Business Live: India will have to installed big enough stimulus bundle to restore call for, says Abhijit Banerjee
After the sharp fall witnessed yesterday, stocks have opened this morning with modest gains.
Join us as we track the top business news through the day.
COVID-19 challenge: India needs a stimulus package, says Professor Abhijit Banerjee
Nobel laureate Abhijit Banerjee in a conversation with former Congress president Rahul Gandhi, an edited video of which was released by the party on Tuesday, said India needed stimulus package to increase spending and revive demand to face the challenge posed by the COVID-19 pandemic.
This is the second conversation in a series of dialogues planned by the Congress on the novel coronavirus challenge.
Asked about micro small medium enterprises (MSMEs) going bankrupt because of a lockdown shock, Dr. Banerjee said spending should be increased to revive demand and the economy.
“That’s the reason, a lot of us have been saying that we need a stimulus package. That’s what the U.S. is doing, Japan is doing, Europe is doing. We really haven’t decided on a large enough stimulus package. We are still talking about 1% of GDP. United States has gone for 10% of GDP,” Dr. Banerjee said.
IMF estimates global output gap due to lockdown at $9 trillion
NBFCs ask RBI for one-time restructuring of all loans till March 2021
The shadow banking sector, which has been rattled by the coronavirus lockdown, has demanded further regulatory relief from the RBI.
PTI reports: “Non-banking financial companies (NBFCs) have asked the Reserve Bank of India to allow them one-time restructuring of all loans till March 2021, as their borrowers are facing funding issues amid the coronavirus pandemic and the subsequent lockdown.
NBFCs have also demanded for extension of the Reserve Bank of India’s moratorium to them, relaxation on provisioning norms and additional funding from Small industrial Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) through refinance mechanism.
These suggestions were made by the industry players in their meeting with the Reserve Bank of India (RBI) held on Monday, according to the Finance Industry Development Council (FIDC), a representative body of lending NBFCs.
The industry body said all their customers are facing disruptions in cash flow cycles, which is likely to be there for the major part of this fiscal. The most affected segments include transport operators, contractors and Micro, Small & Medium Enterprises (MSMEs).
“A one-time restructuring window should be allowed till March 2021 for amending the loan repayment schedules and/or extending loan tenures or restructuring the EMIs, without affecting the asset classification, in line with the revised expectation of cash flows of our customers,” FIDC said in a statement.
Currently, RBI has allowed banks and NBFCs for a one-time restructuring of existing loans to MSMEs till December 2020.”
Corona fee sends major liquor stocks plunging
The revenue-starved Delhi government’s tax on liquor hasn’t gone too well with investors in liquor shares.
IANS reports: “Stock prices of major liquor stocks, including United Spirits and Radico Khaitan plunged on Tuesday after the Delhi government imposed a 70 per cent ‘special corona fee’ on the sale of alcohol in the city.
Other states like Andhra Pradesh have also raised taxes on liquor as all possible avenues of boosting revenue are being explored to fight Covid-19 outbreak.
Around 11.30 a.m., shares of Radico Khaitan, the maker of Magic Moments and Rampur Indian Single Malt Whisky, were at Rs 303.85, lower by Rs 12.75 or 4.03 per cent from its previous close.
Stocks of United Spirits were at Rs 527.65 per share, lower by Rs 13.95 or 2.58 per cent from the previous close. United Spirits produces the brands Black Label, Black Dog and ‘Smirnoff’ vodka among others.
Further, the scrip of United Breweries, the maker of the ‘Kingfisher’ brand of beer, also fell around two per cent. Around 11.30 a.m. it was trading at Rs 948.55, lower by Rs 21.55 or 2.22 per cent from the previous close.
In an order issued late on Monday night, the Finance Department imposed the fee, describing it as the 70 per cent of the maximum retail price on all categories of liquor sold through retail licensees for consumption “off” the premises.”
Diesel turns costlier by Rs 7.10 in Delhi, petrol price also up
States starved of tax revenues due to the nation-wide lockdown are opting to raise taxes to fund spending.
IANS reports: “Diesel has become costlier by Rs 7.10 per liter in Delhi while petrol prices were increased by Rs 1.67 per liter on Tuesday.
The Delhi government in an order dated May 4 announced to increase the Value Added Tax (VAT) on petrol to 30 per cent from the existing 27 per cent while 30 per cent on diesel from the existing 16.75 per cent.
According to Delhi government officials, the move to hike fuel prices is expected to boost the government revenue, which has been hit hard due to the coronavirus lockdown.
On Monday night, the Delhi government had also ordered to impose a 70 per cent ‘Special Corona Fee’ cess on liquor.
After the prices of the petrol and diesel were increased, Deputy Chief Minister Manish Sisodia, who also holds the portfolio of Finance Minister, in a tweet said, “Life isn’t all about rainbows and sunshine. Tough times need Tough solutions — my learning as Finance Minister.””
Oil prices rise on demand prospects as lockdowns start to ease
The oil market, which has been hit hard by the drop in demand due to the global lockdown, is showing signs of revival as governments ease restrictions.
