Current Affairs June 2020 - Economic

1 - India's GDP growth slows to 11-year low of 4.2% in 2019-20

According to data released by the National Statistical Office (NSO), India's economic growth slipped to 3.1% in the January-March quarter while the GDP growth for 2019-20 slowed to an 11-year low of 4.2%. The Indian economy had grown at 6.1% growth rate in 2018-19.

The eight infrastructure sectors contracted by a record 38.1% in April. Trade, hotels and transport grew 2.6% in the January-March quarter from a year ago, while financial services expanded 2.4%.

2 - Yes Bank acquiresd 24.19% stake in Dish TV

Yes Bank Ltd acquired a 24.19% stake in direct-to-home service provider, Dish TV India Ltd. Yes Bank invoked the shares subsequent to default of loan by the company.

Yes Bank, after invocation of pledged shares, has acquired 44,53,48,990 equity shares of Dish TV India. Dish TV has a market capitalisation of Rs. 2,046 crore and a subscriber base of 23.94 million. The DTH market in the country is dominated by Dish TV (40%), followed by Tata Sky (25%) and Airtel TV (22%).

3 - Moody’s downgraded India’s sovereign rating to ‘Baa3’ from ‘Baa2’

Moody's Investors Service has downgraded India's local-currency senior unsecured rating to Baa3 from Baa2 and its short-term local-currency rating to P-3 from P-2. It maintained the negative outlook. Moody's rating is in line with other agencies such as S&P and Fitch.

‘Baa3’ is the lowest investment grade - just a notch above junk status. Moody’s also revised its FY21 GDP estimate for India to 4% contraction against 0% growth projected earlier.

4 - Centre released Rs. 36,400 Crore as GST Compensation to States

The Central Government has released the GST Compensation of Rs. 36,400 Crore to the States/UTs with Legislature for the period from December, 2019 to February, 2020. For the April-November 2019 period, the Centre had already released Rs 1,15,096 crore to compensate states and UTs.

The government released the GST compensation considering the expenditure the state governments need to undertake while their resources are adversely hit due to Covid-19. Under the GST structure, taxes are levied under 5, 12, 18, and 28% slabs.

5 - Fitch Ratings projects Indian economy to grow at 9.5% in next fiscal

Fitch Ratings has forecast that the Indian economy will grow at 9.5% next fiscal. It has forecast a 5 percent contraction in the GDP in the ongoing financial year. Moody's Investors Service had downgraded India's sovereign rating to "Baa3" from "Baa2" and short-term local-currency rating to "P-3" from "P-2".

The government has announced stimulus measures amounting to 10% of GDP and the Reserve Bank of India has eased monetary policy by cutting policy rates and providing liquidity in order to support the economy.

6 - S&P's retained India's sovereign rating at "BBB-" with stable outlook

S&P has retained India's sovereign rating at "BBB-" with a stable outlook, citing that while risks to growth are rising, the economy and fiscal position will stabilise and begin to recover from 2021 onwards.

S&P said its stable outlook for India reflects expectation that the economy will recover after the containment of the covid-19 pandemic, and the country will maintain its sound net external position. S&P has projected the Indian economy to contract by 5% in FY21 before making a strong recovery to grow at 8.5% in FY22.

7 - Fitch Ratings downgrades India outlook from ‘stable’ to ‘negative’

Fitch Ratings revised downward its rating outlook for India from stable to negative while retaining the sovereign rating at the lowest investment grade, citing increasing risk to the country’s growth and debt outlook.

Fitch expects general government debt to jump to 84.5% of GDP in FY21 from an estimated 71.0% of GDP in FY20. All three major rating agencies now have the lowest investment grade rating for India. Fitch and Moody’s have a negative outlook while S&P Global Ratings has a stable outlook.

8 - Quick Estimates of Index of Industrial Production, April 2020

The Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 for the month of April 2020 stands at 56.3. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of April 2020 stand at 78.3, 45.1 and 126.1 respectively.

As per Use-based classification, the indices stand at 92.3 for Primary Goods, 7.7 for Capital Goods, 42.0 for Intermediate Goods and 21.7 for Infrastructure/ Construction Goods (Statement III) for the month of April 2020. Further, the indices for Consumer durables and Consumer non-durables stand at 5.5 and 89.4 respectively for the month of April 2020.

9 - S&P Ratings projected Indian economy to shrink 5% in FY21

S&P Global Rating’s report titled “Financial Conditions Reflect Optimism, Lockdown Fatigue Emerges” predicted Indian economy to shrink by 5% in fiscal year 2020-21.

