BJP will eliminate any remnants of corruption in its second term: Swamy

Mumbai, Mar 27: Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that Monetary Policy Committee (MPC) has taken note of the global economic activity coming to a near standstill due to the coronavirus pandemic and added that large parts of the world could slip into recession in the coming days to the coronavirus crisis.
"The MPC noted that global economic activity has come to a near stand-still as COVID-19 related lockdowns and social distancing are imposed across a widening swath of affected countries. Expectations of a shallow recovery in 2020, from 2019's decade low in global growth, have been dashed," Das said.
"The outlook is now heavily contingent upon the intensity, spread and duration of the pandemic. There is a rising probability that large parts of the world will slip into recession," he added.
The RBI Governor further added that "the implied GDP growth of 4.7 per cent in Quarter 4 of 2019-20, in the second advance estimates of the National Statistics Office which was released in February 2020, within the annual estimate of 5 per cent for the year as a whole is now at risk."
As per the outlook for the year 2020-21, Das said, "Apart from continuing resilience of agriculture and allied activities most other sectors of the economy will be adversely impacted by the pandemic depending upon, its intensity, spread and duration."
Das also announced a reduction in the repo and reverse repo rates for banks.
"The repo rate has been reduced by 75 basis points to 4.4 per cent. The reserve repo rate has been reduced by 90 basis points to 4 per cent," Das said addressing the media.
The decision for "a sizeable reduction" in the policy repo rate, according to the RBI Governor was taken to "revive growth and mitigate the impact of COVID-19 and ensure financial stability." 

Feb 2: Prime Minister Narendra Modi’s second budget in seven months disappointed investors who were hoping for big-bang stimulus to revive growth in Asia’s third-largest economy.

The fiscal plan -- delivered by Finance Minister Nirmala Sitharaman on Saturday -- proposed tax cuts for individuals and wider deficit targets but failed to provide specific steps to fix a struggling financial sector, improve infrastructure and create jobs. Stocks slumped as a proposal to scrap the dividend distribution tax for companies failed to impress investors.

"Far from being a game changer, the budget provides little in terms of short-term growth stimulus,” said Priyanka Kishore, head of India and South East Asia economics at Oxford Economics Ltd. in Singapore. “While income tax cuts will provide some relief on the consumption front, the multiplier effect is low and the overall stance of the budget is not expansionary."

India has gone from being the world’s fastest-growing major economy three years ago, expanding at 8%, to posting its weakest performance in more than a decade this fiscal year, estimated at 5%.

While the government has taken a number of steps in recent months to spur growth, they’ve fallen short of spurring demand in the consumption-driven economy. Saturday’s budget just added to the glum sentiment.

Okay Budget

“It’s an okay budget but not firing on all cylinders that the market was hoping for,” said Andrew Holland, chief executive officer at Avendus Capital Alternate Strategies in Mumbai.

The government had limited scope for a large stimulus given a huge shortfall in revenues in the current year. The slippage induced Sitharaman to invoke a never-used provision in fiscal laws, allowing the government to exceed the budget gap by 0.5 percentage points. The result: the deficit for the year ending March was widened to 3.8% of gross domestic product from a planned 3.3%.

On Friday, India’s chief economic adviser Krishnamurthy Subramanian said reviving economic growth was an “urgent priority” and deficit goals could be relaxed to achieve that. The adviser’s Economic Survey estimated growth will rebound to 6%-6.5% in the year starting April.

The fiscal gap will narrow to 3.5% next year, as the government budgeted for gross market borrowing to rise marginally to 7.8 trillion rupees from 7.1 trillion rupees in the current year. A plan to earn 2.1 trillion rupees by selling state-owned assets in the year starting April will also help plug the deficit.

Total spending in the coming fiscal year will increase to 30.4 trillion rupees, representing a 13% increase from the current year’s budget, according to latest data.

Key highlights from the budget:

* Tax on annual income up to 1.25 million rupees pared, with riders

* Dividend distribution tax to be levied on investors, instead of companies

* Farm sector budget raised 28%, transport infrastructure gets 7% more

* Spending on education raised 5%

* Fertilizer subsidy cut 10%

Analysts said the muted spending plan to keep the deficit in check will lead to more downside risks to growth in the coming months.

“It is very doubtful that the increase in expenditure will push demand much,” Chakravarthy Rangarajan, former governor at the Reserve Bank of India told BloombergQuint, adding that achieving next year’s budget deficit goal of 3.5% of GDP was doubtful.

With the government sticking to a conservative fiscal path, the focus will now turn to central bank, which is set to review monetary policy on Feb. 6. Given inflation has surged to a five-year high of 7.35%, the RBI is unlikely to lower interest rates.

What Bloomberg’s Economists Say:

The burden of recovery now falls solely on the Reserve Bank of India. With inflation breaching RBI’s target at present, any rate cuts by the central bank are likely to be delayed and contingent upon inflation falling below the upper end of its 2%-6% target range.

-- Abhishek Gupta, India economist

Governor Shaktikanta Das may instead focus on unconventional policy tools such as the Federal Reserve-style Operation Twist -- buying long-end debt while selling short-tenor bonds -- to keep borrowing costs down.

Chennai, Apr 25: Civic authorities on Saturday turned down a plea for exhuming the body of a doctor who died of COVID-19 here and burying it in another cemetery, citing health experts' view that it was unsafe to do so. Citing a request from the wife of the deceased doctor to allow exhumation and then re-burial at a cemetery in Kilpauk, the Greater Chennai Corporation said it sought a report from a committee of public health experts to ascertain the feasibility of entertaining her plea.

The spouse of the doctor had appealed to the GCC on April 22 to exhume and bury again her husband's body. She had said that burial in the Kilpauk cemetery here was her husband's last wish and he had conveyed it to her before he was put on a ventilator.

The report of experts has said that "it is not safe" to exhume and again bury the body of a COVID-19 victim and hence "it is not possible to accept her request," the GCC said in an official release. On April 19, a city-based 55-year-old neurosurgeon died of coronavirus and his burial at the Velangadu crematorium here was marred by violence.

A mob which falsely feared that the burial may lead to the spread of contagion had attacked the corporation health employees and associates of the deceased doctor. The doctor's wife and son also had to leave the burial ground in view of the violence.

The body was brought to Velangadu as people of Kilpauk area had opposed his burial there. Over a dozen men involved allegedly in violence were arrested and remanded to judicial custody. Later, in a video message, the surgeon's wife had said that it was her husband's last wish to be interred at the Kilpauk cemetery as per Christian rituals

Chief Minister K Palaniswami and DMK president M K Stalin had spoken to her on Wednesday over the phone and condoled her husband's death.