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Government looking to lure businesses moving out of China with seamless land acquisition policy: Report

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With countries looking to reduce dependence on China after the coronavirus pandemic, India is looking to seize the chance to lure foreign investors searching for new shores.

India is preparing 461,589 hectares of land across the country, for businesses looking to migrate out of China, sources told Bloomberg. Twice as large as Luxembourg (243,000 hectares), the land pool includes areas in Maharashtra, Gujarat, Andhra Pradesh and Tamil Nadu, it said.

Moneycontrol could not independently verify the report.

The central government is working along with the states to smooth the processes and availability of land as the scope now is huge, it noted. Presently, investors have to acquire land on their own, where disputes with small land owners holding on to plots delay projects.

Thus, providing accessible land would solve a major hurdle and attract investors who openly expressed their intent to move away from China. Many companies suffered global supply chain disruptions as the concentration of business in China proved to be harmful when regions locked down due to the COVID-19 pandemic.

COVID-19 | Q1 global contractions indicate a deepening crisis

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Due to the spread of coronavirus and the global lockdown, multilateral organisations and international agencies have been predicting the worst economic downturn since Great Depression. All are almost unanimous on this view for two main reasons. First, the virus has affected both the developed and developing economies simultaneously. Its geographical coverage is now expanding. It is not just China, Europe and the United States; it is now spreading fast into Russia, Turkey, South Asia, West Asia and Latin America.


Second, it has drastically reduced both demand and supply. When the governments themselves have directed industry and services to shut operations, traditional stimulus packages have little meaning.


Now it is not just forecasts, actual GDP numbers for Q1 2020 for some major economies are out. The extent of their decline has surpassed some earlier predictions. The European Union’s (EU)’s statistical agency, Eurostat, has reported that for the 2020 first quarter, the GDP in 19 Eurozone economies has shrunk by 3.8 percent. The same figure for 27 EU economies is minus 3.5 percent. France, the second-largest economy in the EU, has announced that its GDP has dropped by minus 5.6 percent, its biggest drop since 1949. This drop is much bigger than recorded during the financial crisis in Q1 2009 (–1.6 percent) or during political upheaval in Q2 1968 (–5.3 percent). Except food, all sectors have seen contraction, with the sharpest decline in engineering goods and construction

Compared to the previous quarter, the Italian GDP dropped by 4.7 percent. Similarly, the Spanish economy contracted by 5.2 percent  and the Austrian economy by 2.5 percent. When released, the German economic numbers may show similar trends. Christine Lagarde, President of the European Central Bank (ECB), says that the euro area is “facing an economic contraction of a magnitude and speed that are unprecedented in peacetime”. The ECB now estimates that in 2020, the fall of euro area GDP could be between five and 12 percent.


The United States has also reported that in Q1-2020, its GDP has decreased by minus 4.8 percent. In the previous quarter, the US had shown a healthy growth of 2.1 percent. China, the second-largest economy, which was affected first, earlier declared a 6.8 percent decline in the first three months of 2020 from a year ago. This is the first time China has seen this kind of decline since it started recording quarterly data since 1992.


With more than 42,000 infections and already close to six weeks of national lockdown, India’s growth story cannot be very different. Earlier, the International Monetary Fund (IMF) predicted about 2 percent GDP growth in India in 2020. With the developing global recession, India will be fortunate if it is able to achieve this. The economy was already weakening when lockdown started. Still, developing economies such as India, may perform slightly better. Agriculture and basic food items are lest affected by lockdowns. Also, a large number of people in these countries still depend on agriculture and spend significant part of their earnings on food items. India is also less integrated with global value chains.


Since lockdowns started in March in many countries, a much bigger downturn is expected in the second quarter. IMF chief economist Gita Gopinath predicts that the cumulative loss from the pandemic to global GDP in 2020 and 2021 “could be around $9 trillion, greater than the economies of Japan and Germany, combined”.


To offset these impacts, all major economic powers are infusing huge amounts into their economies. The collective response from the EU and its member states is well above 3 trillion euros. The US package of $2trillion include relief to big corporates and small businesses, individuals, states and local governments as well as public health. Japan has announced a $1 trillion relief package. These measures, however, will only be useful if at least some treatment is found by the third quarter and economies start opening up.


