Covid-19 could cause economic loss up to $8.8 trn, 9.7% of global GDP: ADB

Nearly 300,000 people worldwide have died from complications from the virus, which has infected more than 4.3 million people.

Global economic losses caused by the coronavirus pandemic could be between $5.8 trillion and $8.8 trillion this year, the Asian Development Bank (ADB) said on Friday, more than double its earlier estimates as containment measures paralyse economies.
The ADB's forecast, equal to 6.4% to 9.7% of global gross domestic product, was worse than projections in April when it said the global economy could suffer between $2.0 trillion and $4.1 trillion in losses, depending on how long containment measures were in place.

"This new analysis presents a broad picture of the very significant potential economic impact of Covid-19," said ADB Chief Economist Yasuyuki Sawada. "It also highlights the important role policy interventions can play to help mitigate damage to economies."

The ADB said the upper end of the range assumed curbs on movement and businesses lasting six months, while the bottom end assumed they would last three months.

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After the health crisis brought the economy of China, where the virus surfaced in December, to a virtual halt in the first quarter, several countries and territories have reported a rise in infections and deaths, leading to widespread travel bans and stay-at-home orders.

Nearly 300,000 people worldwide have died from complications from the virus, which has infected more than 4.3 million people.

Measures to contain the spread could inflict $1.7 trillion to $2.5 trillion in economic losses in Asia, and between $1.1 trillion and $1.6 trillion in China, the ADB said.

Travel restrictions and lockdowns will likely cut global trade by $1.7 trillion to $2.6 trillion and put between 158 million and 242 million people out of work, the ADB said.

India's credit profile to face further pressure due to Covid-19: Moody's

Moody's rating on the government of India is Baa2 with negative outlook.

India's credit profile will face further pressures amid the coronavirus outbreak, according to rating agency Moody’s.

The shock will exacerbate an already material slowdown in economic growth, which has significantly reduced prospects for durable fiscal consolidation, Moody’s said in credit opinion.

Moody’s rating on the government of India is Baa2 with negative outlook.
India’s credit profile is supported by its large and diverse economy, and stable domestic financing base. This is balanced against high government debt, weak social and physical infrastructure, and a fragile financial sector.

The negative outlook reflects increasing risks that economic growth will remain significantly lower than in the past. This is in light of the deep shock triggered by the coronavirus outbreak.

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"The negative outlook reflects increasing risks that economic growth will remain significantly lower than in the past. This is in light of the deep shock triggered by the coronavirus outbreak, and partly reflects lower government and policy effectiveness at addressing longstanding economic and institutional weaknesses, leading to a gradual rise in the debt burden from already high levels," the agency said in its note.

The government measures to support the economy should help to reduce the depth and duration of India’s growth slowdown. However, prolonged financial stress among rural households, weak job creation and, more recently, a credit crunch among non-bank financial institutions (NBFIs) have increased the probability of a more entrenched weakening

Retail needs therapy: Future and fortunes of a business after coronavirus

Modern, organised retail is bleeding as the coronavirus pandemic keeps India indoors and shuttered. Arvind Singhal explains what it will take to get this business back on its feet.

India’s economy slowed down in March, but it is projected to have managed a gross domestic product (GDP) growth of about $3,000 billion at the end of FY20. Private consumption accounts for about 58 per cent of GDP (around $1,700 billion). Of such consumption, about 48 per cent (or about $825 billion) is consumer spending on merchandise (the size of India’s retail sector) and the remaining $875 billion is spent on a range of services (and small savings).

Traditional mom & pop retail accounts for the largest share and will continue to do so, despite the Cassandras crying for the last 15 years that large (physical and digital) businesses will decimate them. India has an estimated 17 million independent retailers and their number is likely to increase to 20 million by 2025, despite the growth of modern, organised retail (brick and e-commerce).

India’s economy was expected to grow by about 3 per cent in FY21 and by 4.5 per cent in FY22 before returning to 6 per cent growth from 2023. A sharp fall in growth will have a significant impact on what India consumes in the next six or eight quarters as purchasing power diminishes. Accordingly, this will influence the fortunes of the retail sector across all types of channels and formats.

Food and grocery accounts for about $550 billion of the $825 billion consumer spending on merchandise. This spending is likely to see the least impact, either in terms of volume consumed across different sub-segments, or on retail channels selling food and grocery.

Textile and apparel, at about $65 billion, is the next big category in consumer spending on merchandise, and it may suffer the most from the coronavirus. Just about every textile and clothing manufacturer (including those in exports) is likely to have stocks of raw material and semi-finished or finished goods. With textile and apparel stores shut, their stocks run the risk of becoming slow-moving as summer goes. After the nationwide lockdown to contain the coronavirus ends, it is quite likely that spending on clothing (and accessories) would not be a priority for most consumers in various income strata. Clothing and fashion retailers may face tough times well into 2022.

