The First Forum – Edition 23

The First Forum is an initiative which focuses on covering the latest happenings going around in the world in a brief format. This is in lieu with the importance of catching up with these events in this fast changing world.
In this Twenty Third Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Gunika Vij, Somya Yadav and Manraj Uppal)

Business

Trump to announce a business council
In a recent two-hour long press briefing, Donald Trump declared that he is assembling a business council which will comprise of leaders of various kinds of businesses as well as medical experts. The objective of this council would be to chart a comprehensive plan aimed at reviving the American economy which has suffered excessively because of the outbreak of COVID-19. Read MoreHe said that the council will include ‘respectable’ names that will deliberate via teleconferencing. He expressed his firm intention to surround himself with the greatest of minds before taking, what he calls, the most important decision of his presidency. The current ‘stop the spread’ federal guidelines are supposed to end on 30^th April but medical professionals are of the opinion that there needs to be an extension of this period. Their perception is based upon the fact that the spread of COVID has refused to abate in recent days. Donald Trump said that he won’t rush into a decision which would jeopardize the health of people living in America.

CEOs taking Covid-19 pay cuts ‘should not be rewarded with shares’
In the coronavirus lockdown, CEOs and directors of many firms are sharing the burden of pay cuts, waving bonuses and are even making charity donations. On the other hand, other firms are adopting long term incentive plans that awards the CEOs and directors with stock if they hit the desired target. Read MoreIn light to this move, investment advisors have warned that those executives who are taking pay cuts should not be awarded with shares. 

Oil producers agree to cut production by a tenth
After much delays, the OPEC producers and allies including Russia conducted a meeting this Thursday to discuss the current situation of the oil market. The producer countries finally agreed to cut production by 10% of the economic output, reducing it by 10 million barrels a day. Read MoreThe production cuts will be eased in the coming months to 8m bpd and later 6m bpd. This declaration has shown a positive effect on the oil price. 

Window of Opportunity for MSME’s
The Union Minister Nitin Gadkari on Sunday remarked that the Ministry of Medium Small and Micro Enterprises will tide over the huge blow caused by the Coronavirus outbreak by increasing domestic production with the help of the government and reduce the import of goods manufactured in China. Read MoreWhile the outbreak is still ongoing the government is working on measures to resolve issues such as working capital shortage, access to affordable finance. A Rs. 10,000 crore fund has been placed before the cabinet for approval which will facilitate MSMEs to raise money from the capital market as a portion of their equity will be purchased by the government.

Economics

V-shaped or U-shaped? Some economists upbeat on virus recovery
While the IMF has declared the Coronavirus crisis as the worst one since The Great Depression a century ago, forecasters still have an optimistic view about the world recovery. Other economists say, the global economy will witness a steep rebound once the countries get back to their normal functioning. Read MoreWhile the US officials expect a V shaped recovery curve, private economists and IMF forecast a gradual U shaped recovery. 

Gold Backed Exchange Traded Funds
While stock markets across the world are crumbing and succumbing to the pressure exerted by the COVID-19 outbreak the Gold backed exchange traded funds have reached an all-time high. Gold ETFs and assets added a $23 Billion in net inflows the largest quarterly gain in history. Read MoreFurther, trading volumes and assets under management (AUM) reached record highs as gold volatility increased to levels last seen during the financial crisis, even as gold price performance was mostly flat in dollars for the month. This highlights the fact that uncertainty around the short-and long-term economic impacts of COVID-19 continues to drive sharp volatility across many assets, leaving global equities in the bear market territory, while encouraging inflows into safe havens like treasuries and gold.

Helicopter Money
Government authorities all across the globe are brain storming to come up with mechanisms to cope with the COVID-19 disaster. One such mechanism is ‘Helicopter Money’. It basically means non-repayable money transfer from the central bank to the government. It seeks to goad people into spending more and thereby boost the sagging economy. Read MoreThis is an unconventional monetary policy tool aimed at bringing a flagging economy back on track. It involves printing large sums of money and distributing it to the public. According to some analysts, the yield curve control that Japan is resorting to is basically a type of helicopter money only. That is because this strategy lets the government spend more without having to worry about bond yields jumping.

