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Amid COVID-19 Pandemic, India’s Economy To Shrink By 5.9% In 2020: UN Report

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Amid COVID-19 Pandemic, India's Economy To Shrink By 5.9% In 2020: UN Report

India’s economy is forecast to contract by 5.9 per cent in 2020, due to the impact of COVID-19 pandemic recent report by the UN says.

On September 22, the United Nations Conference on Trade And Development (UNCTAD) had published the ‘Trade and Development Report 2020’ showing the impact of COVID-19 pandemic on the global economy. It had stated that the world economy will diminish by 4.3 per cent in 2020 and is currently undergoing a ‘deep recession’. This will translate into a loss of 6 trillion dollars (Rs 4,41,39,300 crore).

Moreover, India’s Gross Domestic Product (GDP) is stated to shrink by 5.9 per cent in the financial year 2020-’21 and recover to 3.9 per cent 2021-’22.

Amid COVID-19, India's Economy To Shrink By 5.9% in 2020: UN Report

UN report predicts a contraction of global and Indian economy. (Image Source: Twitter @UNCTAD)

Highlights of ‘Trade and Development Report 2020’: Global Scenario

  • The world is struggling with the possibility of a complete wipeout of the Brazilian, Indian and Mexican economies;
  • Trade will reduce by 20 per cent or one-fifth this year, the Foreign Direct Investment (FDI) will shrink by up to 40 per cent, with Remittances dropping by over USD 100 billion;

  • South Asia economy is expected to contract by 4.8 per cent in 2020-’21 but then recover to 3.9 per cent in 2021-’22;
  • The first half of 2020 witnessed a sharp drop in its output, as the biggest absolute fall would be seen in the developed countries. Some countries are even set to face a ‘double-digit’ decline over the year. The report shows the current ‘generalised global recession’, will match the ‘Great Depression’ of the 1929-33;

  • By 2021 the economies are expected to bounce back on the right track. However, this will be uneven across the countries;
  • Unemployment will be on the rise with a large number of companies facing the problem of ‘bankruptcy’;
  • Uncertainty will continue to exist with the economy’s demand and supply being weak, with a lack of confidence in the market;
  • The debt levels of the public and private sectors could increase massively than the pre-COVID recorded levels;
  • The greatest economic and social damage will be in the developing world, where levels of informality are high, commodities and tourism a significant sources of foreign exchange, and fiscal space has been squeezed under a mountain of debt;
  • Around 90 million to 120 million people of the developing world will be dragged into poverty, along with approximately 300 million people facing food insecurity;
  • Even if the economy’s activities bounce back and the developed nations were to follow the necessary fiscal and monetary measures, employment will not entirely recover. Several countries will remain in debt distress, and the income gaps will enlarge even more.
  • China will grow at 1.3 per cent in 2020-’21, and a whopping 8.1 per cent the following year.

Indian Scenario:

In case of India, the baseline scenario is a sharp recession in 2020 following strict lockdown measures to stem the virus’ spread brought many productive activities to a halt across the country, according to the UN report. Indian economy’s contraction by 5.9 per cent in the current fiscal year could lead to permanent income loss.

Richard Kozul-Wright, Director at UNCTAD’s Division on Globalization and Development Strategies, mentioned that a ‘V-shaped recovery’ is misleading and the same will require a ‘double-digit’ growth in 2021, which is not possible!

Mukhisa Kituyi, UNCTAD’s Secretary-General, said that building a better nation requires smart actions. He further added that, “The lives of future generations, indeed of the planet itself, will depend on the choices we all take over the coming months.”

Other projections:

On September 8, American credit rating agency Fitch Ratings projected a contraction of 10.5 per cent instead of its earlier estimate of a 5 per cent contraction for India’s economy in the current fiscal year. Last month, official data published showed that the country’s GDP shrank 23.9 per cent in the April-June period, triggered by the stringent lockdown, making the contraction one of the sharpest contractions in the world.

The agency, however, forecast that India’s economy will grow by 11 per cent in the financial year 2021-’22 and 6 per cent in 2022-’23.

Meanwhile, the Asian Development Bank on September 15 predicted that the Indian economy would contract by 9 per cent this financial year.

Domestic rating agency India Ratings and Research, revised India’s GDP growth forecast for the financial year 2020-’21 to -11.8 per cent from -5.3 per cent. The agency added that it expects India’s GDP to rebound and grow at 9.9 per cent year-on-year in the financial year 2021-’22 due to a weak base in 2020-’21.