Ongoing land conflicts affecting lives, livelihoods of over 6.5 mn people

State govts are failing to realise that farmers, landowners are much more aware of the actual market value of their land and about the legal provisions related to consent and rehabilitation etc.

Autonomous analyst Kumar Sambhav, who has helped to establish Land Conflict Watch - the first and biggest database of progressing land clashes in India - tells Aditi Phadnis that while India has ordered laws to ensure the privileges of underestimated networks, these are either not executed, or disregarded and circumvent. Altered extracts:

You have recently turned out with an examination ashore clashes in India. Educate us concerning its discoveries.

Land Conflict Watch embraced a 3-year concentrated research on 703 progressing land clashes across India. More than 40 scientists, spread the nation over, gathered granular information on the diverse monetary divisions included, social elements at play, laws included, and land types associated with these conflicts.We refined information dependent on provincial political-financial real factors, for example, the presence of Left-wing radicalism (LWE) - the viciousness brought about by equipped insubordinate gatherings asserting adherence to extraordinary Left belief systems - in certain locales of India and the ancestral populace overwhelmed 'Planned Areas' which have unique sacred arrangements for insurance of inborn rights.

The resultant examination, which my associate Thomas Worsdell and I co-composed, uncovers where and why land clashes are happening in India and presents crisp proof of how these land clashes are influencing various segments of the general public and a few portions of business and economy.

We found that progressing land clashes influence lives and jobs of over 6.5 million individuals and over 2.1 million ha of land is secured in the contentions. Rs 13.7 trillion (US $190 billion) of submitted, reserved, and potential speculations were discovered involved in 335 of the 703 land clashes. This comprises 7.2% of the modified gauge of the nation's GDP for 2018–19. These are exceptionally traditionalist assessments recorded at the hour of the documentation of the contentions. The absolute quantum of speculation secured all the recorded clashes at the present costs is probably going to be generously higher.

Around Rs 10.52-trn corporate debt may default over 3 years: India Ratings

Further, around 25 per cent of the vulnerable debt is likely to turn delinquent, resulting in additional Rs 2.54 trillion of delinquent debt.

At least Rs 10.52 trillion worth of corporate loans — around 16 per cent of the system-level corporate debt — is likely to default over the next three years due to prolonged slowdown in the economy. Further, around 25 per cent of the vulnerable debt is likely to turn delinquent, resulting in additional Rs 2.54 trillion of delinquent debt, according to a recent report by India Ratings & Research. This is likely to result in incremental delinquencies to the extent of 4 per cent of the system-level corporate debt, the report adds.

A loan becomes delinquent when a borrower makes payments late (even by one day) or misses a regular instalment payment(s).

India Ratings has taken into account top 500 debt-heavy private-sector issuers for the study after assessing their asset quality. The report buckets issuers in five categories of vulnerability — low, moderate, high, extreme and stressed.

The report details the base, bull and bear case estimates for system-wide credit costs based on the historical default rates and loss, given default for each vulnerability bucket. Credit costs on the corporate book are likely to amount to 2.15 per cent of the system debt in the base case.

"Of the companies which are already stressed (that is, recognised as defaulters by banks and credit rating agencies), lenders to at least half of these companies are likely to be required to take deep haircuts, given the inherently weak asset quality of these issuers," said Arindam Som, analyst at the ratings company.

However, in case the growth in real gross domestic product (GDP) sees a sharp recovery (around 7 per cent over FY21-FY22), delinquencies could be lower by 87 basis points (bps) to 3.13 per cent of the system debt. But, if the slowdown accelerates, to say 4.5 per cent over FY21-FY22, delinquencies could be higher by an additional 159 bps to 5.59 per cent of the system debt, the report added.

India's gross domestic product (GDP) growth slipped to nearly a 7-year-low of 4.7 per cent in the December quarter, owing to contraction in investment and manufacturing output. Looking ahead, GDP growth is set to stagnate at 4.7 per cent in the March quarter (Q4), too, according to the annual estimate by the National Statistical Office (NSO), which has forecast 5 per cent growth for full financial year.

Coronavirus impact: Experts see weakest quarter for global growth since GFC

The main channel of economic disruption at this stage, according to UBS, is largely via reduced tourism flows (in/out of China), and reduced import demand from China.