Despite massive relief packages, a joint global effort is vital to resolve the health problems first. On May 4, the EU — along with Canada, France, Germany, Japan, Norway, the United Kingdom, and current and future G20 presidency Saudi Arabia and Italy — is hosting a pledging event: the Coronavirus Global Response Initiative.


Co-convened by WHO and World Bank, the initiative aims to garner at least $8 billion for jointly developing solutions to test, treat and prevent the disease from spreading. New diagnostics, treatments and vaccines needs to be affordable and available to all. With its strong pharmaceutical industry, India could be a valuable partner to these global solutions. The hydroxychloroquine episode has already proved its strength.

The first quarter GDP results from major economies indicate the seriousness of the economic recession. The next quarter could be worse. Massive relief packages by major powers could be useful to the global economy. However, they will only work if a joint global effort is successful in developing affordable health solutions soon.

COVID-19 impact | Railways privatisation may get a shot in the arm

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Infrastructure sector has been deeply affected due to the COVID-19 crisis. Despite the debilitating impact of the pandemic on the economy, Railways may see continuity in investment despite the economic slowdown, according to an expert.


Investment in railways, especially through the private route, was considered an important area as seen in the National Infrastructure Pipeline (NIP), which included planned investment of Rs 13 lakh crore towards railway infrastructure.

"The NIP also foresees up to 30 per cent of the 750 stations privatised and involvement of the private sector in rolling stock operations. The government has set an overall target of 40 per cent modal share of railways in freight operations," said Sameer Bhatnagar, Partner – Transport and Logistics, KPMG India.

Aimed at improving efficiency of the national transporter through involvement of private organisations, Indian railways aims to transport up to 30 per cent of net cargo volumes and 500 passenger trains by 2025 by private players.

According to Bhatnagar, Railways has proven to be a key contributor in India's response to COVID-19 crisis. Freight and parcel trains have been transporting essential commodities and other items when other modes of transport have come to a halt. Thus, it appears imminent that this sector would be in the spotlight going ahead.


However, this would require policy support, financial support, innovative funding and other reforms to enable spending.


The Union Cabinet in March approved a Memorandum of Understanding (MoU) signed between Railway Ministry with Germany's DB Engineering and Consulting GMBH for technological cooperation in the railway sector.

The government has also stated earlier that there is a proposal to outsource commercial and on board services of a few trains and to permit private players to induct modern rakes to run trains on select routes to provide improved service delivery to passengers.

While India appears to have better economic outlook for growth than other countries, investors are expected to be cautious about privatisation after the crisis, said Bhatnagar.


However, investors with deep sector expertise, sufficient capital and long term focus could bid lower but more reasonably and comparably between peers, offering more long term sustainability. As bids are expected to be lower, this may indicate better returns for investors.


As passenger trains may take more time to return to normalcy, track infrastucture and coaches may have less occupancy. This would provide a window of opportunity for maintenance, upgradation and expediting various railway works.

Shipping Minister assures quick evacuation of 30,000 stranded Indian seafarers

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Union Minister of State for Shipping Mansukh Lal Mandaviya assured various seafarers associations of quick evacuation of stranded Indian seafarers whenever the situation turns favourable.

India has about two lakh seafarers working on ships. More than 30,000 Indian seafarers are stuck in their ships at ports in COVID-19 affected countries like the US, UK, Italy and Spain.

Acknowledging the importance of seafarers for smooth supply chain movement, Mandaviya directed associations to provide details of Indian seafarers stranded abroad for future evacuation plans.

"The seafarers are essentially transport workers involved in moving essential goods. Thus, they need to be treated in the same manner and allowed to go home once they complete their tenure on ship," says Captain SM Halbe, CEO, Maritime Association of Shipowners, Ship Managers and Agents (MASSA).

Prolonged stay on board, away from their families, is not only bad for their morale but also detrimental to safe operation of ships.

