By Manoj Kumar
NEW DELHI (Reuters) – India’s economy shrank by nearly a quarter in April-June, much more than forecast and pointing to a longer than previously expected recovery with analysts calling for further stimulus.
Consumer spending, private investments and exports all collapsed during the world’s strictest lockdown imposed in late March to combat the COVID-19 pandemic and India – the world’s fastest-growing large economy until a few years ago – now looks to be headed for its first full-year contraction since 1980.
Gross domestic product shrank by a record 23.9% in April-June from a year earlier, official data showed on Monday, against a Reuters poll forecast for an 18.3% contraction.
Krishnamurthy Subramanian, chief economist at the Ministry of Finance, said India’s economy was set for a “V-shaped” recovery and should perform better in the coming quarters as indicated by a pickup in rail freight, power consumption and tax collections.
Some private economists, however, said the fiscal year that began in April could see a contraction of nearly 10%, the worst performance since India won independence from British colonial rule in 1947, and likely to push millions more into poverty.
“Given the limited fiscal space and the need to stimulate a more durable growth, the growth recovery will be gradual and is likely to continue into 1H FY22,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities, Mumbai.
Consumer spending – the main driver of the economy – dropped 31.2% year-on-year in April-June compared to a 2.6% fall in the previous quarter, data showed, while capital investments were down 47.9% compared to a 2.1% rise in the previous quarter.
Prime Minister Narendra Modi announced a $266 billion stimulus package in May, including credit guarantees on bank loans and free food grains for poor people, but consumer demand and manufacturing have yet to recover.
The Reserve Bank of India, which has reduced the benchmark repo rate by a total of 115 basis points since February, is expected to cut interest rates to boost growth after keeping them on hold this month amid rising inflation.
VIRUS CASES ON RISE
The coronavirus has been spreading in India faster than anywhere else in the world, with more than 3.6 million people already infected and a death toll of over 64,400.
Continuing restrictions on transport, educational institutions and restaurants have hit manufacturing, services and retail sales, while keeping millions of workers out of jobs.
Manufacturing has already entered recession as output fell 39.3% in April-June after falling 1.4% in the previous quarter, and construction and trade services plunged by around 50%.
With an annual growth of 3.4% in the April-June quarter, the farm sector, which accounts for 15% of economic output, offered some hope the rural economy will be able to support millions of migrant workers who have returned to their villages.
Still, Rupa Rege Nitsure, group chief economist at L&T Financial Holdings, said the government will have to take more steps to boost the economy overall.
“Unless the central and state governments focus on re-starting the economic machine completely, the real process of repair and reconstruction will not gain momentum,” she said.
(Additional reporting by Nallur Sethuraman; Editing by Toby Chopra, Barbara Lewis and Susan Fenton)
Why falling immigration isn't that bad for the economy during COVID-19 – Yahoo Canada Finance
COVID-19 travel restrictions have put a big dent in immigration, widely seen as something the economy relies on, but the negative effects aren’t as bad as they might seem.
The latest government numbers show 13,645 fewer permanent residents came to Canada in July, down 63 per cent from the same month last year. April and June were similarly weak periods, making the likelihood of reaching the federal government’s target of 341,000 less likely.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.” data-reactid=”18″>For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada. ” data-reactid=”19″>“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada.
“So, even a complete shutdown of immigration would (roughly) shave 1 percentage point from growth (or a bit less). Not small by any means, but that compares with what could be a 6 per cent drop in GDP (OECD said -5.8 per cent for this year, we are looking at -5.5 per cent).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.” data-reactid=”21″>Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.
“Overall, given the realities of COVID and the now-soft demand for labour, the cool down in immigration by itself will not be particularly harmful — and certainly less so than it would have been say a year ago.” said Porter.
Long term effects without immigration
Pedro Antunes, the Conference Board of Canada’s chief economist, also thinks the effects are mitigated in the short-term but that doesn’t mean the economy will be totally unscathed.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.” data-reactid=”25″>“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.
However, he believes it’s more important to look at the long term repercussions of reduced immigration.
