economic fallout from the coronavirus outbreak to weigh on the already fragile household consumption which, coupled with sluggish business activity, will result in a sharp decline in India’s economic growth in fiscal 2020-21,” says Deborah Tan, a Moody’s Assistant Vice President and Analyst.

Even before the coronavirus outbreak, the economy had already been growing at its slowest pace in six years.

Adding the impact from the outbreak, Moody’s now expects India’s real GDP to contract in the fiscal year ending March 2021 (fiscal 2020-21) compared with an earlier projection of zero growth.

The Reserve Bank of India (RBI) Governor Shaktikanta Das in his monetary policy review statement projected that the economy will contract in FY21.

Moody’s estimates that economy is also expected to recover somewhat more strongly in fiscal 2021-22 relative to an earlier forecast of 6.6% growth.

Among corporates, the auto, oil & gas and mining sectors will bear the brunt of the downturn, given their sensitivity to consumer demand, sentiment and supply chain disruptions.

The economic slowdown will also hit the performance of commercial vehicle and MSME loans, with the effects more significant if the outbreak spreads and suspension of business activity is prolonged.

“Moreover, we expect the economic shock from the coronavirus to result in significant slippage from the central government’s budgeted deficit target for fiscal 2020-21,” added Tan.

While the announced stimulus will bring a degree of relief to rural households and micro, small and medium-sized enterprises (MSMEs), the measures are unlikely to offset lower activity resulting from the extended lockdown.

Banks and finance companies accordingly will see a broad-based deterioration in asset quality, while finance companies and smaller private banks will also face funding and liquidity issues, Moody’s Investors Service said.

Slowing premiums, increasing medical claims and liquidity pressures will pose risks for insurers. While general and health insurers will see some surge in medical premiums, the sector’s challenges will continue, it added.


Amid sharp GDP data revision, debate continues over its fairness




GDP data

New Delhi, May 31 : The sharp revision in quarterly GDP data has grabbed the eyeballs of economists and experts and the government has also received flak over it.

The debate still continues over whether the revision of the previous quarter’s GDP growth numbers were justified or not.

State Bank of India (SBI) Group Chief Economic Adviser, Soumya Kanti Ghosh, in a report, has questioned the data quality and ‘remarkable’ volatility in the new series adopted by the CSO that has led to frequent sharp revisions in GDP numbers in each of quarterly estimates with wide upward and downward swings in numbers in each of the quarter estimate from excisions.

Noting that the loss of economic activity due to the lockdown in last few days of March has dragged GDP growth to a 40-quarter low of 3.1 per cent in Q4 FY20, he said: “However, CSO has significantly revised the previous quarters’ growth rates (compared to Q3 release) which is quite puzzling and raises questions about data quality and remarkable volatility in the new series and we believe that a methodological note from CSO explaining the frequent revisions will be very useful.”

The SBI Ecowrap report, authored by Ghosh, said that in February, the quarterly numbers underwent significant upward revisions and such numbers have now been steeply revised downwards by an almost equal amount, within a span of three months.

“While it is customary to change the quarterly numbers in May when the 3rd estimate of FY20 is released, the extent of such revision reveals possibly the loss in Q4 because of lockdown may have been evenly distributed across quarters/Rs 1.18 lakh crore loss estimated and distributed across quarters in FY20 (Q4 accounted for only 50 per cent of such),” it said.

Talking to IANS, former Chief Statistician of India Pronab Sen said that the fourth quarter numbers are fine, but the revision of the third quarter numbers was the major problem which should have been avoided as it was out of schedule.

“As far as changes were concerned, the changes that were released during this fourth quarter… those are fine. There is no problem at all, that is how it should be. The problem here was the change made with the third quarter data. That was problematic, that was off schedule.”

He explained that as per the normal schedule, the quarterly data is not changed till the provisional estimates of the year are released in June.

“But prior to that, the three quarters data is not changed. When the provisional annual data is released, then the quarterly data has to be changed so that there is consistency between the four quarters and the annual figures. That is the standard operating procedure… now that got violated this year,” Sen said.

N.R. Bhanumurthy, Professor at the National Institute of Public Finance and Policy, however, noted that official GDP data has revisions and this is the third revision, which is called provisional estimates. He was of the view that revision in previous quarters’ GDP numbers should not be a matter of concern as it is a routine process.

On the concerns regarding the quality of data, he said that improving the quality of data is a work in progress as the country is now getting into a new data basis.

