RBI increases overdraft period of states, UTs until September 30

To provide greater flexibility to state governments to tide over cash flow mismatches, the Reserve Bank of India (RBI) on Tuesday increased the number of days for which a state or a Union Territory (UT) can be in overdraft at a stretch to 21 working days from 14 at present.

The number of days for which a state or UT can be in overdraft in a quarter has been increased to 50 working days from the current stipulation of 36 working days, the RBI said.

The arrangement will remain valid till September 30, the RBI said in a statement.

Hurdles remain despite coronavirus lockdown exemption for farming

Jagannath, a marginal farmer from Malhargarh town in Mandsaur district of Madhya Pradesh, the epicentre of a farmers’ agitation a few years ago, has faced a peculiar problem over the past few weeks since the 21-day nationwide lockdown to check the spread of Covid-19 was imposed.

Heightened police scrutiny of his movements. “Though the government exempted farming and harvesting operations from the lockdown, we have to convince the local constable every time we go out that it is to work in the fields and nothing else,” Jagannath says.

Shenu Agarwal, chief executive officer of Escorts Agri-Machinery, one of the largest farm equipment makers in the country, says his firm’s employees and dealers, too, face a similar problem.

“Though the central and several major state governments have issued orders exempting farm equipment repair shops and retailers from lockdown, on the ground a lot of challenges remain and getting curfew passes for our dealers from district magistrates or collectors is a big problem,” Agarwal said.

He said harvesting of rabi crops was underway in Haryana, Uttar Pradesh, Bihar, Rajasthan and Madhya Pradesh, where agriculture machine repair and retail shops are vitally important to enable smooth harvesting operations.

There are around 10,000 farm equipment retailing and manufacturing shops across India in the organised sector, while thousands of others exist in the unorganised space. The Ministry of Home Affairs (MHA) in an order issued last week exempted all sorts of agriculture machinery repair and retail shops from the lockdown.

Amid speculation that the lockdown could be extended, several relaxations given over the past few days need to be clearly conveyed to ground-level authorities to ensure that they are implemented in letter and spirit or else farming operations could get impacted.

Escorts on its part has lined-up a crack team of 10 senior officers who are daily in touch with district officials in various states to see that shops get curfew passes and requisite permission to operate.

“UP has started a very unique system of centralised application for curfew passes and permission to open the shops, while in other states either the dealers themselves or team members assigned have to get in touch with local authorities to see that policemen don’t needlessly harass the tractor shop owners,” Agarwal said.

Amit Saraogi, managing director of Anmol Feeds, a major animal feed maker, said another problem was the difference in the way various state governments interpreted the rules.

Saraogi says lack of information at the ground level about the exemption for movement of animal feed — fish, cattle and poultry feed — was making it difficult to work.

“Though fish feed has been classified as an essential commodity and exempted from the lockdown, some state governments hadn’t notified them separately as a result of which one of our trucks carrying fish feed was stranded at the Assam border a few days back,” he said.

Saraogi said sometimes state and district authorities have to be informed separately of the relaxations. “Human beings can remain without food for a day but poultry can’t remain without food for more than four hours,” he said.

Farmer leaders also say that though movement of big harvesting equipment such as threshers and harvesters have been allowed, they are subjected to numerous checks while crossing from one state to another, which delays their movement.

“If you ask me, in most places, 40 per cent shops selling seeds, fertiliser or even farm equipment have opened while the rest are closed despite exemption,” said Gurnam Singh Chaduni, Haryana president of Bhartiya Kisan Union said.

He said if someone needs to get a tractor spare part from the city to mend their broken vehicle they are stopped at 10 places. “How many farmers will like to face this,” Chaduni said.

The movement of combine harvesters and threshers hasn’t yet started in full swing, which can impact harvesting of wheat in Haryana, which is readying to harvest a big wheat crop, he said.

Union Agriculture Minister Narendra Singh Tomar, meanwhile, on Tuesday held a videoconference with senior officials to ensure that farmers don’t face any difficulty in movement of equipment needed for harvesting, transportation of harvested produce and other shops retailing seeds and fertilisers.

Lockdown won’t impact farmers: NITI Aayog member

The government has taken several measures to safeguard farmers from any adverse impact of the ongoing lockdown, and the farm sector is expected to report a growth of little more than 3 per cent in the financial year 2019-20, NITI Aayog member Ramesh Chand said on Tuesday.

