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Don't expect a snapback for the UK economy after lockdown is lifted | Larry Elliott

Recessions tend to centre on one part of the economy; coronavirus has hit them all. The road to recovery will be long

In a way, Britain should have been the country best prepared for the devastating impact of Covid-19 on the economy, because throughout 2019 barely a day went past without someone popping up to warn of the dangers of a cliff-edge Brexit.

But there are cliff edges and then there’s falling off the cliff, and not even the most pessimistic remainer would have been willing to predict what has happened since the UK went into lockdown at the end of March. While most of the attention has been focused – quite rightly – on the medical emergency, the economy has collapsed.

Continue reading...




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UK unemployment to double and economy to shrink by 14%, warns Bank of England

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Related: Don't expect a snapback for the UK economy after lockdown is lifted | Larry Elliott

Related: Bank of England warns UK economy could shrink 14% in 2020 amid Covid-19 downturn - business live

Related: Bank of England warns UK economy could shrink 14% in 2020 amid Covid-19 downturn - business live

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Impact of COVID-19 on Indian Economy

Impact of COVID-19 on Indian Economy An Overview Impact on Indian Economy Demand Side Impact Supply Side Impact





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COVID-19 impact will remain visible in coming months, need to fight it with impetus on economy: Modi

Prime Minister Narendra Modi on Monday said the impact of coronavirus will remain visible in the coming months and masks and face covers will be part of life while asserting that the country needs to give importance to the economy as well as continue the fight against COVID -19. The remarks came during his interaction with Chief Ministers via video conferencing to discuss the emerging situation and plan ahead for tackling the COVID-19 pandemic.

"The country has seen two Lockdowns till now, both different in certain aspects, and now we have to think of the way ahead. As per experts, the impact of coronavirus will remain visible in the coming months," Modi said, according to an official release.

Reiterating the mantra of 'do gaz doori', he said that "masks and face covers will become part of our lives in the days ahead". "We have to give importance to the economy as well as continue the fight against COVID -19," Modi said. The Prime Minister underlined that the lockdown has yielded positive results as the country has managed to save thousands of lives in the past one and a half months.

"India's population is comparable to that of the combined population of several countries. The situation in many countries, including India, was almost similar at the start of March. However, due to timely measures, India has been able to protect many people," he said.

Prime Minister Modi, however, forewarned that the danger of the virus is far from over and constant vigilance is of paramount importance. "Prime Minister Modi added that under the circumstances, everyone's aim must be rapid response. He pointed out that many people are self-declaring whether they have cough and cold or symptoms, and that this is a welcome sign," the release said.

The Prime Minister emphasised on the importance of usage of technology as much as possible and also to utilize time to embrace reform measures and on the significance of ensuring that more people download the AarogyaSetu app to bolster the efforts of the country in the battle against COVID-19.

"We have to be brave and bring in reforms that touch the lives of common citizens. People associated with Universities can be integrated on devising ways to fight the pandemic and strengthen research as well as innovation," he said. He also highlighted the importance for states to enforce guidelines strictly in the hotspots i.e. the red zone areas. "The efforts of the states should be directed towards converting the red zones into orange and thereafter to green zones," he said.

On the issue of getting back Indians who are overseas, the Prime Minister said that this has to be done keeping in mind the fact that they don't get inconvenienced and their families are not under any risk. He also urged Chief Ministers to factor in the changes in weather - advent of summer and monsoon - and the illnesses that can potentially come in this season, while strategizing ahead. Union Home Minister Amit Shah reaffirmed the need to enforce lockdown so that maximum lives are saved.

"The Chief Ministers praised the leadership of the Prime Minister during this period of crisis, and also highlighted the efforts undertaken by them in containing the virus. They spoke about the need to keep a close vigil on international borders, and also on addressing the economic challenge and ways to further boost health infrastructure. The leaders expressed gratitude towards the police force and medical staff for the exemplary work done by them in the fight against COVID-19," read the release.

This was the fourth such interaction of the Prime Minister with the Chief Ministers, the earlier ones had been held on March 20, April 2, and April 11. Today's meeting comes just a week ahead of the scheduled ending of the nationwide lockdown. On March 24, the Prime Minister had announced a 21-day lockdown as a precautionary measure to contain the spread of COVID-19. The lockdown was later extended till May 3.

Catch up on all the latest Crime, National, International and Hatke news here. Also download the new mid-day Android and iOS apps to get latest updates.