Bhanumurthy, who is also a member of the Advisory Committee on National Accounts Statistics (ACNAS), said: “We are now getting into a much more wider data sense in getting the GDP numbers. I would say it’s still a long way to go. The contribution of the informal sector is always taken on a pro-rata basis based on some survey done in 2011-12… those things need to be updated.”

He was of the view that the problems would have existed in the old GDP data calculation methodology.

Bhanumurthy noted that the GST data is not given in a “disaggregated level” which is also a major obstacle in getting accurate data.

“Previously, we used to use indirect tax data, now we don’t get that kind of a granularity. There used to be VAT separately, there used to be service tax separately. GST is a combination of that, we don’t know what is goods and what is services,” he added.

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Turkey to resume business operation amid COVID-19 normalization

Bars and night clubs will remain to be closed, and the restriction on the movements of those aged over 65 and under 18 will continue.




Turkey Covid Lockdown

Istanbul, June 1 : Many businesses across Turkey prepared to resume their operations for the first time after over two months of closure amid a slowdown in the COVID-19 pandemic.

Restaurants, cafes, parks, beaches, daycare centers, kindergartens, libraries, sports facilities, swimming pools, and museums will be operational as of June 1 as part of the new normalization process which was announced on May 28 by Turkish President Recep Tayyip Erdogan after a cabinet meeting on Sunday, Xinhua news agency reported.

Following the announcement, the Health Ministry prepared a guide in particular for the eating and drinking industry at which it explained the new rules in a detailed way.

The guide said that the distance between the tables should be 1.5 meters in all directions and 60 centimeters between the chairs to ensure the social distancing rule, and the hygiene rules should be strictly followed to combat COVID-19.

Several restaurants in Turkey’s biggest city Istanbul on Sunday disinfected their facilities and redesigned their seating arrangements in line with the ministry’s guide.

Under the new measures, restaurants will only accept customers with facial protective masks, and the clients will be allowed to take off their masks only during eating.

Turkey will also lift restrictions on domestic travels as of midnight on Sunday, and public personnel will return to their jobs on Monday.

Turkey’s national flag carrier Turkish Airlines announced on its website that it would start its domestic operations with a limited number of flights departing from Istanbul to four major cities, including the capital Ankara, and western Izmir province, as of Monday.

The carrier will begin to fly to other cities on June 4 and launch its international flights on June 10, it added.

Meanwhile, bars and night clubs will remain to be closed, and the restriction on the movements of those aged over 65 and under 18 will continue.

The death toll from the coronavirus in Turkey has climbed to 4,515 and the number of confirmed cases totaled 163,103, according to the figures announced by the Health Ministry on Saturday.

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Centre to sell stake in certain pharma PSUs: Goyal

He said the market players should look at large untapped markets in Eastern Europe and Russia.



Piyush Goyal

New Delhi, May 31 : Commerce Minister Piyush Goyal on Sunday said that the Union government has decided to disinvest in certain pharmaceutical public sector units (PSU).

During an interaction with industry leaders of the pharmaceutical sector, he invited the Indian companies to use PSUs for ‘plug and play’ model of manufacturing.

According to an official statement, Goyal also said that India should become a self-reliant country in the supply of active pharmaceutical ingredients (APIs) as early as possible with the government taking steps in that direction in line with Prime Minister Narendra Modi’s vision of ‘Aatmanirbhar Bharat’.

He assured the industry of full government support in the industry’s expansion, diversification and strengthening.

Mentioning the Centre’s initiatives to make the country self-sufficient in terms of APIs, he said that the government has already approved the scheme on promotion of bulk drug parks for financing common infrastructure facilities in three bulk drug parks.

Also, Production Linked Incentive Scheme for promotion of domestic manufacturing of critical KSMs or drug intermediates and APIs in the country has been given a go ahead, he added.

During his interaction, Goyal lauded the pharma industry for making India proud, by rising to the occasion during the Covid crisis. He said that India has been recognised as the ‘Pharmacy of the World’ as over 120 countries got some essential medicines, during the last two months, including 40 of them getting them in the form of grant, free of cost.

The minister said that the anti-dumping investigation process has been expedited and assured that in case of ongoing bilateral free trade agreements, if any roadblock or unfair competition is being noticed, the government may be informed and prompt remedial action will be taken.

He said the market players should look at large untapped markets in Eastern Europe and Russia.

Calling upon a collaborative route in the R&D efforts, the minister said the academicians, universities, ICMR and private sector should join hands.

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