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FY21 GDP growth revised downwards to 3.6%: India Ratings

A stop on the construction activities will accelerate the problems of the real estate sector which is still struggling to access funding in the middle of a meltdown in the NBFC and banking sectors.

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New Delhi, March 30 : India Ratings and Research has revised its FY21 gross domestic product (GDP) growth for India down to 3.6% from 5.5%.

The key reasons for this downgrade are the spread of COVID-19 and the resultant nation-wide lockdown imposed till 14 April 2020, crippling most economic and commercial activities.

The revision is based on the assumption of lockdown continuing till end-April 2020 (full or partial) and gradual restoration of economic activities May 2020 onwards.

In view of the lockdown, India Ratings and Research has even revised the FY20 GDP forecast downward to 4.7% (9MFY20: 5.1%) from The National Statistical Office’s advance estimate of 5.0%.

The rating agency expects the GDP growth to come in at 3.6% in 4QFY20 and 2.3% in 1QFY21. Average growth is forecast to decelerate to 2.8% in 1HFY21 (1HFY20: 5.3%) and recover to 4.3% in 2HFY21 (2HFY20: 4.2%), due to a) the base effect and b) a gradual recovery and restoration of supply chain, it said.

Some of the initial and visible impact of the spread of COVID-19 on the Indian economy has been the disruption in the production of select manufacturing sectors due to the breakdown of supply chain, near collapse of the tourism, hospitality and aviation sectors and a rise in the work load of the healthcare sector. Also micro, small and medium enterprises, irrespective of the sector they operate in, have begun to witness cash flow disruptions. This is not to say that other sectors were not impacted or are not likely to be impacted. However, some the services sectors such as financial services, IT and IT enabled services have greater flexibility in their operations and they quickly readjusted and/or are readjusting their operations by allowing employees to work from home.

Yet, the panic has gripped the Indian capital markets like elsewhere in the world. A changed outlook of investors has led to a huge outflow of capital and the rupee has come under intense pressure, India Ratings said. Also, significant wealth erosion would impact the consumption levels.

With the rabi crop maturing, disruption in harvesting and inability of agricultural markets to timely procure them could be a blow to the farmers’ income and rural demand.

A stop on the construction activities will accelerate the problems of the real estate sector which is still struggling to access funding in the middle of a meltdown in the NBFC and banking sectors.

After agriculture, construction is the largest employment generator in the Indian economy. Closure of non-essential commercial establishment and multiplexes will have a ripple effect on many sectors. Demand for consumer durables, entertainment, sports, wholesale trade, transport, tourism, hospitality etc. will decline, it said in its report.

Its is now expected, the agency said that several manufacturing activities will de-risk their operations by locating themselves outside China. Also, the disruption in supply chain especially in sectors such as automobiles, pharmaceuticals, electronics and chemical products could be an incentive for the Indian manufacturing sector to become part of the supply chain.

India Ratings and Research believes this will require significant government and policy support and will play out only in the medium- to long-term. One of the near-term advantages of the spread of COVID-19 for the Indian economy would be lower global commodity prices especially crude oil. However, to what extent this could benefit the Indian economy would depend on the pace of restoration of normalcy and the ability and nimbleness of the Indian businesses to take advantage of this opportunity. However, converting this advantage to an opportunity would not easy, because the Indian economy is reeling under low consumption and low investment growth, coupled with rupture in the financial system, the report said.

India Ratings and Research expects the government to announce more measures in the coming days/weeks to mitigate the pains and concerns of the other segments/sectors of the society/economy, since the role of the government is crucial in terms of containing the spread of COVID-19 and simultaneously mitigating the adverse impact of the lockdown on the economy.

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Real GDP growth to remain negative in H1, full fiscal: RBI Gov Shaktikanta Das

RBI MPC meet: More protracted spread of the pandemic, deviations from the forecast of a normal monsoon, and global financial market volatility are the key downside risks, said Das

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Reserve Bank of India Governor Shaktikanta Das said that the real GDP growth of the country is expected to remain in the contraction zone. “Real GDP in the first half of the year is expected to remain in the contraction zone.

For the year 2021 as a whole real GDP growth is also estimated to be negative,” said Governor Das during the MPC presser on Thursday.

Das said that in case of an early containment of the COVID-19 spread, there could be an upside to the outlook. “More protracted spread of the pandemic, deviations from the forecast of a normal monsoon, and global financial market volatility are the key downside risks,” he added.