Mid-Day is now on Telegram. Click here to join our channel (@middayinfomedialtd) and stay updated with the latest news

This story has been sourced from a third party syndicated feed, agencies. Mid-day accepts no responsibility or liability for its dependability, trustworthiness, reliability and data of the text. Mid-day management/mid-day.com reserves the sole right to alter, delete or remove (without notice) the content in its absolute discretion for any reason whatsoever




economy

'Need to focus on economy as well'

As India enters the final week of the lockdown, Prime Minister Narendra Modi on Monday conveyed to chief ministers that the country will have to give importance to the economy as well as continue the fight against the Novel Coronavirus.

In a video-conference with the chief ministers, fourth such interaction since March 22 when he first spoke to them on the pandemic, Modi also highlighted the importance for states to enforce prescribed guidelines strictly in the Coronavirus hotspots, the government said in a statement.

The PM underlined that the nationwide lockdown has "yielded positive results as the country has managed to save thousands of lives in the past one-and-a-half months", it said. "The PM said that the country has seen two lockdowns till now, both different in certain aspects, and now we have to think of the way ahead. He said that as per experts, the impact of Coronavirus will remain visible in the coming months," the statement added.

Modi also said that masks and face covers will become part of lives of people in the days ahead, adding everyone's aim must be to ensure rapid response under the current circumstances. He emphasised on the importance of the use of technology as much as possible. "The situation in many countries, including India, was almost similar at the start of March. However, due to timely measures, India has been able to protect many people," the statement said quoting the Prime Minister.

CRPF reaches out to cops over jawan's arrest

The CRPF has taken up with the Karnataka Police the "unpleasant" case of alleged manhandling and handcuffing of its CoBRA commando by cops and has sent a team to follow-up on the matter, officials said on Monday. The CoBRA unit of the CRPF specialises in guerrilla tactics and jungle warfare. The force has written a letter to Karnataka Director General of Police (DGP), Praveen Sood stating that the "unpleasant situation could have been avoided had the state police taken the CRPF hierarchy into confidence before making the arrest" of the jawan on April 23 in Belagavi district.

As govts decide on next plan of action...

. SC rejects petition: The SC on Monday declined to entertain a petition seeking direction to the Centre to conduct en masse door-to-door testing for COVID-19 and challenging the validity of PM CARES fund, and termed it having "political colour."

. Kanpur a Corona hotspot: With 33 more Corona positive cases emerging in the past 24 hours, Kanpur is now a major COVID-19 hotspot in UP after Agra. The tally of Corona positive cases in Kanpur is now 185 and the city has 25 hotspots.

.Lockdown extension: Odisha Health Minister, Naba Kishore Das on Monday said that the COVID-19 lockdown should be extended for another month. "There is a need for the extension of lockdown and it should further be extended by one month," said Das after attending the video-conference of Prime Minister, Narendra Modi and chief ministers of all states.

. COVID cess on ultra-rich: Former Karnataka chief minister, H D Kumaraswamy on Monday suggested imposing "COVID cess" on the ultra rich to offset the loss of revenue, as he called for citizen-centric measures and lower the cost of living, to help those affected by the lockdown.

. Relaxations in Meghalaya: The Meghalaya government on Monday relaxed a number of activities including sale of essential goods, courier services for essential goods, e-commerce operations in essential goods and Common Service Centres during the lockdown period.

Catch up on all the latest Crime, National, International and Hatke news here. Also download the new mid-day Android and iOS apps to get latest updates.

Mid-Day is now on Telegram. Click here to join our channel (@middayinfomedialtd) and stay updated with the latest news

This story has been sourced from a third party syndicated feed, agencies. Mid-day accepts no responsibility or liability for its dependability, trustworthiness, reliability and data of the text. Mid-day management/mid-day.com reserves the sole right to alter, delete or remove (without notice) the content in its absolute discretion for any reason whatsoever




economy

FM Nirmala Sitharaman Inherits an Economy Facing a Number of Headwinds

Posted by Equitymaster
      

A former defense and trade minister, Nirmala Sitharaman became the first woman finance minister of India after Indira Gandhi.

She has inherited an economy facing a number of risks.

She faces immense challenges as finance minister. India's economy is starting to splutter on the back of a slow-down in consumption and private investment.

Fixing this and jump-starting the economy are the first order of business.

The data released on Friday was disappointing at different levels.

Lower growth in GDP, stagnant growth in core sector in April 2019, and the government just about managing the 3.4% deficit number in FY19 pose puzzles for the new Cabinet which assumes responsibility of kick-starting the economy.

A look at key macroeconomic indicators presents a gloomy picture.

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Sinking GDP Growth Means FM Nirmala Sitharaman has to Push for Sweeping Reforms

According to the data released by the Central Statistics Office on Friday, gross domestic product (GDP) grew by only 5.8% in the last quarter of financial year 2019 (FY19), between January and March.