Highlights of report are:

India’s growth to rebound to 8.5% in the fiscal year 2021-22.
India’s growth to be 6.5% in the fiscal year 2022-23 and 6.5% in FY 2023-24.
Fiscal stimulus worth 1.2% of GDP is not sufficient to provide significant growth support.
The big hit to growth will mean a large, permanent economic loss and a deterioration in balance sheets throughout the economy.

10 - IL&FS finished sale of 50% stake in GIFT city to Gujarat government

Infrastructure Leasing & Financial Services Limited (IL&FS) finished the sale of its 50% stake in Gujarat International Finance Tec-City (GIFT City) which were bought by the Gujarat Urban Development Company Ltd (GUDCL), on behalf of the Gujarat government, at an amount of Rs 32.71 crore. The stake has been reduced to lower down its debt by Rs 1,230 crore. The group's current outstanding debt is around Rs 94,000 crore.

Infrastructure Leasing & Financial Services Limited is an Indian infrastructure development and finance company.

11 - Jio Platforms raised 5683.50 crore rupees from ADIA

Reliance Industries Limited (RIL) on Sunday announced 1.16 per cent stake sale in Jio Platforms, its digital services subsidiary, to Abu Dhabi Investment Authority for Rs 5,683.50 crore, as it accelerates its debt reduction plan. Jio Platforms are valued at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore.

The stake sale has been done to make the firm RIL debt free by December 2020. RIL had a net debt of Rs 1.6 trillion as of March 2020. The Abu Dhabi Investment Authority is a sovereign wealth fund owned by the Emirate of Abu Dhabi.

12 - OECD predicted contraction of Indian Economy at 3.7% in FY21

Organisation for Economic Co-operation and Development released its Economic Outlook and predicted Indian Economy to contract to 3.7% in the fiscal year 2020-21.

Highlights are:

The global economy is expected to shrink at 3.7%.
If there is a second COVID-19 outbreak in the country, then its growth will drop further to -7.3%.
Domestic demand will suffer from the permanent loss of income in many enterprises.
OECD predicted a strong 5.2% rebound in FY 2021-22.

13 - India's forex reserves rise to a life-time high of 507.64 US billion in the second week of June

India's forex reserves rose to touch a life-time high of 507.64 US billion in the second week of June, helped by a significant jump in the foreign currency assets (FCA). The forex reserves had crossed the half-a-trillion mark for the first time in the week ended June 5.

The increase in foreign exchange reserves is due to higher capital inflows and also due to the narrowing current account deficit as trade activities have come to a standstill due to the disruptions caused by the COVID-19 pandemic.

14 - INDIA’S FOREIGN TRADE: May 2020

India’s overall exports (Merchandise and Services combined) in April-May 2020-21 are estimated to be USD 61.57 billion, exhibiting a negative growth of -33.66% over the same period last year. Overall imports in April-May 2020-21 are estimated to be USD 57.19 billion, exhibiting a negative growth of -48.31% over the same period last year.

MERCHANDISE: The trade deficit for May 2020 was estimated at USD3.15 billion as against the deficit of USD15.36 billion in May 2019.

SERVICES: The trade balance in Services (i.e. Net Services export) for April 2020 is estimated at USD7.15 billion.

OVERALL TRADE BALANCE: Taking merchandise and services together, overall trade surplus for April-May 2020-21 is estimated at USD4.37 billion as compared to the deficit of USD17.84 billion in April-May 2019-20.

15 - Wholesale Price Inflation at -3.21% in May

According to the Office of the Economic Adviser, annual rate of inflation, based on monthly WPI, stood at (-3.21%) (provisional) for the month of May, 2020 (over May, 2019) as compared to 2.79% during the corresponding month of the previous year. The official Wholesale Price Index for 'All Commodities' (Base: 2011-12=100) for the month of May, 2020 declined by (-2.24%) to 117.7 (provisional) from 120.4 (Final) for the month of March, 2020.

With regards to the final index for the month of March, WPI based rate of inflation stood at 0.42% as compared to its provisional levels of 1.00% reported on 14.04.2020. The final Wholesale Price Index and inflation rate for 'All Commodities' (Base: 2011-12=100) stood at 120.4 as compared to provisional figure of 121.1 in March 2020.

