Would intervene on Kashmir 'if wanted' by India, Pakistan: Donald Trump

Mar 21: India’s economy, already in the grip of a slowdown, is in for more pain after Prime Minister Narendra Modi appealed to citizens to stay at and work from home to curb the coronavirus outbreak.

The services sector, which accounts for about 55% of India’s gross domestic product, is poised to be the worst hit after Modi, in a late evening address on Thursday, urged citizens to go on a self-imposed curfew for a day and private companies to allow employees to work from home for longer. In the country’s vast informal sector, social-distancing measures could mean a dent to productivity and consumption because of job or pay losses.

“The impact of a partial lock-down or social distancing will be significant,” said Rahul Bajoria, a senior economist at Barclays Plc in Mumbai. “If there’s a widespread community outbreak, GDP could fall as low as 3.5% in the year starting April 1.”

Shrinking output may limit growth in an economy that’s already set to expand at an 11-year low of 5% in the current year to March 31. Before the virus outbreak, India had forecast growth to recover to 6%-6.5% in the next fiscal year. S&P Global Ratings and Fitch Ratings have already slashed their growth forecast by 50 basis points.

“The current social-distancing measures will severely impact airlines, hotels, malls, multiplexes, restaurants and retailers,” according to analysts at Crisil Ltd., the local unit of S&P Global. “Lower footfalls and occupancies, decline in business volume and sub-optimal operating efficiencies will impact cash flows of companies in these sectors,” wrote the analysts led by Chief Economist Dharmakirti Joshi.

The government will try to announce a relief package for virus-affected sectors as early as possible, Finance Minister Nirmala Sitharaman said Friday.

In a televised address, Modi advised all citizens to stay at home for a day on March 22, as he sought to stem the spread of the coronavirus -- cases of which are relatively low in India at about 200, compared with more than 200,000 infected people globally. His government also barred incoming flights for a week from that day, joining a growing list of countries effectively sealing their borders.

What Bloomberg’s Economists Say

We had only earlier this week lowered our GDP outlook to consider the direct impact of the local outbreak as confirmed virus cases exceeded 100 as of March 15 and the federal and state governments announced social distancing measures that have already started to crimp economic activity. We are now revising down our GDP estimate for 4Q fiscal 2020 to 3.3%, from our 3.5%.

-- Abhishek Gupta, India economist

For more, click here

“Consumption being the biggest component of GDP, a lock-down is bound to have a big impact on the economy,” said Devendra Kumar Pant, chief economist at India Ratings and Research, the local unit of Fitch. “Modeling uncertainty in any system will be very difficult, but one can say the slowdown could deepen or prolong further.”

Work From Home

While companies, including billionaire Mukesh Ambani-controlled Reliance Industries Ltd., are asking employees to work from home, the option isn’t feasible in India’s vast informal sector.

“The option to work remotely simply won’t exist for most,” said Shilan Shah, an economist with Capital Economics Pte. in Singapore.

As many households don’t have savings buffers, the government would probably have to back this up with large-scale cash handouts that reach the poorest, he said.

Work from home is posing implementation challenges for the manufacturing sector where workers are required to be physically present at the production sites. The services sector, such as banking and information technology, also needs employees to be present in offices as confidential data is used, according to industry group Federation of Indian Chambers of Commerce and Industry.

The dollar's dominance will slowly melt away over the coming year on weakening global demand and a sombre U.S. economic outlook, according to a Reuters poll of currency forecasters whose views depend on there being no second coronavirus shock.

Despite fears a surge in new Covid-19 cases would delay economies reopening and stymie a tentative recovery, world stocks have rallied - with the S&P 500 finishing higher in June, marking its biggest quarterly percentage gain since the height of the technology boom in 1998.

Caught between bets in favour of riskier investments, weak U.S. economic prospects as well as an easing in the thirst for dollars after the Federal Reserve flooded markets with liquidity, the greenback fell nearly 1.0 per cent last month. It was its worst monthly performance since December.

While there was a dire prognosis from the top U.S. medical expert on the coronavirus' spread, the June 25-July 1 poll of over 70 analysts showed weak dollar projections as Fed Chair Jerome Powell on Monday reiterated the economic outlook for the world's largest economy was uncertain.

"The dollar rises in two instances: when you see risk off or when there is a situation where the U.S. is leading the global recovery, and we don't think that's going to be the case anytime soon," said Gavin Friend, senior FX strategist at NAB Group in London.

