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Coronavirus lockdown to cost India nearly $100 billion, claims ratings agency

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The economy is expected to lose nearly $100 billion during the 21-day lockdown due to coronavirus, a credit rating agency said. Each day of the shutdown may cost the economy more than $4.5 billion, Acuite Ratings said in a report. In the last week of March, Prime Minister Narendra Modi announced a three-week complete lockdown of the country until April 14 to prevent spread of coronavirus. Q1FY21 GDP is expected to see a risk of contraction to the tune of 5 per cent to 6 per cent with Q2 also likely to record a muted growth, the rating agency also said. Despite the expectation of a significant economic revival in the second half, the overall GDP growth for FY21 may remain in the range of 2 per cent to 3 per cent, Acuite Ratings added.

The worst affected services due to the lockdown include transport, hotel and restaurant and real estate. These industries account for nearly 22 per cent in GVA. "We are expecting around 50% loss in these sectors in Q1 of FY21. Agricultural sector that accounts for 15% of GVA will be relatively less impacted as crop harvesting and food distribution activities will continue; however, livestock and fishery segments to witness mute demand and lower the sector's average 3.5-4% growth", Acuite Ratings said in the report.

Moody's Investors Service has also slashed its estimate of India's GDP growth for the calendar year 2020 to 2.5 per cent from an earlier estimate of 5.3 per cent, citing the rising economic cost of the coronavirus pandemic.

Meanwhile, both the government and the RBI have announced a slew of measures to mitigate the negative impact of COVID-19 on the economy. Finance Minister Nirmala Sitharaman last month announced a relief package worth Rs 1.70 lakh crore to help the nation's poor tackle the financial difficulties arising from coronavirus outbreak. Similarly, the RBI has announced proposals to provide relief to the loan borrowers, state governments, exporters and banks.

RBI announces more measures to deal with coronavirus fallout

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A week after announcing several steps to boost demand in the wake of coronavirus crisis in India, the Reserve Bank of India (RBI) on Wednesday launched additional measures. The central bank has decided to extend realisation period of export proceeds, limits of way and means advances (WMA) of states/UTs, and mechanism for counter-cyclical capital buffer (CCyB).

Extension of export proceeds realisation period

Presently, the value of the goods or software exports made by the exporters is required to be realised fully and repatriated to the country in 9 months from the date of exports. The RBI has now extended the time for exports made up to or on July 31, 2020, to 15 months from the date of export. The measure will enable them to realise receipts, especially from COVID-19 affected countries, in the extended period and provide greater flexibility to negotiate future contracts.

Review of WMA limit enhanced

The RBI has decided to increase the WMA limit by 30 per cent from the existing limit for states/UTs to enable them to tide over the situation arising from the COVID-19 pandemic. The revised limits will come into force from April 1 till September 30.

Implementation of countercyclical capital buffer extended

The RBI had put in place the framework on counter-cyclical capital buffer (CCyB)  on February 5, 2015, wherein it was advised that the CCyB would be activated as and when the circumstances warranted. This framework envisages the credit-to-GDP gap as the main indicator, which is used in conjunction with other supplementary indicators, the RBI said. Based on the analysis of CCyB indicators, the apex bank has decided that it is not necessary to activate CCyB for one year or earlier, central bank said.

Amid the 21-day lockdown in India, the RBI's Monetary Policy Committee, in its meeting held between March 24-27, decided to cut repo rate by 75 basis points to 4.4 per cent, while the reverse repo rate has been reduced by 90 basis points. Calling the current times "extraordinary circumstances", the RBI Governor said the MPC voted for a sizeable reduction in repo rate to revive growth, mitigate COVID-19 impact.

Coronavirus effect: GST collection slips below Rs 1 lakh crore mark in March, hits 5-month low

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Goods and services tax (GST) collection has slipped below the Rs 1 lakh crore mark in March, hitting five month low of Rs 97,597 lakh crore, due to the impact of the novel coronavirus outbreak on the economy. In the last four month, the GST collection had crossed the Rs 1 lakh crore mark on the back of anti-evasion steps taken by tax officers.

The GST revenue collection stood at Rs 97,597 lakh crore in March, reporting a decline of 4 per cent over the same month last year. The collection, however, was lower than the Rs 1.05 lakh crore collected in February 2020. The total number of GSTR-3B Returns filed for the month of February up to March 31, 2020 was 76.5 lakh.