In an interview with PTI, Chand said the government had taken measures so that markets work normally during the lockdown period.

“The government has responded to the situation. No restriction is put on farmers in going to field and undertaking agriculture operations.

So, all those states which are following these guidelines, I do not think there will be any adverse impact on the farmers,” he said.

The country is under a 21-day lockdown to curb spreading of coronavirus. On the first day of the countrywide lockdown, Chand said some reports came that farmers had to throw their perishable produce on the road.

“After states issuing order and the district administration allowing movement of machinery transport, etc. I see that after first day, we will not have any adverse impact on agriculture or farmers,” the member said. PTI

90% of trucks in India are now off roads amid coronavirus lockdown

The world’s biggest lockdown has brought transportation of goods in the country close to a halt, even though the government has exempted the sector from restrictions to halt the spread of coronavirus.

Daily movement of trucks has collapsed to less than 10 per cent of normal levels, according to All India Motor Transport Congress (AIMTC), an umbrella body of goods-vehicle operators representing about 10 million truckers. Road transport accounts for about 60 per cent of freight traffic in India and 87 per cent of its passenger traffic, according to the Ministry of Road Transport and Highways.

Trucking has emerged as a major chokepoint in global supply chains from food to medical supplies as governments around the world take ever more stringent steps to contain the pandemic, restricting the movement of vehicles as well as people to drive them.

The stoppages in the country, where Prime Minister Narendra Modi imposed a three-week lockdown from March 25, are a harbinger of the damage the measures are wreaking on the economy amid forecasts the country could see its first contraction in at least two decades.

“Though the government has allowed movement of both essential and non-essential goods, the situation is very different at the ground level,” said Naveen Kumar Gupta, secretary general of AIMTC, the largest grouping of transporters in India. Almost daily clarifications by the government take time to trickle down to officials enforcing the rules, making operations difficult, according to the organisation’s president, Kultaran Singh Atwal.

The decline in road transport is another major setback for fuel demand in the world’s third biggest oil market, which has already been hit by the collapse in air travel. Fuel sales in March by India’s three biggest state-run retailers shrank by as much as 33 per cent.

One of the major problems facing truckers is loading and unloading because of a shortage of labor, according to AIMTC.

And with the lockdown shutting highway food establishments and workshops, truckers can’t get the services they need even if they are on the road.

The world could be on the brink a food scare as the coronavirus upends supply chains and sends prices for key staples higher. Prices of rice and wheat — crops that account for a third of the world’s calories — are rapidly climbing.

Covid-19 impact: 195 mn full-time workers may lose jobs globally, says ILO

The coronavirus pandemic is expected to erase 6.7 per cent of working hours globally during July-December, 2020 - equivalent to 195 million full-time workers, which far exceeds the effects of the 2008-09 financial crisis, the International Labour Organization (ILO) warned on Tuesday.

Large reductions are foreseen in the Arab states (8.1 per cent, equivalent to 5 million full-time workers), Europe (7.8 per cent, or 12 million full-time workers) and Asia and the Pacific (7.2 per cent, 125 million full-time workers).

Huge losses are expected across different income groups, especially in upper-middle income countries (7 per cent, 100 million full-time workers), said the ILO.

"Workers and businesses are facing catastrophe, in both developed and developing economies. We have to move fast, decisively, and together. The right and urgent measures could make the difference between survival and collapse," Guy Ryder, ILO's Director-General, said in a statement.

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The sectors most at risk include accommodation and food services, manufacturing, retail, and business and administrative activities.

The eventual increase in global unemployment during 2020 will depend substantially on future developments and policy measures.

"There is a high risk that the end-of-year figure will be significantly higher than the initial ILO projection, of 25 million," said the ILO report titled "LLO Monitor 2nd edition: COVID-19 and the world of work".

More than four out of five people (81 per cent) in the global workforce of 3.3 billion are currently affected by full or partial workplace closures.

According to the new study, 1.25 billion workers are employed in the sectors identified as being at high risk of "drastic and devastating" increases in layoffs and reductions in wages and working hours.

Many are in low-paid, low-skilled jobs, where a sudden loss of income could be devastating, said the ILO report.

Worldwide, 2 billion people work in the informal sector (mostly in emerging and developing economies) and are particularly at risk.

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"This is the greatest test for international cooperation in more than 75 years," said Ryder.

"If one country fails, then we all fail.

We must find solutions that help all segments of our global society, particularly those that are most vulnerable or least able to help themselves," Ryder added.

