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GDP of India 2020 Prediction Cut to -0.5% from 4.5% by Nomura

Professor of Financial Economics and Part-time Value Investor, Transfin.
Mar 31, 2020 6:05 AM 5 min read
Editorial

Nomura cuts GDP of India 2020 prediction to -0.5% from 4.5%. Chinese central bank cuts reverse repo rate by most in five years. Oil prices fall to 17-year low. Online retailers could suffer loss of $1bn during 21-day nationwide lockdown.

 

 

INDIA'S LOCKDOWN

Lockdown period not to be considered for any activity under the corporate insolvency resolution process.

Buying Some Time

As per a notification by the Insolvency and Bankruptcy Board of India, the 21-day lockdown period imposed to break the chain of infection in the wake of the coronavirus pandemic will not be counted towards the timeline for any activity under the corporate insolvency resolution process.

 

Corporate insolvency resolution process (CIRP) in a case under Insolvency and Bankruptcy Code (IBC) needs to be completed in 330 days including time taken for litigation. [Bar and Bench]

 

  19-43% of MSMEs may shut shop if the lockdown extends beyond four to eight weeks.

 Lockdown...Forever?

Around 19-43% of India's 69m micro, small and medium enterprises (MSMEs) may be forced to shut shop owing to unavailability of funds if the lockdown extends beyond four to eight weeks, says Ravi Venkatesan, Chairman, Global Alliance for Mass Entrepreneurship (GAME). 

 

In addition to this, GAME has also highlighted that MSMEs will see operational challenges with low or zero manpower over the next few weeks since migrant workers are fleeing to their hometowns. 

 

Meanwhile, GAME is in the process of creating a $100m Small Business Stabilisation Fund to help disburse low-interest loans to these small businesses. [ET Rise]

 

WhatsApp reduces status video time limit to 15 seconds in India. 

FYI

Cabinet Secretary Rajiv Gauba has brushed aside all rumors of a possible extension in the lockdown period, saying that the Centre does not plan to extend the lockdown. [Business Today

 

Extra Crunch

Facebook-owned messaging platform WhatsApp is limiting the status video time limit to 15 seconds form the current 30 seconds in India, where it has over 400m users in order to not put further strain on internet networks amidst the lockdown. [The Hindu]

 

ECOMMERCE

Online retailers could suffer loss of $1bn during 21-day nationwide lockdown.

Online is Offline

The 21-day nationwide lockdown has caused a boom for internet-based businesses, from online education to social media companies. But this boom has not reached ecommerce. On the contrary, according to American market research and advisory firm Forrester, India’s ecommerce sector may suffer $1bn in loss in sales during the lockdown.

 

Already, in the past week the sector is estimated to have lost $400m. Since the lockdown began on March 25th, confusion over whether ecommerce companies would be allowed to operate on the streets led to firms like Amazon, Flipkart, Myntra, BigBasket, Grofer, Pepperfry etc. suspending operations across the country. [News18]

 

Some e-retailers resumed operations today, but face massive backlog of orders. 

Getting Back on their Feet

On Monday, top ecommerce firms slowly began resuming operations in major cities. But faced with a massive backlog of orders and shortage of workers, expect your order to be delayed by a few more days. [ET Tech]

 

MONEY MATTERS

EPF subscribers can withdraw non-refundable advance to face COVID-19 crisis.

Urgent Issues

The Government has said that pandemics can also be cited under the Employees’ Provident Fund (EPF) rules to allow subscribers to withdraw non-refundable advances. Subscribers can now withdraw Basic Pay + Dearness Allowance (DA) of three months or 75% of their PF money, whichever is lower, as a non-refundable advance to face the COVID-19 crisis. [Financial Express]

 

Insurance industry sees strong growth amidst current crisis.

Fortuitous Uptick

The insurance industry usually sees strong growth in March, as people rush to buy policies before the end of the financial year (because of tax-saving purposes). However, this year the growth has been particularly strong on account of the coronavirus crisis. Online distribution portal Policybazaar says health insurance has seen a jump of 35-40% on its platform while life insurance registered a 20% growth during the last 20-30 days. [Business Today]

 

Speaking of Insurance...

There have been all sorts of doubts regarding health insurance these days, including the implications on insurance due to COVID-19’s pandemic status, coverage for quarantine and pricing impact. Read this article to get the answers to some common queries related to the health insurance coverage under COVID-19. [Moneycontrol]

 

OIL & GAS

Oil prices fall to 17-year low.

And Way Down We Go

Oil prices are in free fall. Today, Brent crude climbed below $25 a barrel while US West Texas Intermediate crude futures dipped below $20 a barrel. A combination of two decisive factors – decrease in demand due to the coronavirus crisis and tensions between Saudi Arabia and Russia – have caused prices to plummet to their lowest in 17 years. [CNBC]

 

Why are Russia and Saudi Arabia sparring over oil prices? And why does the US want to intervene? Read this article for an explainer. [TRANSFIN.]

 

Saudi Arabia assures India of uninterrupted LPG supply.  

Meanwhile

Saudi Energy Minister Prince Abdulaziz bin Salman has reportedly assured India that LPG supplies will not be interrupted amidst the coronavirus lockdown. [India Today]

 

GLOBAL ECONOMY

Indian economy could contract to -10.3%, US by 11%, Nomura warns.

In Negative Terrain

Nomura has some dire predictions for the Indian economy. It has cut the country’s Y-o-Y growth forecast for 2020 from 4.5% to -0.5%.

 

“We now expect GDP growth to slide from 4.7% Y-o-Y in Q4 2019 to 3.1% in Q1 and plunge to -6.1% in Q2, when both domestic and external demand will weaken. We are building in a sequential pickup in the second half of 2020, but the pace of recovery is likely to be much weaker given some lasting damage to potential output,” Nomura has predicted.

 

At the global level, Nomura sees the US and Euro area economies to suffer the most due to the pandemic. The American economy, it forecast, could contract by over 11% in the worst case scenario. [BS]

 

Chinese central bank cuts reverse repo rate by most in five years.

It's a Cut

Meanwhile, in China, where the coronavirus originated, the central bank announced that it was lowering the seven-day reverse repo rate to 2.2% from 2.4%. The 20 basis points cut is the largest in nearly five years. [Reuters]

FIN.

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