“As regards the outlook for growth, the MPC noted that the recovery of the rural economy is expected to be robust, buoyed by the progress in kharif sowing. Manufacturing firms expect domestic demand to recover gradually from Q2 and to sustain through Q1 2021-22. On the other hand, consumer confidence turned more pessimistic in July relative to the preceding round of the Reserve Bank’s survey. External demand is expected to remain anaemic under the weight of the global recession and 5 contractions in global trade,” Das stated.

He said that the MPC has noted that in such an environment of unprecedented stress, supporting recovery of the economy would assume primacy in the conduct of the monetary policy. “While the space for further monetary policy is available, it is important to use it judiciously to maximise the beneficial effects on the underlying economy,” Das highlighted.

Das said there were signs of recovery across the world. “Monetary Policy Committee noted that in India too, economic activity had started to recover, but surges of fresh infections have forced fresh lockdowns, hence several high-frequency indicators have levelled off,” he added.

Additionally, the MPC putting all debates to rest, left the repo rate unchanged at 4 per cent and would maintain an accommodative stance.

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RBI leaves repo rate unchanged at 4%, reverse repo rate at 3.35%: Shaktikanta Das

RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations.

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Shaktikanta Das

Repo rate remains unchanged at 4%, and Reverse repo rate also remains unchanged at 3.3%, RBI Governor Shaktikanta Das said.

Accommodative stance of the monetary policy will continue as long as necessary to revive growth and mitigate the impact of COVID19 pandemic, while ensuring that inflation remains within target going forward.

RBI is perhaps the only central bank in the world which has set up a special quarantine facility for continuity of critical operations.

Taking into consideration all factors, the GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative: Reserve Bank of India (RBI) Governor Shaktikanta Das

Monetary Policy Committee (MPC) noted that in India too, economic activity had started to recover, but surges of fresh infections have forced fresh lockdowns, hence several high-frequency indicators have levelled off: RBI Governor Shaktikanta Das

With COVID19 infections rising under fragile micro-economic&financial conditions, we propose to take regulatory&developmental measures – enhance liquidity support for financial markets, ease financial stress caused by COVID19 while strengthening credit discipline improve the flow of credit, deepen digital payment systems and facilitate innovations by leveraging technology.

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Facebook launches TikTok-like product inside Instagram

Similar to TikTok, Reels users can record short mobile-friendly vertical videos, then add special effects and soundtracks pulled from a music library.

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The product immediately got uptake with several celebrities, following a push by Facebook to attract creative talent before launch: actress Jessica Alba posted a video with her family promoting her Honest Company’s masks, while comedian Mindy Kaling showed off an intentionally underwhelming quarantine “workout” routine.

Reels’ debut comes days after Microsoft said it was in talks to acquire TikTok’s U.S. operations from China’s ByteDance. ByteDance has agreed to divest parts of TikTok, sources have said, under pressure from the White House, which has threatened to ban it and other Chinese-owned apps over data security concerns.

The launch escalates a bruising fight between Facebook and TikTok, with each casting the other as a threat. Both have been eager to attract American teenagers, many of whom have flocked to TikTok in the last two years.

Reels was first tested in Brazil in 2018 and then later in France, Germany and India, which was TikTok’s biggest market until the Indian government banned it last month following a border clash with China. Facebook also tried out a standalone app called Lasso which did not gain much traction.

Similar to TikTok, Reels users can record short mobile-friendly vertical videos, then add special effects and soundtracks pulled from a music library.

Those similarities led TikTok Chief Executive Kevin Mayer to call Reels a “copycat product” that could coast on Instagram’s enormous existing user base after “their other copycat Lasso failed quickly.”

Facebook faced similar charges at a congressional hearing on U.S. tech companies’ alleged abuse of market power last week, with lawmakers suggesting the company has copied rivals like Snapchat for anti-competitive reasons.

Vishal Shah, Instagram’s vice president of product, acknowledged the similarities in a Tuesday video conference call with reporters and said that “inspiration for products comes from everywhere,” including Facebook’s teams and “the ecosystem more broadly.”

Instagram is not yet planning to offer advertising or other ways for users to make money through Reels, although it did recruit young online stars like dancer Merrick Hanna and musician Tiagz – who was recently signed by Sony/ATV after rising to fame via TikTok memes – to test the product ahead of launch.

The company paid the creators for production costs, Shah said.

Joe Gagliese, chief executive of influencer marketing agency Viral Nation, said Reels was poised to mimic Instagram’s success with Stories, a product modeled on Snapchat’s core offering.

“They’re a huge monstrous threat (to TikTok),” he said. “The current turmoil couldn’t be playing more into (Instagram’s) court to launch this thing.”

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