PPF and Sukanya Samridhi Norms
In the wake of the coronavirus pandemic the government has eased out norms for PPF and Sukanya Samridhi account holders. The Finance Ministry on Saturday extended the deadline for mandatory minimum deposit in Public Provident Fund (PPF) and Sukanya Samridhi Account (SSA) for 2019-20 by three months up to June 30 in view of the lockdown due to coronavirus outbreak. Read MoreTo keep these accounts active the subscribers are required to make some specified deposit in a year otherwise penalty is charged over that. Usually, subscribers make a payment towards the end of fiscal as these schemes are part of 80C of the Income Tax Act. The subscribers of PPF and SSA may now deposit their savings up to June 30, which couldn’t be deposited in 2019-20 due to lockdown in the country. The account holders of the specified schemes will be eligible to make a single deposit each in the account or accounts opened in his own name or in the name of minors the case may be for 2019-20 till June subject to maximum deposit ceiling of prescribed by law, an office memorandum issued by the ministry said.

Finance

India to get 2.2 billion dollars worth of aid
The coronavirus pandemic has witnessed a steady increase in India. The government of India has stepped in to quell its rise through some assertive measures. A 23 billion dollar relief package was approved by the Finance Ministry on 26^th March. Its main aim is to compensate for the losses that many businesses are currently enduring as well as to provide for the underprivileged sections of the society who are out of work. Read MoreThe government has also made efforts to accelerate testing, protect the frontline health workers and designate certain places as quarantine facilities. Seeing these developments, the president of Asian Development Bank has pledged 2.2 billion dollars of aid to India to assist in its war against COVID 19. Such a huge assistance package is likely to significantly improve the efficiency and endurance of the health sector of India.

EU Finance Ministers approve 590 billion dollar package
The coronavirus pandemic has wreaked havoc on Europe. While the body count on the continent is relentlessly growing, many economies are teetering on the edge of collapse. On top of this, hard-hit countries like Italy have been pretty vocal about the EU’s incompetence when it comes to dealing with this crisis. However, in an unprecedented move, EU Finance ministers approved a 590 billion dollar package to get the European economies back on track after the pandemic is over. Read MoreThis money would be channelized through various economic and financial instruments aimed at supporting companies. The ministers also agreed to work on another package whose benefits will be specifically targeted towards the worst-hit countries. While the room broke out in applause when consensus was reached, there may yet be another twist in the tale. All the leaders of EU member states are required to approve this proposal within this week but there are many points of disagreement in the draft. Whether the EU leaders will choose to keep their political disagreements aside for the interest of Europe remains to be seen.

The Poor Finally get financial relief
About 30 crore underprivileged people in India have received financial assistance from a total pool of 28,256 crore rupees under the Pradhan Mantri Garib Kalyan Yojana announced by the Finance ministry last month to tide over the 21 day lockdown. Out of the total disbursement, about 13,000 crore rupees have gone to about 6.93 crore beneficiaries. Read MoreEach of them has received about 2000 rupees in their bank accounts. In addition to this, the government announced free foodgrains and cash doles to women and senior citizens. The government is also planning to release 12 million MT of foodgrain during April-June. As many as 2.16 construction workers received support from the Building and Constructions workers fund managed by state governments. Upto 50 lakh insurance covers for healthcare workers have also been proposed. 3-month free LPG refills for over 8.2 crore beneficiaries of Ujjwala yojana is also in the works.

FTSE 100 records strongest weekly gain since January 2009
With markets closing for Good Friday, FTSE 100 enjoyed it’s biggest weekly gain since the 2008 financial crisis as FED released a $2.3tn stimulus package. The FTSE 100 closed at 5842.66 on Thursday, gaining 2.9% in a single day. Read MoreOverall, it saw a weekly gain of 7.8% in a week, biggest since 2009.