“Canada’s underlying capacity is dependent on private and public investment, adoption of technology and the number of workers (and the skills of those workers). We know from our prior research that without immigration, our labour force would be flat or declining (since exiting baby-boomers outnumber school leavers),” said Antunes.
“If immigration levels are reduced over a few years (we think 2020 and 2021 at least) the result is a long-lasting impact on our potential (or productive capacity).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.” data-reactid=”29″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for Apple and Android.” data-reactid=”30″>Download the Yahoo Finance app, available for Apple and Android.
EU looks to fast 5G, supercomputers to boost virus-hit economy – TheChronicleHerald.ca
By Foo Yun Chee
BRUSSELS (Reuters) – The European Commission on Friday urged the 27-country bloc to work together to speed up the rollout of fibre and 5G networks to boost the region’s virus-hit economy and secure its technology autonomy.
EU countries should develop a best practices toolbox by March 30 with the aim of cutting cost and red tape, provide timely access to 5G radio spectrum and allow for more cross-border coordination for radio spectrum for 5G services, the EU executive said.
The coronavirus outbreak showed how important internet services and 5G are, European digital chief Margrethe Vestager said.
“We have seen the current crisis highlight the importance of access to very high-speed internet for businesses, public services and citizens, but also to accelerate the pace towards 5G,” she said in a statement. “We must therefore work together towards fast network rollout without any further delays.”
The Commission also proposed a recommendation to boost research and activities to develop new supercomputing technologies.
“Keeping up in the international technological race is a priority, and Europe has both the know-how and the political will to play a leading role,” Internal Market Commissioner Thierry Breton said in a statement.
The Commission is investing 8 billion euros($9.46 billion)in the next generation of supercomputers.
(Reporting by Foo Yun Chee; Editing by Tomasz Janowski)
Charting the Global Economy: Fed Signals Rates on Hold for Years – BNN
(Bloomberg) — The Federal Reserve signaled it will keep its benchmark interest rate near zero through 2023 to help the world’s largest economy recover from the coronavirus pandemic.
Cheap borrowing costs are fueling demand for U.S. housing and leaving builders brimming with optimism in the process. In China, retail sales and industrial output are on the mend, while in the U.K., the virus-related shutdowns are having a large negative impact on youth employment.
Here are some of the charts that appeared on Bloomberg this week, offering insight into the latest developments in the global economy:
The global economic slump won’t be as sharp as previously feared this year, though the recovery is losing pace and will need support from governments and central banks for some time yet, according to the OECD.
The Federal Reserve’s so-called dot plot, which the central bank uses to signal its outlook for the path of interest rates, shows that officials expect no change in policy this year and borrowing costs near zero through 2023.
Homebuilder optimism rose to a record in September, with low mortgage rates driving a housing boom that has boosted the pandemic economy, National Association of Home Builders data show.
The U.K.’s lockdown hit young workers particularly hard, with employment in the 16-24 age category falling by 156,000. That may reflect the share of young workers in hotels, restaurants and bars, a sector devastated by the pandemic.
China’s economic recovery from Covid-19 accelerated, spurred by a rebound in consumption as virus restrictions eased and larger-than-expected gains in industrial output. Retail sales rose for the first time this year in August, by 0.5% from a year earlier, while industrial production expanded 5.6%, against a forecast of 5.1%.
Scoring 75 emerging-market and frontier economies, Bloomberg Economics finds that Asia leads in getting closer to pre-outbreak norms, with some countries in Africa and Eastern Europe also outperforming. Latin America is still struggling to contain the pandemic, with 18 of the bottom 25 in the ranking in Latin America or the Caribbean.
Saudi Arabia’s crude exports dropped to the lowest since at least 2016 in the second quarter as it led a campaign alongside Russia to curb oil production following a coronavirus-induced price crash. While the effort yielded a stark turnaround in prices in May and June, Saudi revenue from oil sales still plunged almost 62% in the three-month period from a year earlier.
South Africa is among the countries with the highest percentage of smokers globally, with almost one in every three adults lighting up. So when the government banned cigarette sales for about five months of the nation’s Covid-19 lockdown, some 90% found a workaround.
©2020 Bloomberg L.P.
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