Transfin.
HomeNewsGuidesReadsPodcastsTRANSFIN. EOD
  1. News
  2. Explained

Indian Economy May Be Heading for First Contraction in 40 Years

Professor of Financial Economics and Part-time Value Investor, Transfin.
Apr 17, 2020 4:20 AM 4 min read
Editorial

With the 21-day lockdown extended to 40 days, the Indian economy may be headed for its first contraction in four decades, opine Nomura, Bloomberg, ICRA. Mukesh-Ambani led Reliance Industries Ltd in talks with tech giant Facebook to build a ‘super app’ of sorts, along the lines of the Chinese app WeChat. SEBI to increase scrutiny of all Chinese investments in Indian stock markets. Setu, which helps small businesses offer financial products, raises $15m. 

 

 

ECONOMY

Indian economy may be heading for first contraction in 40 years. 

Dubious Distinctions

India’s economy was painfully trying to reverse a long-drawn slowdown that had dragged GDP growth to the lowest point in six years before the coronavirus pandemic hit. Now, with the 21-day lockdown extended to 40 days, the economy may be headed for its first contraction in four decades. Societe Generala GSC, Nomura, Bloomberg, ICRA – these are some of the research firms that have recently predicted a contraction in FY21. [BS]

 

Other ratings agencies like Moody’s, Fitch, Crisil and CARE Ratings have already made grim predictions of their own. [TRANSFIN.]

 

Exports fall at fastest pace in 25 years. 

India’s merchandise exports, meanwhile, plunged by 34.6% last month while imports fell by 28.7%. The fall in exports is the steepest in 25 years. [Livemint]

 

TECH

Reliance Jio in talks with Facebook to build a ‘super app’. 

Super Together

Mukesh-Ambani led Reliance Industries and tech giant Facebook are reportedly in talks to build a ‘super app’ of sorts, along the lines of the Chinese app WeChat.

 

The plan is to leverage Facebook-owned WhatsApp's massive user base in India and create an app that would combine digital payments, social media, gaming as well as flight and hotel bookings, among other features. 

 

The app would not just be a communication platform but one where users would also be able to buy groceries through Reliance Retail stores, or shop at ajio.com, or make payments using JioMoney. 

 

The ongoing discussions, however, have been delayed due to the pandemic. [ET Software]

 

Apple and Google say the COVID-19 contact-tracing technology will be turned off after the pandemic is over.  

A Spotty Track Record

Apple and Google recently announced that they have teamed up to develop contact-tracing technology that can help individuals determine if they have been exposed to someone with COVID-19.

 

And considering their rather dubious track record, and the recent uproar regarding data and personal privacy, the two have clarified that  the COVID-19 contact tracing technology, which will be rolled out to Android and iOS smartphones in May, won’t remain in the devices forever and will be turned off once the pandemic is over. [The Indian Express]

 

REGULATIONS

SEBI to increase scrutiny of all Chinese investments in Indian stock markets. 

Under the Lens

The Securities and Exchange Board of India (SEBI) has issued fresh communication to custodians seeking details of all investments coming from China or via China into Indian stock markets. This development comes after the Government clarified that the market regulator should increase scrutiny of investments coming from China and Hong Kong. [Livemint]

 

RBI and SEBI seem to split over default recognition.       

Cut the Clutter

As a relief measure amidst the coronavirus lockdown, the RBI had announced a three-month moratorium on term loans given by banks, but it was not clear about shadow banks’ liabilities. SEBI, on the other hand, has asked ratings firms to avoid assigning a default tag to companies unable to pay amidst the lockdown.

 

This seeming clash between the two regulators has caught investors, mutual funds and ratings agencies off guard and in need of clarity. [BS]

 

COMPANIES

Vodafone Group and Aditya Birla Group may inject fresh capital into ailing Vodafone Idea. 

Parents to the Rescue

Vodafone Idea, as you may know, is a joint venture between Vodafone Group and Aditya Birla Group. The two are now reportedly considering injecting fresh capital into the embattled telco to meet operational requirements and clear adjusted gross revenue dues.

 

Vodafone Group could provide $200-225m while Aditya Birla Group wcould chip in with $125-150m. [Moneycontrol]

 

TCS results to be out today. 

Preparing for the Worst

India’s IT sector has undoubtedly been hit hard by the COVID-19 pandemic and by the nationwide lockdown. The country’s largest IT services company Tata Consultancy Services (TCS) is slated to announce its Match quarter results today – and it is expected to report a dip in profits. TCS’s rival Wipro has already reported a 6% Y-o-Y fall in profits and refrained from providing revenue guidance for the next quarter. [ET Markets]

 

FINANCIAL SERVICES

Setu, which helps small businesses offer financial products, raises $15m. 

Funding Alert

Setu, a two-year-old digital financial services startup, has raised $15m in a Series A funding round from Falcon Edge and Lightspeed Venture Partners US. Existing investors Lightspeed India Partners and Bharat Inclusion Seed Fund also participated in the round.

 

Setu is an API infrastructure provider that connects financial institutions like banks with small businesses like local kirana stores to help the latter provide financial services to their customers. [TechCrunch]

 

Time is Health, Health is Money

The renewal dates of health and motor insurance policies, which fall during the period of March 25th to May 3rd, have now been extended till May 15th, as per a notification by the Finance Ministry. [Livemint]

FIN.

Congratulations! You've made it to the end. Looking for more takes on Business, Finance, Markets, and Investing? Subscribe to our Wrap Up Newsletter for informative and insightful daily news updates, smartly curated from the top sources, delivered straight to your inbox.