PTI reports: “Oil prices climbed in early trade on Tuesday, adding to gains in the previous session, on expectations that fuel demand will begin to pick up as some U.S. states and nations in Europe and Asia start to ease coronavirus lockdown measures.
Brent crude futures hit a high of $28.37 a barrel in early trade and were up 4.1%, or $1.12 cents, at $28.32. Brent is up for a sixth straight day.
Prospects improved for fuel demand as some U.S. states and several countries, including Italy, Spain, Portugal, India and Thailand, began allowing some people to go back to work and opened up construction sites, parks and libraries.
“Considering … the depths of demand destruction, markets are probably inclined to take any good news relatively quickly,” said Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group.
Global oil demand probably collapsed by as much as 30% in April, analysts have said, and the recovery is likely to be slow, especially with airlines expected to remain largely grounded for months to come.”
Rupee rises 15 paise to 75.58 against US dollar in early trade
Tracking gains in domestic equities, the rupee has recorded a modest recovery against the dollar this morning.
PTI reports: “The rupee appreciated by 15 paise to 75.58 against the US dollar in early trade on Tuesday tracking positive opening of domestic equities and weakness in the American currency.
Forex traders said a positive start of domestic stocks supported the local unit, while sustained foreign fund outflows and concerns over coronavirus outbreak weighed on the local unit.
At the interbank foreign exchange, the rupee opened at 75.62, then gained ground to touch 75.58, registering a rise of 15 paise over its previous close.
On Monday, the rupee had settled at 75.73 against the US dollar.
Domestic bourses were trading on a positive note on Tuesday with the benchmark Sensex trading 256.81 points higher at 31,972.16 and broader Nifty rising 132.85 points to 9,426.35.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.01 per cent down at 99.47.
Traders said investor sentiments remained fragile amid concerns over the impact of coronavirus outbreak on the domestic as well as global economy.”
India should put in large enough stimulus package to revive demand, says Abhijit Banerjee
In his conversation with Congress leader Rahul Gandhi, Nobel laureate Abhijit Banerjee emphasized the need for a much larger stimulus package to help the poor and revive the economy.
PTI reports: “India should put in a large enough stimulus package to revive demand, Nobel laureate Abhijit Banerjee said on Tuesday, asserting that putting cash in the hands of people would be the best way to boost the economy post lockdown.
Banerjee, while talking to Congress leader Rahul Gandhi through video-conferencing, suggested giving money into the hands of the bottom 60 per cent population to help revive demand.
He was deliberating on the economic impact of the COVID-19 pandemic with Gandhi as part of a series of dialogues broadcast on Congress’ social media handles.
Banerjee said it was important for India to announce a large enough stimulus package to deal with the crisis on the lines of what the US, Japan and the Europe are doing.
“We really haven’t decided on a large enough stimulus package. We are still talking about 1% of GDP. The United States has gone for 10% of GDP,” the noted economist said.
“We have done one thing that I think is wise, which is to kind of put a moratorium on debt payments. We could do more than that. We could even say that the debt payments for this quarter will be cancelled and will be taken care of by the government,” he said.”
₹18,500 crore debt to be repaid in three months: MFIs tell RBI
With banks declining to extend a moratorium to non-banking finance companies and micro-finance institutions, micro-lenders have informed the Reserve Bank of India that they have to repay a debt of ₹18,500 crore in the next three months.
Though the NBFCs have extended loan moratorium to their customers, in the absence of a similar benefit from their lenders, that is commercial banks, they are staring at a potential liquidity crisis. Their woes have been compounded as banks are reluctant to extend loans. RBI Governor Shaktikanta Das met NBFCs, including MFIs, and mutual fund industry representatives in two separate meetings on Monday.
Micro-lenders’ association Sa-dhan, which attended the meeting, suggested direct lending by the RBI to micro-finance institutions to tide over the liquidity crisis.
Sensex jumps over 500 points in opening trade; Nifty tops 9,400
The benchmark stock indices have opened with modest gains this morning after the steep 6% fall yesterday.
PTI reports: “Equity benchmark Sensex surged over 500 points in opening trade on Tuesday led by gains in index-heavyweights Reliance Industries, HDFC duo and ICICI Bank amid thin trade in Asian markets.
After hitting a high of 32,264, the 30-share index was trading 431.74 points or 1.36 per cent higher at 32,147.09, and the NSE Nifty rose 114.25 points, or 1.23 per cent, to 9,407.75.
ONGC was the top gainer in the Sensex pack, rallying over 5 per cent, followed by M&M, Bharti Airtel, IndusInd Bank, ICICI Bank, PowerGrid and Tech Mahindra.
On the other hand, Asian Paints, Titan and Ultratech Cement were the laggards.
In the previous session, the BSE barometer settled at 31,715.35, plunging 2,002.27 points, or 5.94 per cent. The broader Nifty suffered a heavy loss of 566.40 points, or 5.74 per cent, to close at 9,293.50.
Foreign portfolio investors were net sellers in the capital market on Monday, as they offloaded equity shares worth Rs 1,373.98 crore, according to provisional exchange data.
According to traders, the market recovered from Monday’s lows as stock-specific action lifted key indices.”