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How SEBI’s New Margin Rule Is Affecting Retail Traders?

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SEBI Margin Rule | News Aur Chai

Securities and Exchange Board of India has introduced new margin rules for traders. Traders and Brokers are not happy with the new regulations because they will have to invest a large amount of cash in fulfilling margin requirements for trade.

SEBI had introduced the new margin rule in the year 2020 for intraday traders. It is being implemented in a phased manner. Traders were supposed to maintain 25 per cent of the peak margin in the first phase; the margin was raised by 50 per cent in the second phase. In the third phase, as per the new margin rule, intraday traders will have to pay a 100 per cent upfront margin. According to new norms, the margin requirements will be calculated four times during every trading session because the money margin must be greater than the need.

As per the new rule, brokers must collect margin from investors for any purchase or sale, and if they fail to do so, they will have to pay the penalty. Thus, brokers will not receive power of attorney. Brokers cannot use power of attorney for pledging anymore.

Those investors who want to make use of margin will have to create margin pledges separately. As per the new rule, investors will have to pay at least a 30 per cent margin upfront to avail a margin loan. Shares brought today cannot be sold tomorrow. Funds from shares sold today cannot be used for new trades on the same day.

The market experts said that there must be proper adjustments for implementing new rules, or it may create chaos, trouble and disturbance to the market participants. The CEO and founder of Zerodha broking firm, Nithin Kamath tweeted that, “the day when the new rules came into effect was the dreaded day for brokers, exchanges, intraday traders”.

Traders Are Not Happy:

Changes in rules have evoked strong reactions from traders because they will have to invest a large amount of cash in fulfilling margin requirements for trades as per new margin rules. Even the trading in futures and options will become more expensive. Traders are disappointed because they will have to pay up more money to bet in stock markets. As per new margin rules, Traders are also liable for the penalty if the rules are not followed during the trading session. If a trader wants to buy Nifty worth Rs 10 lakh, he will have to pay a 20 per cent margin of around 2 lakh. If the margin of the trader does not meet the need, he will be penalized. Traders will have to pay the minimum amount for opening the Multilateral Trading facility account, and they have to maintain a minor balance at all times.

Why Gas SEBI Introduced A New Margin Rule?

SEBI has introduced new rules to protect retail investors from purchasing difficulty. The intended goal of SEBI behind new margin rules is to bring down the difficult market situation and avoid huge fluctuation in stock markets during extreme stress. The new margin rules are likely to bring transparency to the market; it is expected to strengthen the market’s safety.

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Maya Global Education Society Acquires GIAP Journals

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GIAP MGES Journals | News Aur Chai

Gyandhara International Academic Publications (GIAP Journals), headquarter at Mira Road, Thane, Maharashtra, has been completely acquired by Maya Global Education Society (MGES), Prayagraj, India, with effect from 25th August 2021. Maya Global Education Society is an emerging confluence of academicians to cater to challenges in the educational and research domain in the post-pandemic world. Its headquarter is at Prayagraj, India.

According to our trusted sources value of this acquisition is around 50,000 USD. MGES claimed that their core activity is developing an online research-based education and training system that will reach all parts of the society irrespective of their economic status.

MGES aims to delve into the following activities:
* Training to academicians on tools and systems to improve students’ engagement in an online environment.
* Training to early researchers on research tools, software, and methodology.
* Training to early professionals and graduates to meet the skills demand of Industrial Revolution 4.0 (based on World Economic Forum suggestions).
* Publication of open access research journals and books (Recently acquired GIAP Journals).
* Distribution of scholarly content to Universities and higher education institutions.

GIAP cofounder and CEO Mrs. Rajni told us in an exclusive interview that the journey of GIAP was like a dream come true. It started in 2012 with loans on personal jewelry. After serving in the academic fraternity for the last 9 years, it was a timely decision for all journals and books to grow under the able guidance of pure academicians and researchers.

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Kitex’s Stock Surged 46% In A Week Post Tussle With Kerala Government

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Kitex Vs Pinarayi Vijayan & Kerala Government 2021 | News Aur Chai

The stock of Kitex Garments, the world’s second-largest manufacturer of kids’ garments, based in Kerala, saw a secular uptrend recently, after the company’s announcement that it will relocate to Telangana following a squabble with the Kerala government. The group withdrew a 3,500-crore investment project from Kerala and is planning to move to Telangana with a 1000 crore worth investment project.