With coronavirus getting a tighter grip on the China and impacting world trade, most analysts have started lowering global growth forecasts as measured by the gross domestic product (GDP) for the first quarter of calendar year 2020 (Q1-2020). Those at UBS, for instance, expect this would be the weakest quarter for global growth since the global financial crisis (GFC) and on par with the Asian crisis in the late 1990s.

Global GDP, according to Arend Kapteyn, global head of economic research at UBS, will take a serious knock and slip to 0.7 per cent in the January 2020 quarter (Q1-2020) from 3.2 per cent in the December 2019 quarter (Q4-2019). Though he expects growth to rebound in the April – June 2020 quarter, the impact could slow the overall 2020 GDP growth by 20 basis points (bps) to 2.9 per cent.

The main channel of economic disruption at this stage, according to UBS, is largely via reduced tourism flows (in/out of China), reduced import demand from China — particularly of consumption goods — and restrictions imposed by third countries to avoid the virus spreading.

“We expect import growth in China to fall from 3.2 per cent in Q4 to a negative 4 per cent in Q1. The rebound we hope for in Q2 largely reflects delayed consumption effects in China, while the improvement in Q3 reflects the lagged impact of stimulus coming on line, particularly in China,” the UBS report says.

With the number of suspected/confirmed cases rising at an alarming rate, close to 99 per cent of those are in China, reports suggest. The economic impact, experts say, will also be magnified this time around compared to the SARS outbreak as Asia's weight in the global economy has risen from 21 per cent in 2003 to 37 per cent now.

Market News

Seeking turnaround, PM Narendra Modi likely to review ministerial work

The PMO will appraise the departments on their performance over the last six months, and will seek solutions to revive growth.

ECONOMY & POLICY : Over the coming few weeks, Prime Minister Narendra Modi is likely to review each department and ministry’s work to evaluate their performance. The review could culminate in seeking inputs from them to turn around the economy, after the country witnessed its worst slowdown in 26 quarters in the second quarter of 2019-20.

Starting Friday, Narendra Modi and his top officials in the Prime Minister’s Office (PMO) will be briefed by various central ministries and departments on their plans as well as agenda for the next five years. They will also apprise the PMO of the work they have done so far in realising the agenda of government’s second term in office.

According to sources, the PMO will appraise the departments on their performance over the last six months, and will seek solutions to revive growth. The commerce and industry ministry, among others, will present its report card to the PMO on Friday.

A part of the performance review started last month

during the Council of Ministers meeting, with a few key ministries such as agriculture and aviation making their presentations.

The fresh set of review meetings are scheduled to take place on January 3 and 4, 7 and 8, and 13 and 14, depending upon the time taken by each ministry, Business Standard has learnt from government sources.

Officials said there is some talk that the exercise could form the basis for some sort of rejig of portfolios of ministers, but this could not be separately confirmed. The stock-taking exercise could also throw up valuable inputs for the upcoming Union Budget.

Gross domestic product (GDP) growth fell to 4.5 per cent during July-September. The finance ministry had said the slowdown has bottomed out and that it expects a gradual recovery from the October-December quarter. Others disagree.

The Reserve Bank of India now sees GDP growth for the first financial year under the second Modi government at 5 per cent, compared to the 6.1 per cent it projected earlier. While the finance ministry hasn’t put out any revised estimates, officials say it is in line with the RBI.

If GDP growth for the year does come in at around 5 per cent, it will be the slowest growth rate since 2008-09.

Fiscal deficit for April-November likely stood at 107% of FY20 target

For the deficit to be 3.3 per cent of GDP, it assumes a nominal GDP growth of 12 per cent in FY20.

Business Standard : The Centre’s fiscal deficit for April-November likely stood at 107 per cent of the fiscal year 2019-20 target of Rs 7.04 trillion, said senior government sources. This compares to 114.8 per cent for April-November, 2018-19, and 102.4 per cent till the end of October this year.

The April-November fiscal deficit data will be officially released on December 31.

“At end-November, fiscal deficit is at 107 per cent of the full-year target,” said an official. In absolute terms, that comes to around Rs 7.53 trillion.

This means that for the remaining four months of the fiscal year, the Centre has to initiate a heavy compression of expenditure in order to meet the fiscal deficit target, which has been pegged at 3.3 per cent of GDP. For the first half of the year (April-September), fiscal deficit was at 6.6 per cent of the GDP for that period.

However, as reported earlier, the Narendra Modi government is highly likely to miss its fiscal deficit target for 2019-20. It could be between 3.5 per cent to 3.8 per cent of GDP. A final call on the what it will be, within the 3.5-3.8 per cent range, will be taken by Finance Minister Nirmala Sitharaman and her budget team after the advance tax numbers are available in mid-December.

