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 Hindustan Times, October 14, 2020 India’s sovereign bonds are turning a corner as a supply overhang dissipates following a raft of liquidity measures from the central bank. Early signs of economic revival are also spurring hopes of an improvement in government finances. The yield on India’s benchmark 10-year bond fell about 13 basis points over the past month to 5.9%, making it Asia’s best performer, with the bulk of its decline coming in after the Reserve Bank of India announced steps including doubling the size of its bond purchases in a policy address last week. The expectations are for the 10-year yield to drop further to 5.75%, a level last seen in July, according to a median estimate of 15 traders surveyed by Bloomberg. That’s compared to forecasts of around 6% just two weeks ago amid concern that the administration may further hike its 12 trillion rupees ($163.8 billion) bond sale target for the year. “The RBI in one shot has cleared all the uncertainty about the heavy borr...

 Hindustan Times, October 14, 2020 Russia’s foreign minister warned Tuesday that Moscow could freeze its contacts with the European Union in response to its sanctions over the poisoning of Russian opposition leader Alexei Navalny — an unprecedented threat that reflects a bitter Russia-EU strain. The tough statement from Sergey Lavrov comes a day after the EU foreign ministers agreed to impose sanctions on Russian officials and organizations blamed for Navalny’s poisoning with a Soviet-era nerve agent. “We probably simply have to temporarily stop talking to those people in the West who are responsible for foreign policy and don’t understand the need for mutually respectful dialogue,” Lavrov said at a foreign policy conference attended by experts in Moscow. He specifically pointed at European Commission President Ursula von der Leyen’s recent statements ruling out a partnership with Russia, saying that scenario will play out if that’s what the EU wants. “Russia wants to understand wh...

 Financial Express, October 14, 2020 The trend of rising dues to power plants continues despite the Union power ministry implementing the letter of credit (LC) mechanism since August 2019 to compel discoms to become more disciplined in meeting payment obligations. The Union power ministry’s proposal to reduce late payment surcharge for state-run power distribution companies could potentially provide a relief of about Rs 6,000 crore annually to these distressed entities, given their current level of over-dues to gencos, analysts said. In the draft Electricity Late Payment Surcharge Rules, 2020, recently released by the ministry, it has proposed to reduce the rate of late payment surcharge from the existing 18%, to a graded payment linked to the “bank rate” which is 500 basis points (bps) more than SBI’s marginal cost of funds-based lending rate. Discoms’ over-dues — payment default of 45-60 days or more — to power plants increased 52% annually to Rs 1.19 lakh crore at August end. Th...

 Financial Express, October 13, 2020 Batting for more fiscal spending, chief economic adviser Krishnamurthy V Subramanian said a boost to infrastructure and employment-related programmes like creation of an urban job guarantee programme would help pep up consumption demand. The Covid-ravaged economy will likely shrink by a record 9.5% in the current fiscal, Subramanian said on Tuesday, as he agreed with the central bank’s latest assessment of the magnitude of growth slump. However, elevated inflation will still drive up nominal GDP. Monetising the fiscal deficit in a year like this can’t be ruled out as one of the financing options for the government, the CEA told CNBC-TV18. “We have time-one can do it within the borrowing programme itself-short-term borrowing so as not to increase the yields,” he said. “We might be looking at about 1.7- 1.8% of GDP ($50 billion) of current account surplus (in FY21),” he noted. With net tax revenues declining 30% on year in April-August (the budget...

 Business Standard October 14, 2020 A day after the goods and services tax (GST) Council meeting ended in a deadlock, the Centre on Tuesday allowed 20 states to borrow an additional Rs 68,825 crore through the market to make up for the compensation shortfall amid inadequate cess collection. Meanwhile, dissenting states like Kerala, West Bengal, Punjab and Chhattisgarh said they are exploring legal options, including moving the Supreme Court, to counter the Centre’s move. Twenty states had picked the finance ministry’s first option of raising up to Rs 1.1 trillion to make up for revenue loss estimated on account of GST implementation alone, but not for losses due to the pandemic. Under this option, the entire principle and the interest will be repaid through compensation cess collection, which has been extended beyond June 2022. “Additional borrowing permission has been granted at 0.50 per cent of the gross state domestic product (GSDP) to those states that have opted for Option 1 o...