The GST collection for March include CGST (Central GST) of Rs 19,183 crore, while SGST (State GST) and IGST (integrated goods and services tax) have been recorded at Rs 25,601 crore and 44,508 crore, respectively. Cess for the month stands at Rs 8,306 crore.

"The gross GST revenue collected in the month of March, 2020 is Rs. 97,597crore of which CGST is Rs. 19,183 crore, SGST is Rs. 25,601 crore, IGST is Rs. 44,508 crore (including Rs. 18,056 crore collected on imports) and Cess is Rs. 8,306 crore (including Rs. 841 crore collected on imports)," according to a statement released by Ministry of Finance on Wednesday.

Taking into account the GST collected from import of goods, the total revenue during March has decreased by 8 per cent in comparison to the revenue during March, 2019. During last month, the GST on import of goods has shown a negative growth of (-) 23 per cent as compared to March, 2019.

For the full financial year 2019-20 (FY20), the GST for domestic transaction has reported a growth of 8 per cent over the revenues during last year. During the year, GST from import on goods fell down by 8 per cent on the yearly basis. Overall, gross GST revenues rose at 4 per cent over the same period last year.

As per the statement, the government settled Rs 19,718 crore to CGST and Rs 14,915 crore to SGST from IGST as regular settlement. In addition, Centre has also apportioned unsettled balance IGST of Rs 6,000 crore on ad-hoc basis in the ratio of 50:50 between centre and States/UTs. The total revenue earned by central government and the state governments after regular settlement in the month of March was Rs 41,901 crore for CGST and Rs 43,516 crore for the SGST.

Coronavirus scare: India Ratings cuts India's GDP forecast to 3.6% from 5.5% for FY21

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Amid the nationwide lockdown in the wake of coronavirus outbreak, India Ratings and Research (Ind-Ra) has cut India's gross domestic product (GDP) growth forecast to 3.6% from 5.5% for the financial year 2020-21 (FY21). The spread of COVID-19 and the resultant nationwide lockdown imposed till April 14 will cripple most economic and commercial activities, the agency said in a latest report.

The agency has also lowered GDP forecast for current fiscal to 4.7% (9MFY20: 5.1%) from the National Statistical Office's advance estimate of 5%. It expects the GDP growth to come down to 3.6% in 4QFY20 and 2.3% in 1QFY21. This is the rating agency's fifth revision in GDP forecast so far. It had revised the GDP growth forecast to 5.6 per cent in January.

"The revision is based on the assumption of lockdown continuing till end-April 2020 (full or partial) and gradual restoration of economic activities May 2020 onwards," Indian subsidiary of Fitch group said in its report.

In the last one week, several rating agencies have cut its growth estimate for India due to the coronavirus pandemic. S&P Global Ratings has slashed its forecast for FY21 to 3.5% from its earlier estimates of 5.2% as it expects coronavirus to hit output. While CRISIL has lowered India's FY21 growth forecast to 3.5%, Moody's Investors Service had slashed India's GDP growth projection for 2020 to 2.5% from 5.3%.

As per Ind-Ra report, average growth is forecasted to decline to 2.8% in H1FY21 (April-September period) versus 5.3% in H1FY20 and recover to 4.3% in H2FY21 (H2FY20: 4.2%), due to the base effect and a gradual recovery and restoration of supply chain.

Some of the initial and visible impact of the spread of COVID-19 on the India economy has been the disruption in the production of select manufacturing sectors due to the breakdown of supply chain, near collapse of tourism, hospitality and aviation sectors and a rise in the work load of the healthcare sector. The micro, small and medium enterprises (MSMEs), irrespective of the sector they operate in, have begun to witness cash flow disruptions. This is not to say that other sectors are not impacted.

India Ratings, however, said that some the services sectors such as financial services, IT and IT enabled services have greater flexibility in their operations and they quickly readjusted or are readjusting their operations by allowing employees to work from home.

According to Ind-Ra, panic has gripped the Indian capital markets like elsewhere in the world. A changed outlook of investors has led to a huge outflow of capital and the rupee has come under intense pressure. Also, significant wealth erosion would impact the consumption levels, it said.