"The U.S. is playing fast and loose with the virus, and chronologically they're behind the rest of the world."

Currency speculators, who had built up trades against the dollar to the highest in two years during May, increased their out-of-favour dollar bets further last week, the latest positioning data showed.

About 80 per cent of analysts, 53 of 66, said the likely path for the dollar over the next six months was to trade around current levels, alternating between slight gains and losses in a range. That suggests the greenback may be at a crucial crossroad as more currency strategists have turned bearish.

But more than 90 per cent, or 63 of 68, said a second shock from the pandemic would push the dollar higher. Five said it would push the U.S. currency lower.

Much will also depend on debt servicing and repayments by Asian, European and other international borrowers in U.S. dollars.

While an early shortage of dollars in March from the pandemic's first shock pushed the Fed to open currency swap lines with major central banks, international funding strains have eased significantly since. In recent weeks, usage of the facility has reduced dramatically.

That trend is expected to continue over the next six months with major central banks' usage of swap lines to "stay around current levels", according to 32 of 46 analysts. While 13 predicted a sharp drop, only one respondent said use of them would "rise sharply".

The dollar index, which measures the greenback's strength against six other major currencies, has slipped over 5 per cent since touching a more than three-year high in March.

When asked which currencies would perform better against the dollar by end-December, a touch over half of 49 respondents said major developed market ones, with the remaining almost split between commodity-linked and emerging market currencies.

"The dollar is so overvalued, and has been overvalued for a long time, it's time now for it to come back down again, as we head towards the (U.S.) election," added NAB's Friend.

Over the last quarter, the euro has staged a 1.8 per cent comeback after falling by a similar margin during the first three months of the year. For the month of June, the euro was up 1.2 per cent against the dollar.

The single currency was now expected to gain about 2.5 per cent to trade at $1.15 in a year from around $1.12 on Wednesday, slightly stronger than $1.14 predicted last month. While those findings are similar to what analysts have been predicting for nearly two years, there was a clear shift in their outlook for the euro, with the range of forecasts showing higher highs and higher lows from last month.

"In comparison to even a month or two ago, the outlook in Europe has improved significantly," said Lee Hardman, currency strategist at MUFG.

"I think that makes the euro look relatively more attractive and cheap against the likes of the dollar. We're not arguing strongly for the euro to surge higher, we're just saying, after the weakness we have seen in recent years, there is the potential for that weakness to start to reverse."

Islamabad, Jun 10: The World Health Organization has told Pakistan it should implement "intermittent" lockdowns to counter a surge in coronavirus infections that has come as the country loosens restrictions, officials said.

Since the start of Pakistan's outbreak in March, Prime Minister Imran Khan opposed a nationwide lockdown of the sort seen elsewhere, arguing the impoverished country could not afford it.

Instead, Pakistan's four provinces ordered a patchwork of closures, but last week Khan said most of these restrictions would be lifted.

Health officials on Wednesday declared a record number of new cases in the past 24 hours. The country has now confirmed a total of more than 113,000 cases and 2,200 deaths -- though with testing still limited, real rates are thought to be much higher.

"As of today, Pakistan does not meet any of the pre-requisite conditions for opening the lockdown", the WHO said in a letter confirmed by Pakistan officials on Tuesday.

Many people have not adopted behavioural changes such as social distancing and frequent hand-washing, meaning "difficult" decisions will be required including "intermittent lockdowns" in targeted areas, the letter states.

Some 25 percent of tests in Pakistan come back positive for COVID-19, the WHO said, indicating high levels of infection in the general population.

The health body recommended an intermittent lockdown cycle of two weeks on, two weeks off.

Responding to the WHO's letter, Zafar Mirza, the prime minister's special advisor for health, said the country had "consciously but gradually" eased lockdowns while enforcing guidelines in shops, mosques and public transport.

"We have to make tough policy choices to strike a balance between lives and livelihoods," Mirza said Wednesday.

Punjab's provincial health minister Yasmin Rashid, who received the WHO's letter, said the provincial government had already given "orders to take strict action against those violating" virus guidelines.

Hospitals across Pakistan say they are at or near capacity, and some are turning COVID-19 patients away.

WHO Director-General Tedros Adhanom Ghebreyesus said Monday that 136,000 cases had been reported in the previous 24 hours, "the most in a single day so far", with the majority of them in South Asia and the Americas.