The First Forum – Edition 29

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 Ninth Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Ankita Punjani, Mehak Gupta and Divyansh Gupta)

Business

Stockpiling drives best nestle sales growth in years
Swiss food giant Nestle reported its best quarterly sales growth in nearly five years as consumers are filling their cupboards with its well-known brands ahead for the coronavirus lockdown. Sales particularly in North America, Europe and middle east in March, helped to drive an overall rise of 4.3% in the first quarter of the year which is the fastest quarterly growth in nearly five years. Read MoreWhile underlying sales in Asia fell 4.6% as customers in China stayed away from shops but online sales jumped. A 3% increase is expected from the above analysis.

India’s scrap gold supply to hit all time high: WGC
The World Gold Council (WGC) said that Scrap gold supplies in India were likely to hit an all-time high in 2020 as consumers would sell jewellery to cope with the financial crunch from the coronavirus lockdown. Local gold prices surged 25% in 2019 and have risen another 16% so far in the year. Record high local prices coupled with financial pressure on households would encourage people to sell it. Read MoreRising scrap supplies, amid a fall in demand could dent the world’s second-biggest bullion consumer’s imports and cap a rally in global prices. Falling bullion imports could help reduce India’s trade deficit and support the ailing rupee.

Coronavirus brews trouble for tea, disrupts supply as demand spikes
The coronavirus outbreak is causing a rare stir in the usually staid global tea market, with labour lockdowns stifling supplies just as millions in lockdown drive up demand for the beverage known for its immunity-boosting properties. Five countries – China, India, Kenya, Sri Lanka and Vietnam – account for 82 per cent of global tea exports, but strict restrictions on movement to contain the coronavirus pandemic have already disrupted the key leaf-picking season, delayed some shipments by about a month and triggered a spike in prices. Read MoreIndia’s output is likely to drop by 120 million kgs or 9 per cent in 2020 as the lockdown initially forced plantations to suspend plucking during the opening harvest – the prized first flush – and then operate with about half the workforce. The International Tea Committee (ITC) estimates India’s 2020 exports will fall 7 per cent.

Maruti Suzuki records zero sales in April due to lockdown
Maruti Suzuki India on Friday reported zero monthly domestic sales for the first time ever in April, as the country remained under lockdown to contain the spread of the coronavirus. The carmaker suspended operations from March 22, in line with orders from the government as India rushed to curb the spread of the virus. Read MoreThe nationwide lockdown has added more pressure on India’s auto industry that was struggling with a slowing economy and lean demand. Meanwhile, following resumption of port operations, the first export shipment of 632 units was undertaken from the Mundra port, ensuring that all guidelines for safety were followed.

Economics

Low crude oil prices don’t mean much for India: Experts
India’s 40-day lockdown to contain the spread of the coronavirus is curbing oil demand and reducing the government’s tax income from the petroleum industry, which contributes about a fifth of budget revenue. Read MoreConsumption of fuel products probably declined at least 80% in April, which would lead to revenue loss of as much as Rs 400 billion, according to estimates by an economist, Madan Sabnavis. Demand in the world’s third-biggest consumer of fuel plummeted this month due to the lockdown. At the same time, oil prices have collapsed, further reducing tax receipts from fuel products and crude production from local fields.

 Growth of core sector industries contract by 6.5% in March
India’s eight infrastructure sectors slumped by a record 6.5% in March after touching an 11-month high in February, hit by a nationwide lockdown to contain the spread of covid-19. Data released by the industry department showed sectors including crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity saw a contraction in output in the month, except coal which grew 4%. Read MoreIndia’s core sector grew just 0.6% in FY20 lagging a 4.4% rise in FY19, which will have an adverse impact on factory output and subsequently on economic growth. The contraction in core sector output is likely to worsen to alarming levels in April.

 SAARC Nations Roll Out Stimulus Packages to Tackle Economic Fallout
All the South Asian Association for Regional Cooperation (SAARC) nations have rolled out a raft of stimulus packages to boost investments, buffer private businesses and bolster growth in response to the COVID-19 pandemic that has upended life and disrupted economic activity in a region inhabited by over 1.8 billion people. Read MoreThe World Bank recently warned that South Asia faces its worst economic performance in 40 years due to the deadly pandemic. It has advised the governments to ramp up action to curb the health emergency, protect their people, especially the poorest and most vulnerable, and set the stage now for fast economic recovery.