16 - CCI approved acquisition by MacRitchie Investments in 91^streets, Ascent and API

The Competition Commission of India (CCI) has approved acquisition by MacRitchie Investments (MacRitchie) in 91^streets Media Technologies (91^streets), Ascent Health and Wellness Solutions (Ascent) and API Holdings (API) under Section 31(1) of the Competition Act 2002. MacRitchie Investments is an investment holding company, an indirect wholly-owned subsidiary of Temasek Holdings.

The 91streets owns technology and intellectual property required to develop an e-commerce platform. Ascent is engaged in online as well as offline wholesale B2B sale and distribution of pharmaceutical, over the counter FMCG and nutraceutical products.

17 - Fitch Ratings retained India’s sovereign rating at “BBB-“

Credit ratings agency Fitch revised its outlook and retained the India's sovereign rating at the lowest investment grade of BBB. The rating has been put from stable to negative. Fitch predicted India’s economic activity to contract by 5% in the fiscal year 2021 before rebounding by 9.5% in fiscal year 2022.

The rating has been downgraded due to Covid 19 impact. The impact may put government’s fiscal deficit to 11% of GDP in FY21. Fitch Ratings Inc. is an American credit rating agency and is one of the three nationally recognized statistical rating organizations by USA.

18 - ADB predicted Indian economy to contract 4% in FY21

The Asian Development Bank predicted Indian economy to contract by 4% in Fiscal Year 2021 and bounce back in FY22 and grow at 5%. Due to Covid 19 pandemic, India’s GDP slowed to 3.1% in the March quarter of FY20, its slowest since early 2003.

ADB predicted food inflation to remain unchanged at 3.0% for FY21 but revised up marginally to 4.0% for FY22. The Asian Development Bank is a regional development bank to promote social and economic development in Asia.

19 - RIL became first Indian Company to be valued at USD 150 Billion

The Mukesh Ambani-helmed Reliance Industries (RIL) became India's first $150-billion company in terms of market capitalization. Mukesh Ambani's net worth surged to $60 bn. This is the highest ever valuation of an Indian company.

Reliance Industries Limited (RIL) is an Indian multinational conglomerate company, headquartered in Mumbai. Reliance Industries owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications. It is largest company in India as measured by revenue. It is ranked 106^th on the Fortune Global 500 list.

20 - CCI approved acquisition of 9.99% stake in Jio Platforms by Jaadhu Holdings LLC

The Competition Commission of India (CCI) has approved acquisition of 9.99% stake in Jio Platforms by Jaadhu Holdings LLC. Jaadhu is an indirect wholly owned subsidiary of Facebook. It is a newly incorporated company formed in March 2020 under the laws of the State of Delaware in United States.

Facebook on 22^nd April announced its plan to purchase a stake in Jio Platforms for $5.7 billion (Rs 43,574 crore). RIL has shed 24.7% stake in Jio Platforms and has raised Rs 115,693.95 crore from some of the world’s top technology investors.

21 - India became 12^th largest holder of US government securities at April end

India has become the 12^th largest holder of US government securities at the end of April, with holding worth 157.4 billion dollars. The data from the US Treasury Department showed that after significantly reducing the exposure in March to 156.5 billion dollars, India marginally hiked the holding by 0.9 billion dollars to 157.4 billion dollars in April.

At the end of April, Japan remained the country with the maximum exposure at 1.27 trillion dollars, followed by China at 1.1 trillion dollars and the UK at 368.5 billion dollars.

22 - Moody’s projects India’s GDP to shrink 3.1% in 2020

Moody's Investors Service projected the Indian economy to shrink 3.1% in 2020. However, Moody's expects the economy to register 6.9% growth in 2021. In its June update to Global Macro Outlook (2020-21), Moody's revised down its 2020 growth forecast for India on account of coronavirus-related disruption in January-March and April-June quarters.

Moody's also believes the country's border standoffs with China hints for geopolitical tension. India and China are in an intense diplomatic and military standoff.

23 - IMF predicts Indian economy to contract by 4.5% in FY21

International Monetary Fund (IMF), in its June 2020 World Economic Outlook (WEO) forecast, has predicted that Indian economy will contract 4.5% during financial year 2020-21 on the back of extended coronavirus lockdown. IMF had projected the Indian economy to grow at 1.9% in its April forecast.

IMF also expects India to gow at 6% in FY22 as compared to its earlier forecast of 7.4%. The Previously, ADB had also scaled down India’s growth forecast to -4%. Indian economy grew by 4.2% in 2019-20.