Mandaviya interacted through video conference with various stakeholders of the shipping industry including ship liners, shipping companies, maritime associations and seafarers unions regarding the change of crew at Indian ports and assessed the situation of Indian seafarers working as well as stranded in International waters.

The participants of the video conference include representatives of the associations like Indian National Ship Owners’ Association (INSA), Maritime Association of Nationwide Shipping Agencies – India (MANSA), National Union of Seafarers of India (NUSI), The Indian Maritime Foundation (IMF), The Maritime Union of India (MUI), The Maritime Association of Ship Owners Ship managers and Agents (MASSA).

Mandaviya also directed officials of the Ministry of Shipping for easing out the process of sign on and off of seafarers at the Indian ports..

Coronavirus impact | Govt mulls 6-month pause on GST payments for affected sectors: Report

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Amid the nationwide lockdown, the government may provide a six-month freeze on goods and services tax (GST) as relief for most affected industries, according to a report by The Economic Times.

India is currently in a nationwide lockdown to contain the spread of COVID-19. That only essential items and services can be provided during this period has hurt several sectors.

The pause on GST payments might be extended to industries such as aviation and hospitality, and a lower rate might be set for the real estate sector, the report said.

There is also a recommendation to move to a cash-based method of calculating tax from the existing invoice-based system, The Economic Times reported.

The Centre may also provide GST relief on sales for which payments have been received during the lockdown by treating them as bad debts, the report said.

The government is also considering liquidity relief measures for cash-strapped businesses, the report said.

"There is a thinking that for these service sectors, the government should at least spare its dues," a government official told ET.

The government may also waive other statutory charges on a temporary basis, the report added.

The GST Council will make the final decision on the recommendations, the report said.

India's GDP growth likely to range up to 1.5% in FY21: CII

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India's GDP is likely to range between a decline of 0.9 percent and a growth of 1.5 percent in the current financial year, with the economy undergoing a "turbulent" phase caused by the coronavirus-induced lockdown, according to a report.

The Confederation of Indian Industry (CII) in a paper - A plan for economic recovery - has laid out its growth expectation under three os and suggested "urgent" fiscal interventions.

In the baseline scenario, the Gross Domestic Product (GDP) is expected to grow at just 0.6 percent on an annual basis as economic activity is expected to remain constrained due to continuing restrictions on the free movement of goods and people beyond the lockdown period.

This will lead to disruption in supply chains, slow pick-up in investment activity, labour shortages in the short-run and muted consumption demand on account of reduced household incomes, the industry body said.

In the optimistic scenario, which envisages a faster pick-up post the lockdown period, the GDP is forecast to register a growth of 1.5 percent in the best case.

In case of a more prolonged outbreak, where the restrictions in existing hot-spot regions get extended, while new regions are identified as ‘hot-spots' leading to intermittent stop and start in economic activity, GDP is likely to decline by -0.9 percent.

The urgent fiscal interventions, as suggested by CII should include cash transfers amounting to Rs 2 lakh crore to JAM account holders, in addition to the Rs 1.7 lakh stimulus already announced.

CII has also suggested additional working capital limits to be provided by banks, equivalent to April-June wage bill of the borrowers, backed by a government guarantee, at 4-5 percent interest.

In addition, the CII paper has suggested the creation of a fund or SPV with a corpus of Rs 1.5 lakh crore which will subscribe to NCDs/Bonds of corporates rated A and above.

The fund can be seeded by the government contributing a corpus of Rs 10,000-20,000 crore, with further investments from banks and financial institutions such as LIC, PFC, EPF, NIIF, IIFCL et al.

This will limit Government exposure while providing adequate liquidity to industry.

For MSMEs, CII has suggested a credit protection scheme whereby 75-80 percent of the loan should be guaranteed by RBI, i.e. if the borrower defaults, RBI should buy the loan and repay the bank upto 75-80 percent of the loan, so the risk to the lender is limited.

SIDBI could provide the guarantee for loans to industry and trade while NABARD could provide the guarantee for loans to agro-processing sectors.

“There is no doubt that the economy is going through turbulent times, and India will have to spend, for navigating its way out of the current crisis.