The pandemic will also have a severe impact on India. The report added that about 400 million workers in India, working in the informal economy, are at risk of falling deeper into poverty during the Covid-19 pandemic crisis. ILO said that particularly in low- and middle-income countries, hard-hit sectors have a high proportion of workers in informal employment and workers with limited access to health services and social protection. Without appropriate policy measures, workers face a high risk of falling into poverty and will experience greater challenges in regaining their livelihoods during the recovery period.

Covid-19: APAC firms likely to face nearly 33% carve-out acquisition delays

In the wake of the Covid-19 pandemic, businesses in the APAC (Asia Pacific) region are more likely to experience carve-out acquisition delays, than those in other regions. Whereas businesses APAC region might face 33 per cent acquisition delays, those in US are likely to face 18 per cent acquisition delays, and in the EMEA (Europe, the Middle East and Africa) region it is 16 per cent, a new report said on Wednesday.

While the deal economics of carve-outs can be very attractive, an independent survey, commissioned by TMF Group found that 34 per cent of senior executives from private equity firms with buy-side experience and 27 per cent from corporations said their most recent cross-border carve-out failed to deliver on expectations.

TMF Group is the leading provider of administrative support services for international business expansion.

While a delay resulted in increased cost, a clear majority of those from private equity firms (92 per cent) said it added 10 per cent or more of the original value of the deal, while others quoted it to be more than 16 per cent.

The figure for corporates was equally high, with 85 per cent claiming that it increased add-on costs by 10 per cent or more, and 38 per cent at 16 per cent or more -- all considerable sums given that most of the carve-outs were valued at over $50 million, and some more than $1 billion.

A carve-out is the partial divestiture of a business unit in which a parent company sells minority interest of a child company to outside investors.

The research comes at a time when the market has seen a three-fold increase in the annual volume of spin-offs and carve-outs since 2016.

"We expect a significant reduction in transactions in the immediate term, but there are clearly going to be big opportunities for the cash-rich corporates and private equity firms, with the latter reported to be sitting on a record level of dry powder at the end of last year," said Paolo Tavolato, Head of APAC, TMF Group.

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The unloading of business units and other assets is inevitable as management teams right across the globe look to simplify their business and de-risk their balance sheets as this human tragedy continues to unfold. "But with uncertainty, comes less financial flexibility and consequently added pressure to get any carve-out opportunity right," he added.

When it comes to other success factors, the research indicates that the right expertise and resources need to be brought on board as early as possible.

Of those who experienced delays in completion, 78 per cent of corporate and 64 per cent of private equity respondents said they believe they could have avoided the overrun and additional costs if they had been better prepared.

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"Untangling a business from its parent company across multiple jurisdictions to create a fully standalone entity can be complex," added Tavolato.

"In some regions, for example, companies can run six processes in parallel, while in others, each task needs to be completed in sequence".

Goldman Sachs slashes India's FY21 real GDP growth forecast to 1.6%

Goldman Sachs expects the global economy to sink into recession in 2020 and sees the coronavirus (Covid-19) pandemic–hit global gross domestic product (GDP) come in at a negative 1.8 per cent in 2020. The latest forecast is a 5 percentage point (pp) downward revision since early this year and around 3 pp lower than the March 22 forecast.

For India, the global research house has lowered its real GDP forecast to 1.6 per cent in financial year 2020-21 (FY21) from 3.3 per cent earlier. This, however, is still higher than United States, which it now sees contracting to -6.2 per cent in 2020 (from -3.7 per cent earlier).

“We now expect sequential real GDP growth (quarter-on-quarter seasonally adjusted and annualised rate) of -1.4 per cent in Q12020 (revised down from 3.5 per cent), -3.8 per cent in Q2 2020 (revised down from -2.0 per cent), +2 per cent, 7.5 per cent in Q3 and Q4, respectively, and further strong gains of +11 per cent in Q1-2021. This takes our FY21 GDP forecast down to 1.6 per cent on an annual-average basis," wrote Andrew Tilton, Goldman Sachs' chief Asia-Pacific economist in a co-authored report with Prachi Mishra.

Goldman Sachs, like most other research houses, expects a strong economic recovery in the second half of FY21. This, they said, is based on three assumptions. First, the three-week nationwide lockdown is expected to be removed only in a staggered fashion. As a result, social distancing measures will help reduce new infections over the next four – six weeks. While the fiscal easing so far has been limited, they do expect more fiscal measures by the central and the state governments.