 The Hindu, October 13, 2020 The Ministry of Home Affairs (MHA) has asked all NGOs seeking foreign donations to open a designated FCRA account at the State Bank of India’s New Delhi branch by March 31, 2021. The MHA order reiterated that NGOs registered under FCRA shall not receive any foreign donations in any other bank account from April 1, 2021. In September, the Foreign Contribution (Regulation) Act, 2020 was amended by Parliament and a new provision that makes it mandatory for all non-government organisations and associations to receive foreign funds in a designated bank account at SBI’s New Delhi branch was inserted. An order specifying the process of opening the FCRA bank account was issued by the MHA on Tuesday. As of now there are 22,434 such NGOs and associations active under the FCRA. The order said an NGO will have to report the amount and source of foreign remittance received to the authorities. The order said the Centre has notified the New Delhi Main Branch (NDMB) of...

 The Hindu Business Line,  October 14, 2020 Mexico’s experience bears out that foreign ownership will not boost credit growth in the economy The paper ‘Indian Banks: A Time to Reform?’ by Raghuram Rajan and Viral Acharya outlines a three-part process towards privatisation of public sector banks (PSBs). First, move to state-linked banks where government stakes are brought down below 50 per cent, re-privatisation by “bringing in private investors who have both financial expertise as well as technological expertise”, and subsequent further dilution of ownership by capital expansion. This change in ownership, along with other reforms, according to the authors, will result in rapid credit growth without the “boom-and-bust cycle view of credit”, in the country. Really? Even as I make the case for continued majority ownership by the state in PSBs, I agree with the commentary often heard that these banks are in need of efficiency-enhancing operational changes and should be permitted t...

 Business Standard, October 14, 2020 Bangladesh is set to beat India in terms of per capita gross domestic product (GDP) this calendar year, thanks to a sharp contraction in the Indian economy due to Covid-19 and the economic lockdown. According to International Monetary Fund (IMF)-World Economic Outlook (WEO), Bangladesh’s per capita GDP in dollar terms is expected to grow 4 per cent in 2020 to $1,888. India’s per capita GDP, on the other hand, is expected to decline 10.5 per cent to $1,877 – the lowest in the last four years. The GDP figure for both countries is at current prices. This makes India the third poorest country in South Asia, with only Pakistan and Nepal reporting lower per capita GDP, while Bangladesh, Bhutan, Sri Lanka, and Maldives would be ahead of India. The WEO database suggests that the Indian economy will be the worst hit from the pandemic in South Asia after Sri Lanka, whose per capita GDP is expected to shrink 4 per cent in the current calendar year. In comp...

The Indian Express,  October 14, 2020 The IMF on Tuesday predicted a deep global recession this year and the world growth to be – 4.4 per cent, asserting that the global economic crisis is far from over mainly due to the impact of the coronavirus pandemic. In its latest World Economic Outlook report, the International Monetary Fund also said the swift recovery in China has surprised on the upside while the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks. “This crisis is however far from over. In our latest World Economic Outlook, we continue to project a deep recession in 2020. Global growth is projected to be -4.4 per cent, an upward revision of 0.8 percentage points compared to our June update,” Gita Gopinath, the Chief Economist of the IMF, said. This upgrade owes to somewhat less dire outcomes in the second quarter, as well as signs of a stronger recovery in the third quarter, offset partly by downgrades in some emerging and develo...

 The Indian Express, October 14, 2020 Just three days ago, a consumer confidence survey by the Reserve Bank of India said discretionary spending was expected to remain low in the near future even though people expected an improvement not just in economic situation but also in employment conditions and income scenario. Finance Minister Nirmala Sitharaman’s announcement on measures to boost consumer spending is clearly an acknowledgement that people going out and spending is key to a faster turnaround of the economy. But then, two things stand out in the announcement: One, much of it (the consumer spending part) is front-loading of expenditure, or in other words, repurposing of government spending, and the size of the overall package is nothing much to talk home about (compared with the Prime Minister’s Garib Kalyan Yojana and the AtmaNirbhar Bharat package); and, two, by specifying how and where to spend, the Finance Ministry just doused any excitement among the 35 lakh-odd Central ...