At this stage, the government must do whatever it takes to tide over the crisis," CII Director General Chandrajit Banerjee said.

“Given the extent of the damage to the economy from the disruption to business, the GDP growth in FY21 will likely be the lowest in many decades," he added.

According to him, without an increase in government spending in the near-term to drive an economic recovery, government revenue will dwindle, and high deficits will continue to be a problem in future.

Any significant revival in investment activity is unlikely as capacity utilization levels may remain suboptimal.

Consumption demand is likely to remain lacklustre as people's incomes have been impacted, CII said.

On the external front, as economies across the globe continue to struggle with the pandemic, global trade may decline by 13 to 32 percent in 2020, as estimated by the World Trade Organisation.

“Given the situation, government intervention becomes critical not only to sustain the economy but also to prevent any humanitarian crisis,” observed Banerjee.

Gold smuggling rises as COVID-19 crisis pushes up prices to all-time high

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With the ongoing coronavirus pandemic disrupting economies and markets, safe-haven options such as gold have increasingly become the choice of investment. Gold prices continue to soar, touching as high as Rs 47,000 per 10 gram last week, even as other sectors take a hit amid lockdowns employed by various countries to combat COVID-19.

But this increased interest in the precious metal has also fuelled another sector – smuggling, the Hindu BussinessLine 

The Customs Office at Chennai International Airport in Tamil Nadu, in particular, has recorded an all-time high in smuggling activity during FY20. As much as 375 kg of gold valuing Rs 134 crore was seized compared to 271 kg of gold valuing Rs 87 crore in FY19, the report noted.

Total 924 cases of smuggling were booked, compared to 461 in FY19 – a 100 percent jump. The number of arrested also increased from 56 to 136 year-on-year (YoY), data from Chennai Customs showed.

Another factor that can be attributed to the spike in smuggling is the increase in customs duty from 10 percent to 12.5 percent, and increase in GST from 1 percent to 3 percent. There is also the 5 percent additional GST charge on making of gold ornaments.

All these, coupled with the rupee depreciation against the US dollar and the already high price of the metal, have pushed up the cost of legal import, N Anantha Padmanaban, Chairman, All India Gem and Jewellery Domestic Council (GJC) told the paper.

“Today, if anyone brings 1 kg of gold (through smuggling), they earn more than Rs 6 lakh. Unfortunately, people who were not willing earlier have also started doing it and that’s the reason why you see news about smuggling every one or two hours,” Padmanaban added.

Among the methods used are concealing the gold in laptops, hard-disks, skateboards, packed food tins or even in the rectum. On February 14, Chennai Customs caught a passenger smuggling 1,164 gm of gold worth Rs 44.33 lakh in a meat cleaver, it added.

Coronavirus pandemic: Moody's says loan moratorium may lead to greater build-up of credit losses for banks

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The loan moratorium extended by banking regulators in countries like India and China to deal with the liquidity crunch amid COVID-19 crisis will provide temporary relief to borrowers, but will constrain banks from taking proactive recovery actions and could lead to an even greater build-up of credit losses once the moratoriums are lifted, according to Moody's.

In a report on Asia Pacific region, Moody's on Tuesday said while policy stimulus will shore up credit quality for larger companies in sectors, including airline and oil and gas, Asia's banking sector profitability will also decline from deteriorating asset quality and lower net interest margins.

"Financial regulators in China, Australia, Malaysia, India and some other Asian economies have enacted debt moratoriums to soften the liquidity crunch for businesses and households. While repayment delays will provide temporary relief to borrowers, these directives will also constrain banks' abilities to take proactive restructuring and recovery actions. These measures also could lead to an even greater build-up of credit losses once the moratoriums are lifted," Moody's said.

Moody's Investors Service further said this risk will increase substantially if the economic downturn, and measures to contain the spread of the coronavirus, persist for longer than expected.

The loan moratorium extended by banking regulators in countries like India and China to deal with the liquidity crunch amid COVID-19 crisis will provide temporary relief to borrowers, but will constrain banks from taking proactive recovery actions and could lead to an even greater build-up of credit losses once the moratoriums are lifted, according to Moody's.