“We expect the RBI to continue with its monetary easing policy, along with liquidity infusion measures. While more forceful policy support could present some upside risk, the recovery could further be delayed if the pandemic is not brought under control globally and domestically over the next few months,” Tilton and Mishra wrote.

Despite the policy support so far, and expectations of more, Goldman Sachs believes the nationwide shutdown, and rising public anxiety about the virus are likely to lead to a sharp deterioration in economic activity in March, and in the first quarter of FY21. That said, 1.6 per cent growth for FY21 would be deeper compared to widely perceived ‘recessions’ India has experienced in the 1970s, 1980s, and in 2009.

"Notably, as our global team has argued, the global COVID-19 crisis — or more precisely, the response to that crisis — represents a physical (as opposed to purely financial) constraint on economic activity that is unprecedented in post-war history.

Sector-wise assessment

Among sectors, Goldman now expects a larger hit – up to 95 per cent – on recreation and culture, and restaurant and hotels sectors (versus earlier estimates of 70-80 per cent) and increased the hit to education services up to 80 per cent (versus 60 per cent earlier).

“Overall, consumption contributes 60 per cent to Indian GDP. Our assumptions about consumption cutbacks in these categories imply a monthly hit to the level of annual GDP of around 1.2 per cent, for each month the lockdown is in place. These calculations imply a peak hit to the level of monthly GDP of 14.8 per cent, through consumption spillovers. These effects obviously appear very high; in our growth forecasts, we assume these effects to be partial, given that the enforcement of even the nationwide lockdown is not complete, and we assume a staggering exit from the lockdown,” Goldman Sachs said.

India ports at sea: Cargo handling sinks as coronavirus scuttles economies

Cargo handling at the country’s ports may fall to 10 per cent-12 per cent of capacity this fiscal as the coronavirus pandemic forces countries to lock down and demand in India’s economy sinks.

Cargo handling at major ports grew 2.8 per cent in FY19, but it grew just 1.4 per cent in FY20 till February end.

Cargo volumes in FY21 will decline primarily because of flagging demand for crude oil during the pandemic. A study by CARE Ratings forecasts a dip of 5.1 per cent in India’s crude oil imports in FY21. Liquid cargo inclusive of crude oil and petroleum products accounted for 38 per cent share of the major ports’ traffic in last fiscal.

Coal imports will fall too, as India’s power demand declines. Electricity demand will contract as a three-week national lockdown to prevent the spread of the coronavirus disrupts industrial and commercial establishments. The demand slump will in turn precipitate fall in coal imports.

Also, demand for steel is poised to be subdued on account of temporary suspension in building and construction activities and sluggish production of automobiles, thus affecting iron ore shipments.

The outlook is unimpressive for container traffic too.

“Container traffic is to be limited as well due to port congestion and increase in turnabout time which has resulted in problems in clearing import containers due to factory closures and migration of factory workers. This can potentially dissuade international container companies in order to avoid their carriers to be stuck at the Indian ports”, the report by CARE Ratings noted.

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The Covid-19 pandemic has triggered disruptions in logistics supply chains, leading to delays in clearing of goods from ports, prompting some cargo owners suspending their operations and detaining of containers.

Following the 21-day lockdown, the Directorate General of Shipping (DGS) has imposed a14-day quarantine on shipping vessels arriving from any port in China and any nation affected by COVID-19. The vessels arriving after 14 days of departure from a Coronavirus-infected country are, however, not required to comply with the additional precautionary measures.

Stoppages of a vessel at any port of the affected countries only for refuelling will not be considered for the calculation of 14 days. Ports which are not able to comply with the specified requirements have been told not to allow berthing for vessels arrived within 14 days from the infected countries. In order to ensure delivery of essential goods and commodities like fuel, medical supplies and food grains shipping services are not suspended. The Ministry of Home Affairs has also ordered that each major port shall ensure that no penalties, demurrage, charges, fee, rentals are imposed on any port user for delay in berthing, loading or unloading operations, or evacuation or arrival of cargo caused by the reason attributable to lockdown measures from March 22 to April 14, 2020.

Kolkata Port Trust has declared force majeure at its Haldia Dock Complex, becoming the first state-owned major port trust to invoke the clause in the wake of the outbreak of the Coronavirus. Most of the private ports and terminals operating in the country too have invoked the force majeure clause as most of them are involved in end-to-end contracts.