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Index of Industrial Production India Data In: IIP Grows at 4.5% in February

Professor of Financial Economics and Part-time Value Investor, Transfin.
Apr 10, 2020 4:19 PM 5 min read
Editorial

Industrial production in India grows at 4.5% in February. India in talks with the US for Dollar swap line. Economists and business leaders push for a ₹10trn ($132bn) fiscal stimulus package in India. Mutual fund outflows reach highest point since IL&FS crisis even as equity schemes rise despite volatility.

 

 

INDIAN ECONOMY

Industrial production grows at 4.5% in February.

Modern Times

Industrial production in India grew at the fastest pace in seven months at 4.5% during February vs 2.1% in the previous month, bolstered by an uptick in mining and manufacturing activity as well as power generation, as per official data. [ET Indicators]

 

India in talks with the US for Dollar swap line.

Switch Challenge

India is reportedly in talks with the US to secure a Dollar swap line to provide additional hedge to the economy in case an abrupt outflow of funds takes place owing to the coronavirus outbreak.

 

The US Federal Reserve had recently granted the RBI and some other central banks the currency swap facility to help them fund their Dollar requirements.

 

In a swap arrangement, the Fed provides Dollars to a foreign central bank. At the same time, the foreign central bank provides the equivalent amount of funds in its currency to the Fed, based on the market exchange rate at the time of the transaction.

 

The parties agree to swap back these quantities of their two currencies at a specified date in the future, which is the next day or as far ahead as three months, using the same exchange rate as in the first transaction. These swap operations carry no exchange rate or other market risks as transaction terms are set in advance. [The Indian Express]

 

COVID CRISIS

 

Economists and business leaders push for a ₹10trn ($132bn) fiscal stimulus package in India.

Pushing for More

Economists and business leaders are pushing for a ₹10trn ($132bn) fiscal stimulus package equivalent to 5% of India’s GDP to support those who have lost their livelihoods and businesses that on the verge of collapse because of the coronavirus crisis. [Livemint]

 

Former CEA Arvind Subramanian along with Johns Hopkins University Professor Devesh Kapur have recommended five ways of financing additional expenditure over a period of one year, including borrowing directly from RBI or monetising debt. Read this article for the full scoop. [BS]

 

The coronavirus may be “reactivating” in people who have been cured. 

A Nightmare!

The coronavirus may be “reactivating” in people who have been cured, reported Korea’s Center for Disease Control and Prevention (CDC).

 

About 51 patients classed as having been cured in South Korea have tested positive again, the CDC said in a briefing on Monday. Rather than being infected again, the virus may have been reactivated in these people, given they tested positive again shortly after being released from quarantine, said Jeong Eun-kyeong, Director-General of the Korean CDC.

 

A patient is deemed fully recovered when two tests conducted within a 24-hour interval show negative results. [Bloomberg]

 

INVESTING

Mutual fund outflows reach highest point since IL&FS crisis even as equity schemes rise despite volatility.

Up & Down

Last month, despite the widespread volatility due to COVID-19, investments into equity mutual funds jumped by ₹11,485cr ($1.5bn), the highest level in a year.           

 

Meanwhile, net outflows across all segments of schemes stood at the highest point since the IL&FS crisis at ₹2.12Lcr ($28bn). [BBG Quint]

 

Overall, the industry saw nearly ₹5trn ($66bn), or 18%, of asset erosion in March, with the asset base shrinking to ₹22.26trn ($294bn) from ₹27.22trn ($359bn) at February-end. And net outflows were witnessed across debt categories, with liquid schemes accounting for ₹1.1trn ($14.5bn) of outflows. [BS]

 

CRUDE OIL

Saudi Arabia and Russia reach agreement in principle to cut oil production. A final oil supply deal, however, hinges on Mexico joining the cuts. 

Light at the End of the Tunnel?

Saudi Arabia and Russia have agreed in principle to cut oil production to raise prices, which have reached record lows, after a 23-nation coalition of crude producers engaged in negotiations via teleconference on Thursday. (FYI: Why are Russia and Saudi Arabia fighting over oil supply?)

 

The meeting included representatives from 13 countries in the Organisation of the Petroleum Exporting Countries (OPEC), 10 countries led by Russia, and a handful of other crude-producing nations.

 

The output curbs, if finalised, would see Saudi Arabia cutting production by 3.3m barrels per day (bpd) and Russia by 2m bpd. [WSJ]

 

However, talks were derailed after Mexico abruptly left the negotiating table in protest. Mexican officials argued that stronger players like the US, Saudi Arabia and Russia should be cutting back more than Mexico.

 

Talks presently continue but a final oil supply pact hinges on Mexico joining the cuts, Saudi’s Energy Minister has said. [Reuters]

 

GLOBAL

 

Japan to pay manufacturers to shift production out of China. 

Out of China

Japan’s stimulus package is worth 108trn Yen ($990bn). This is equal to 20% of Japan’s economic output – it’s a massive package. And $2.2bn of this has been earmarked for one sole purpose – to help Japanese manufacturers shift production out of China to Japan or other countries.

 

Ties between the two major economies – usually strained by geopolitics, history and conflicting interests – were supposed to have improved this month when Chinese President Xi Jinping made a state visit to Japan in the first trip of its sort in a decade. But this was postponed because of the spread of the novel coronavirus, which began in China, and has now put Japan, the world’s third-largest economy, in a state of emergency. [SCMP]

 

SoftBank's Founder reportedly pledged a majority of shares to banks during sell-off.

And Now, This

SoftBank's Founder Masayoshi Son reportedly pledged a majority of shares to banks during sell-off. He pledged as much as 60% of his shares in the company as collateral against billions of dollars of personal loans in March, as the company’s plunging market value threatened to expose him to margin calls. [FT]

FIN.

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