For the deficit to be 3.3 per cent of GDP, it assumes a nominal GDP growth of 12 per cent in FY20. Officials now concede that nominal GDP growth for the year will nowhere be close to 12 per cent. The nominal GDP growth for April-June was 6 per cent and that for July-September was 6 per cent. With the Reserve Bank of India’s latest forecast of 5 per cent real GDP growth for 2019-20, even a 3 per cent deflator would take nominal GDP growth to around 8 per cent.

That means that theoretically, even if the fiscal deficit for the year is Rs 7.04 trillion, as a percentage of GDP, it will shoot up to around 3.5 per cent. Given the revenue scenario, that seems difficult.

While the divestment target is expected to be met and non-tax revenues could even be exceeded, tax revenues remain a major cause of concern and a shortfall of at least Rs 2 trillion is expected in gross tax revenue.

New speed breaker on India's road to $ 5 trn economy; NHAI's mounting debt

NHAI's debt has increased seven-fold in the past five years.

Business Standard : India’s path to economic recovery faces another obstacle, with Prime Minister Narendra Modi asking the state road builder to stop constructing highways after its debt ballooned almost seven-fold over the past five years.

"National Highways Authority of India totally logjammed with unplanned and excessive expansion of roads," the prime minister’s office wrote to NHAI in a letter dated August 17. "NHAI mandated to pay several times the land cost; its construction costs also shooting up. Road infrastructure has become financially unviable."

Modi’s office proposed that NHAI be transformed into a road-asset management company, according to the letter obtained by Bloomberg, and the prime minister’s office asked NHAI to reply within a week.

The decision is a reversal from Modi’s first term, when his administration was praised for its breakneck speed of highway construction that helped make India one of the fastest-growing economies in the world. However this came with the burden of escalating costs, leaving NHAI increasingly dependent on the government for financial support at a time when Modi is looking to contain his budget deficit.

Restricting road-building risks imperiling Modi’s target to make India a $5 trillion economy as roads are necessary for socio-economic development, said Vikash Kumar Sharda, a partner at Infranomics Consulting LLP, who previously consulted for PWC India. “Road is critical infrastructure, and putting breaks on it will not only result in a slowdown of highway construction but also of other sectors that are dependent on it.”

There’s a strong co-relation between economic growth and investments in infrastructure, with roads accounting for about 3.1% of gross value added, Modi’s economic advisers said in a report this year. Data due Friday will probably show India’s gross domestic product expanded 5.7% in the quarter through June, the slowest pace in five years.

Modi’s office now wants NHAI to revert to a model used by his predecessor, where NHAI would auction projects to developers. They’d construct the roads, collect toll from users and then would transfer ownership back to NHAI after an agreed period. Weak private sector participation pushed Modi to scrap this practice and he permitted NHAI to bear as much as 100% of the costs in certain road projects that led to ballooning debt.

One year of GST: Sowing the seeds for fruits of GDP growth in the future

GST may have had issues at the time of roll out and some creases need to be ironed out but it will help India's GDP grow.

One Year Of GST : A year back when GST was being rolled out, this was a point of time when many state legislatures were in the mode of circumspection. GST was long needed for establishing a robust indirect tax system in the country. It came in at a right time when the 'Digital India' campaign had started to succeed in reaching across the length and breadth of the country.


Let’s check out some of the hits that GST has marked for itself :
GST law functioning under a shelter of a robust technology
Despite GSTN having a tight deadline to prepare a robust system to handle various GST compliances like Migration, Registrations, Return filing and Refund processing, a sound and reliable system was set-up for citizens to operate. At times, system software and hardware failed to take the load and hence crashed. Not only this, despite online filing, a manual submission of form RFD-01A - for GST refunds - continues till today. But a look into the legal structure of GST formulated by the GST council and the lawmakers, a proper technology backing is a must. Nevertheless, GSTN is dedicated towards building a strong GST portal in an ongoing effort to resolve tech issues.


Salute to GST council’s statecraft
Uphill task of decision-making that had a nation-wide impact was managed with strong and principled diplomacy. The statesmanship shown by all the members of the state is appreciable. Timely meetings ( offline and through video conferencing ) to discuss various relevant concerns of trade and industry worked well. Handling of the entire process of simplification in GST return filing to make it taxpayer-friendly in short time is welcome.


The revenue figures for May 2018 of GST collected stands approximately at 940 billion, which is above the monthly average GST collected for any previous month.


Despite GST stabilising with anti-tax evasion measures such as e-way bill mechanism, there are few misses that need further deliberation:

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