Adding to the woes, disruption in maturing and harvesting of rabi crop coupled with inability of agricultural markets to timely procure them could hit the farmers' income and rural demand. A stop on the construction activities will accelerate the problems of the real estate sector which is still struggling to access funding in the middle of a meltdown in the NBFC and banking sectors, it said.

It is notable that after agriculture, construction is the largest employment generator in the Indian economy.

Besides, closure of non-essential commercial establishment and multiplexes will also have a ripple effect on many sectors, the report said. This will led to decline in demand for consumer durables, entertainment, sports, wholesale trade, transport, tourism, hospitality etc.

In a bid to minimise the adverse impact of COVID-19 and the lockdown, both government and the Reserve Bank of India have announced several measures. The government has so far announced measures which are focussed on easing business related processes/compliance and a package for the vulnerable sections of the society. Similarly, the regulator has responded to the evolving situation in two tranches. In the first one, it announced measures to avert any immediate disruption in the financial system through a liquidity infusion and in the second one, it has eased the regulatory and supervision related norms to mitigate the financial stress building up in the system.

Ind-Ra expects the government to announce more measures in the coming days/weeks to mitigate the pains and concerns of the other sectors of the society/economy.

Battle against coronavirus: Maruti ties up with AgVA Healthcare to produce 10,000 ventilators per month

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India's largest carmaker Maruti Suzuki India Ltd on Saturday said it had entered into an arrangement with AgVA Healthcare to try and produce up to 10,000 ventilators per month to help bridge the shortfall of the life-saving medical device in the ongoing battle against the coronavirus pandemic.

Maruti said AgVa Healthcare, which is an existing approved manufacturer of ventilators, would be responsible for the technology, performance and related matters for all the ventilators produced and sold by them. The company would use its suppliers to produce the required volume of components and use its experience and knowledge to upgrade systems for the production and quality control of the higher volumes.

"Any other assistance required would also be provided. MSIL would also help, to the required extent to arrange to finance and obtain all permissions and approvals required to enable the higher production. MSIL would provide these services free of cost to AgVa Healthcare," the company said in a statement. "The intention is to reach a volume of 10,000 units per month."

A ventilator is a mechanical breathing device that can blow air and oxygen into the lungs and are critical in the treatment of people with lung failure, a complication suffered by patients with severe COVID-19. It costs anywhere between Rs 5-12 lakh. Currently, India imports around 80-85 per cent of all medical devices for intensive care, including ventilators.

With the number of COVID-19 cases in India rising every day and the death toll reaching 20, the shortage of ventilators in the country is likely to get woefully exposed in the days to come. According to a Brookings report, if the number of cases spirals in India, it may need as many as 1,10,000-2,20,000 ventilators as early as mid-May. It estimated the number of ventilators today in the country at a maximum 57,000.

The Indian government has reached out to other companies including Mahindra and Mahindra, Tata Motors and Hyundai to look at ways to manufacture ventilators expeditiously. Two days ago, Mahindra had said it had indigenously developed a low-cost Rs 7,500 ventilator and is talking to two PSUs in the sector for developing it further. Responses to a detailed questionnaire sent to Mahindra are awaited.

Hyundai has also said it has begun the process of importing COVID-19 advanced diagnostic testing kits that can serve 25,000 people in India from South Korea.

"We are committed to supporting the government's spirited fight against COVID-19 crisis. Our contribution towards supplies of advanced diagnostic testing kits will help over 25,000 people," said SS Kim, Managing Director and CEO, Hyundai Motor India Ltd. "We will continue to monitor the situation closely and support the Indian government with multi-layered CSR initiatives to bring back normalcy at the earliest."

Besides the ventilator production, Maruti is also looking into the possibility of producing masks and other protective equipment. Krishna Maruti Limited, a joint venture of MSIL with Ashok Kapur, would manufacture 3-ply masks for supply to the Haryana and Central governments. Production is expected to start as soon as all approvals are received. Kapur would also provide 2 million masks free of cost as his contribution.

Another MSIL joint venture Bharat Seats Limited would be manufacturing protective clothing as soon as all approvals are in place. "All manufacturing units would take maximum care to protect the safety and health of the workers in accordance with the government recommended practices," the company said.

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