In a report on Asia Pacific region, Moody's on Tuesday said while policy stimulus will shore up credit quality for larger companies in sectors, including airline and oil and gas, Asia's banking sector profitability will also decline from deteriorating asset quality and lower net interest margins.

"Financial regulators in China, Australia, Malaysia, India and some other Asian economies have enacted debt moratoriums to soften the liquidity crunch for businesses and households. While repayment delays will provide temporary relief to borrowers, these directives will also constrain banks' abilities to take proactive restructuring and recovery actions. These measures also could lead to an even greater build-up of credit losses once the moratoriums are lifted," Moody's said.

Moody's Investors Service further said this risk will increase substantially if the economic downturn, and measures to contain the spread of the coronavirus, persist for longer than expected.


COVID-19 impact | Highway builders in a bind over force majeure notification

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Even though the Ministry of Road Transport and Highways has declared COVID-19 as a force majeure event and informed National Highways Authority of India (NHAI) accordingly on March 25, NHAI has not issued a similar notification, leading to confusion at the ground level.

This has resulted in local field officers and independent engineers acting according to their discretion, to the extent of rejecting COVID-19 as a force majeure event in certain cases, according to the National Highway Builders Federation (NHBF).

The force majeure clause in a contract provides temporary reprieve to a party from performing its obligations upon occurrence of a force majeure event. This typically includes war, terrorism, earthquakes, hurricanes, acts of government, explosions, fire, plagues or epidemics or a list of events as agreed by both parties.

Rejection of COVID-19 as force majeure event has serious implications on the rights available to highway builders under the concession or contract agreement and may further affect the projects.

Even though the Ministry of Road Transport and Highways has declared COVID-19 as a force majeure event and informed National Highways Authority of India (NHAI) accordingly on March 25, NHAI has not issued a similar notification, leading to confusion at the ground level.

This has resulted in local field officers and independent engineers acting according to their discretion, to the extent of rejecting COVID-19 as a force majeure event in certain cases, according to the National Highway Builders Federation (NHBF).

The force majeure clause in a contract provides temporary reprieve to a party from performing its obligations upon occurrence of a force majeure event. This typically includes war, terrorism, earthquakes, hurricanes, acts of government, explosions, fire, plagues or epidemics or a list of events as agreed by both parties.

Rejection of COVID-19 as force majeure event has serious implications on the rights available to highway builders under the concession or contract agreement and may further affect the projects.

For the BOT Toll and TOT projects, under force majeure event, the revenue loss is compensated in the form of extension in concession period.

In addition, 100 per cent of operations and maintenance (O&M) and interest costs are reimbursed for the BOT Toll projects for the affected period. This would amount to 50-55 per cent of loss of revenue incurred by these projects.

For projects that are public-funded (currently being tolled by NHAI through toll contractors), the suspension would result in a direct revenue loss for NHAI.

Fresh exemptions for lockdown period, construction allowed in rural areas

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The government on Friday gave exemptions to a few more areas from the purview of the ongoing lockdown including construction activities in rural areas, water supply, sanitation works and functioning of non-banking financial institutions and cooperative credit societies across India.

In a communication to all States and Union Territories, Union Home Secretary Ajay Bhalla also said collection, harvesting and processing of minor forest produce, non-timber forest produce by Scheduled Tribes and other forest dwellers in forest areas were also allowed to be carried out during the lockdown which will last till May 3.

Construction activities in rural areas include water supply and sanitation, laying and erection of power transmission lines and laying of telecom optical fibre and cable along with related activities will be allowed, Bhalla said in his communication.

Non-Banking financial institutions, including housing finance companies, and micro finance institutions with bare minimum staff and cooperative credit societies are exempted from the lockdown across India.

Bamboo, coconut, arecanut cocoa, spices plantation and their harvesting, processing, packaging, sale and marketing are also allowed to be carried out during the lockdown.

The lockdown was first announced by Prime Minister Narendra Modi on March 24 in a bid to combat the Coronavirus endemic.

It was further extended till May 3.

On Wednesday, the Home Ministry had announced a series of exemptions given to different people and services during the lockdown.

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