Sabu M Jacob, the chairperson and managing director of the Kitex Group, stated his morality forbids him from ever investing a single rupee in Kerala, his native state. The comment brings the confrontation between the Kerala government and the homegrown firm to a close.

What is at the root of the clash?

Kitex has been subjected to repeated inspections by various Kerala government authorities in recent weeks, with group chairperson Sabu Jacob publicly accusing Pinarayi Vijayan’s Left administration of hounding the firm.

The inspections, Jacob said, were intended to “harass” businesses like him and “push him into a corner.” The authorities who came down to examine the firm, he claimed, seemed as though they were on the lookout for thieves and criminals.

P Rajeev, the state’s Industries Minister, emphasized that the government had not conducted any Suo Motu inspections of the firm. While the industries department did not conduct any searches, he said the health and labour agencies did so in response to orders from the Kerala High Court and the National Human Rights Commission based on individual complaints. The accusations are allegedly related to the company’s treatment of employees and the contamination of a nearby river due to wastewater discharge.

A Congress MP and a Congress MLA, and a female employee filed charges against the organization. The charges ranged from polluting a local waterway to harassing employees and violating minimum wage laws.

The Kerala government has denied targeting Kitex on purpose. The inspections were carried out in response to complaints and directives from courts and the state’s human rights commission; according to state industries minister P. Rajeev, he said his government stands for “responsible investment”, and the state would be a hub for such investments in a few years. He added, “The LDF Govt. ensures that sustainable and innovative industries thrive here,”

What was the aftermath of the inspections?

Even though the final findings of the official inspections are still pending, Jacob escalated his feud with the government by announcing that he was cancelling investments worth Rs 3,500 crores that were announced during the ASCEND conference in January 2020. By 2025, the investments were intended at establishing an apparel park and industrial parks along the proposed economic corridor in Kochi, Thiruvananthapuram, and Palakkad, resulting in the creation of thousands of employment opportunities.

Without identifying anyone in the state administration, Jacob said that the state lacked a business-friendly environment. While he did not want to relinquish the intended investments in Kerala, he said he was compelled to do so due to political and bureaucratic persecution. He said that although other states in the country were gradually improving their economic environment, Kerala was still 50 years behind.

Jacob and a few Kitex officials went to Hyderabad last week on a private plane supplied by the Telangana government, where they met with a team led by the state’s Industries Minister, KT Rama Rao. The business revealed intentions to spend Rs 1,000 crore in an apparel park at the Kakatiya Mega Textile Park in Warangal after two days of negotiations.

The political consequences of the experiment

Jacob, the founder of the Kitex Group, is an industrialist who has also dabbled in politics. Jacob launched Twenty 20, a one-of-a-kind political experiment that won seats in panchayat elections in 2015 and then built on that success in the 2020 elections by winning seats in new panchayats.
This corporate-driven panchayat model has resulted in a lot of growth in tiny villages, putting both the Congress and the Communist Party of India in danger (Marxist).

Kerala’s rating in terms of ease of doing business

Kerala ranks worse than many other states and union territories when it comes to the ease of doing business. Based on improvements that states were asked to adopt in 2019, it was placed 28th out of 36 states and UTs in the ease of doing business rankings.

Kerala was judged to have failed to implement some labour reforms, such as single-window clearance and measures to ensure simple information flow and transparency.
Following the Kitex withdrawal, however, several groups that had thrived in the state for years came out openly in favour of the state administration.

RPG Enterprise’s chairperson Harsh Goenka publicly tweeted in support of the administration. He stated, “We are the largest employers in Kerala. We find the local government very supportive,”

Where does the company stand in the share market?

With the decision to invest in Telangana, Kitex’s shares were once again trapped in the upper circuit. On Wednesday, the stock soared almost 10%, reaching a record high of Rs 204.05.

Within a week, the stock price of the children’s clothing company rose by almost 85 percent. The stock price increased from Rs 110.05 to Rs 204.05, reaching its highest level in three years. The company’s market capitalization increased to Rs 1,357 crore from Rs 732 crore as a result of this.

Because it controls 55 percent of the firm, the promoter entity, which includes Kitex Managing Director Sabu Jacob, profited Rs 347 crore. Sabu Jacob’s entire share value increased to Rs 754 crore.

Meanwhile, the BSE pressed Kitex for an explanation for the sharp increase in share prices, which the firm attributed to a Rs 1,000 crore investment plan in Telangana.

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