Sugar output falls 20 per cent in October-April
India’s sugar production fell 20 per cent to 258.01 lakh tonne in the current marketing year ending September due to lower cane output, while sales plummeted during the last two months because of the lockdown. Production stood at 321.71 lakh tonne in the corresponding period (October-April) of 2018-19 marketing year. ISMA has pegged the country’s sugar production to fall at 260 lakh tonne in 2019-20 marketing year (October-September) from around 330 lakh tonne in the previous year. Read MoreDue to lockdown, the sugar sale in March and April, 2020, was lower than what was sold last year, by about 10 lakh tonne, bringing us back to same levels as last year stated the ISMA. Further, it is expected that sugar demand will increase as soon as the lockdown is withdrawn, especially because of demand from the traders to refill the pipeline, which is almost dry, and also because of the consumption increase coming up due to summer demand for beverages, ice creams, juices etc.

Ministry of Corporate Affairs invites proposals for research into corporate governance
The vast repository of corporate data contained within the corporate affairs ministry’s MCA-21 registry will now be available for research and studies into corporate governance and other related topics. The ministry has invited proposals for funding up to Rs 50 lakh for research in various topics from integration of the MCA-21 database with other databases to a corporate governance index (CGI) and more, in a notification released by the Ministry. Read MoreThe indicative list of topics provided by the ministry included a bankruptcy prediction model based on the financial statements of companies and a study of related party transactions to identify money laundering. As per the funding guidelines, institutions, organisations, agencies and individuals of academic repute or engaged in research in related domains may apply. The timeline for the proposed projects should be within 6-month but can be extended by the expert committee.

Finance

Reliance Industries to raise up to Rs 53000 crore via right shares
Reliance Industries Ltd plans to raise ₹53,215 crore by selling shares to existing investors, the biggest such fundraising by a company in India, as the energy conglomerate aims to wipe off its massive debt. Read MoreShareholders of Reliance will be offered one new share for every 15 held at ₹1,257 apiece, a discount of 14% from the previous close. It is the first such share sale by India’s most valuable firm in three decades. The company said that the promoters will subscribe to the full portion of their quota, and also to the unsubscribed portion of the public offer.

Government to raise up to Rs 10,000 crore via tax-free bonds
The government is in search of to boost as much as Rs 10,000 crore in its maiden tax-free bond situation to assist bridge the fiscal hole, which is set to widen in the aftermath of Covid-19-induced economic disruptions and low tax collections.Read More The finance ministry has begun negotiations with bankers on a likely tax-free bond issue. The money may be raised in multiple instalments. The structure of the issue and number of instalments are yet to be decided. The government may either sell the bonds in a direct public issue, or use a public sector company to raise the funds.

Fitch downgrades viability rating for four banks on Covid-19 impact
Rating agency Fitch has downgraded viability rating (VR) for four lenders – Axis Bank, Bank of Baroda, ICICI Bank and State Bank of India – on rapid deterioration in the operating environment for banks in India. The deterioration in operating environment follows the coronavirus pandemic and measures to contain its spread. Read MoreThe rating agency revised the viability rating from “bb+” to “bb” for Axis Bank, ICICI Bank and SBI and from “bb” to “bb-“ for Bank of Baroda. This was despite relief measures implemented by the authorities to support the economy and protect borrowers, which indirectly benefit the banks.

Sidbi, Nabard compete to lend to top MFIs under RBI’s liquidity support
The Small Industries Development Bank of India (Sidbi) and National Bank for Agriculture & Rural Development (Nabard), having Rs 40,000 crore at their disposal for liquidity support from Reserve Bank of India (RBI), both organisations are chasing top Microfinance Institutions (MFIs) for financing. According to informal estimates, the two organisations together are looking to extend Rs 7,000-8,000 crore in funding to MFIs. Read MoreRBI has allocated Rs 50,000 crore to Nabard, Sidbi and National Housing Bank (NHB). Of this, Rs 25,000 crore is earmarked for Nabard for refinancing regional rural banks (RRBs), cooperative banks and MFIs; Rs 15,000 crore has been set aside for Sidbi to on-lend/refinance; and Rs 10,000 crore has been earmarked for NHB to enable it to support housing finance companies (HFCs).