GDP Growth Slips to 5-Year Low


The data demonstrates GDP growth slowing steadily, from 8 to 7 to 6.6% in the first three quarters of FY19.

The signs of slowdown are visible throughout the economy.

Growth of Core Sector Industries Remained Flat

India's core economy grew at 4.3% in FY19, its second slowest pace in the past 5 years, down from 4.9% in FY15, according to latest data by the ministry of commerce and industry.

The 8 core industries include Coal, Crude Oil, Natural Gas, Refinery, Fertilisers, Steel, Cement, and Electricity.

8 Core Sectors Report Flat Growth in FY19


The growth rate is also flat since fiscal FY18 which had also recorded a 4.3% growth.

Manufacturing and Services Sector Activity Decelerates

Core sector growth will have a direct impact on the Index of Industrial Production (IIP) as these sectors account for a major chunk of total factory output.

Worries Rise as Factory Output Shrinks in March


The Index of Industrial Production (IIP) and the Manufacturing Purchasing Managers' Index (PMI) are used to gauge the level of activity in the manufacturing sector.

What Does the PMI Say?


The country's manufacturing sector performance fell to an eight-month low in April as new business growth moderated, curbed by the elections and a challenging economic environment.

The Nikkei India Manufacturing Purchasing Managers' Index declined from 52.6 in March to 51.8 in April, reflecting weakest improvement in business conditions since August 2018.

However, this was the 21st consecutive month that the manufacturing PMI remained above the 50-point mark.

In PMI parlance, a number above 50 means expansion, while a score below that denotes contraction.

The April PMI data indicated a softer increase in new orders had restricted growth of output, employment, and business sentiment.

Further, the Indian service sector lost momentum in April, with rates of new business and output growth both cooling to seven-month lows.

Indian Service Sector Loses Momentum Too


Falling from 52.0 in March to 51.0 at the start of FY19, the seasonally adjusted Nikkei India Services Business Activity Index pointed to the weakest upturn in output since last September.

Besides these, there are many other indicators of a slowdown.

A decline in consumer demand, a slowdown in government spending, and weak private investment have likely impacted India's growth in the fourth quarter.

One such high frequency indicator is automobile sales.

What do these numbers indicate?

Vehicle sales are a very important economic indicator about how the people of India feel about their economic prospects.

After all, no one is forcing anyone to buy a car and given that if a consumer buys a car, he chooses to make a down payment and/or take on an EMI.

This is only possible if the consumer is feeling positive about his future economic prospects.

Automobile Sales Skid as Demand Remains Sluggish


On Saturday, India's largest carmaker, Maruti Suzuki, reported a 22% decline in sales in May, the lowest in seven years.

Other auto-makers such as Tata Motors, Eicher Motors, and Hero Moto Corp reported declines in sales too.

All these economic indicators basically provide evidence of the Indian economy slowing down further since January 2019.

Another major area that needs immediate attention by the government, is job creation.

According to a CMIE survey, the unemployment number stands at 41 million people. That is too big a number to be ignored.

Now, job creation at such a mass level won't be a walk in the park. To set the wheels in motion, the government will have to look at infrastructure spending.

Capacity expansion in new projects has seen a gradual slowdown in the past few years.

Infra Capacity Expansion Likely to Be the Key Focus of the Modi Government


From Rs 3.3 trillion in June 2018, the number has come down sharply to Rs 2.1 trillion as of March 2019.

Co-head of research, Tanushree Banerjee believes this is first area the government will look to focus on.

Apart from creating jobs in the infrastructure sector, it opens a lot of other avenues.

Here's an excerpt of what she wrote in The 5Minute WrapUp:

  • Better infrastructure will mean better connectivity to non-metros. This will attract manufacturing companies to set shop in these towns. It will give a boost to the urbanisation of the population.

    This is a trend I see clearly playing out in the coming years.

    Infrastructure spending -> Improved roads -> Increased two-wheeler sales.

    It is just one of the 50 irreversible trends I believe will carry the Sensex to 1,00,000.

Typically, when the capacity utilisation rises, it prompts companies to expand their capacities. If this gradual pick-up sustains, it could lead to a pick-up in private sector investment.

Thus, a revival in the investment cycle could be underway despite the current economic slowdown.

And, as far as equity markets are concerned, participants were expecting a weak fourth quarter growth data.

As such, the now published data may not weigh on the market but will raise expectations from the government and the RBI.

The pressure points in the form of finance, tax rates, infra expenditure, specific sector-related policies etc, must be addressed.

While the weak GDP data will be an important input for the Union Budget.

Most investors are now keen to know what's in store in the first week of July.

Warm regards,
Rini Mehta



This article (FM Nirmala Sitharaman Inherits an Economy Facing a Number of Headwinds) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.




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