Economy and Markets June 2020
The world’s battle with COVID -19 continues
World-wide situation of the COVID-19 6.28 million cases of COVID-19 as of 3 rd June 2020 Mortality rate stands at 6% as of 3 rd June 2020 Total number of confirmed cases stands at 62,87,771 as of 3 rd June 2020. • • The mortality rate in June has declined when compared to the averages of May and April. Mortality rate stands at 6% as of 3 rd June 2020 lower than. 6.7% in May 2020 and 6.3% in April 2020.. • (Source : WHO) Source: WHO, as of 3 rd June 2020
Country-wise COVID-19 cases Country-wise spread of the disease • United states account for highest number of COVID-19 cases (29%) followed by Brazil (8.3%), Russia (6.8%) and United Kingdom (4.4%) • India now has the seventh-highest number of COVID-19 cases. While, in absolute number, India ranks 7, in terms of total cases (% of population) , the ranking is much below at 131. • Qatar has the highest cases (as % of population) at 2.17%. Source: CEIC; World Bank; Cases as of 3 rd June 2020; Population as of 2018; Data labels in the graph corresponds to total number of COVID-19 cases
Medical research to combat COVID-19 Several organizations have formed international alliances to expedite vaccine development : WHO has raised US$8.1 billion in pledges and implementing an access to COVID-19 Tools Accelerator for global vaccine development. The Coalition for Epidemic Preparedness Innovations (CEPI) is working with global health authorities and vaccine developers to raise US$8 billion in a global Nearly 159 vaccine partnership between public, private, philanthropic, and civil society organizations for accelerated research and clinical testing of eight vaccine candidates. candidates have been developed so far for testing , of which 10 are in clinical evaluation and 121 are in Pre- clinical evaluation. The Global Alliance for Vaccines and Immunization (GAVI) is financing and organizing clinical groups in under-developed countries with COVID-19 vaccination preparedness. The Gates Foundation, a private charitable organization dedicated to vaccine research and distribution, is donating US$250 million for research and public educational support, mainly in support of CEPI. Source: WHO, News reports; Data as of 30 th May 2020
India continues to see sharp rise in COVID-19 cases; Recovery rate improves too Cases in India stands at 207,615 as on 3 rd June2020 Testing in India continues to ramp up • India continues to see exponential rise in number of cases , despite lockdowns. • Testing now has increased to 0.14 million on a daily basis vs. an average of 0.07 million in April 2020. • Total number of confirmed cases in India stands at 207,615 as of June 3, 2020. • Even as the deaths have surpassed 5,000, the mortality rate in India continues to remain relatively low at 2.8% compared with the global average (6%). • The recovery rate in India is increasing. As many as 91,855 patients have been recovered in India, taking the recovery rate to 48%. (vs. 24.9 as of April end and 8.9% as of March end) (Source : WHO, CEIC) Source: WHO ; CEIC ; Data as of 3 rd June 2020
Four states account for 70% of COVID-19 cases Maharashtra, Tamil Nadu, Gujarat and Delhi accounts for nearly 70% of the COVID-19 cases Source: CEIC, *Data as of 27 th May 2020
GLOBAL ECONOMIC RESPONSES TO THE SITUATION
Global central banks have delivered sharp rate cuts • Host of global central banks reacted promptly by reducing rates in order to support growth Source: Bloomberg, SBIMF Research; NB: * Indonesia had announced to use new policy benchmark i.e. 7-day reverse report rate as its benchmark policy rate in April 2016;
Other monetary measures undertaken by Global Central Banks Focus areas of monetary stimulus rolled out by various countries : Lowering of capital/reserve Support bank lending to small Asset (securities) purchases requirements and medium enterprises Temporary forbearance on Long term refinancing Broaden the eligible collateral classification of past due operations for open market operations loans Providing liquidity to mutual funds Source : IMF;
Fiscal measures rolled out by various countries to contain the slowdown Fiscal stimulus come in the form of combination of guarantees, delayed payables and direct impulse, hence does not entail immediate spending in all cases 25.0 21.1 20.0 13.0 12.0 15.0 10.0 9.9 9.8 8.0 10.0 7.2 6.1 5.3 5.0 4.9 4.1 4.0 4.0 2.9 2.8 5.0 2.5 1.4 0.7 0.0 Japan Singapore United States South Africa Australia Canada Brazil United Kingdom India Turkey France Indonesia European Union Argentina Russia Saudi Arabia China Italy Mexico Germany Fiscal stimulus as a % of GDP Source: IMF, SBIMF Research ; *As of 21 st May 2020
Contours of fiscal stimulus rolled out by various countries Focus areas of fiscal stimulus rolled out by various countries : Business Tax relief Healthcare Loans/grants Targeted industry Jobs retention Loan guarantees support schemes Unemployment Direct cash Public investment Insurance transfers Source: IMF, SBIMF Research ; *As of 30 th April 2020
INDIA’S RESPONSE TO THE SITUATION
Govt of India’s response to COVID -19 Timeline of social distancing measures by the government No. of confirmed cases The government has decided to re-open the economy outside of containment zones in three phases and complete lockdown to still continue in containment zones till 30 th June 2020. Source:SBIMF Research
From lockdowns to Unlocking Government decides to relax the restrictions and re-open economic and social activities in a calibrated manner Activities allowed Activities allowed (Outside of containment zones) in Containment zones Phase 1 Phase 2 Phase 3 From June 1 (from 8th June 2020) (in July 2020) (dates to be decided) Inter and intra state movement of persons Schools and colleges International air travel, metro Religious places and goods without e- rail services pass Only essential Cinema halls, gyms, services allowed Movement of Hotels, restaurants swimming pools, goods/cargo for cross and other hospitality Educational/training/c entertainment parks, land border trade services oaching institutions theatres, bars, auditoriums, cinema halls Night curfew timings Social/political/sports/enterta relaxed to 9 pm -5 am Shopping malls inment/academic/cultural/reli (from 7 pm - 7 am gious functions earlier) • Earlier classification of red, orange or green zones has been done away with. Now the whole country is divided into containment zone and non-containment zone, • Containment zones will continue to see earlier imposed lockdown guidelines at least until 30 th June 2018. • The perimeters of a containment zone are decided based on number of positive cases in area, contact tracing history and population density. • States/UTs can prohibit certain activities based on their assessment of the situation and pose restrictions as deemed necessary. Source: MHA ;SBIMF Research
Fiscal response to COVID-19 by Government of India Government of India announced stimulus measures to the • The measures announced contained a set of temporary tune of Rs 20.97 trillion (~10% of GDP) compliance relaxations to tide over COVID situation, liquidity support to businesses (primarily MSME, NBFC), Total benefits Fiscal cost Fiscal cost as relief measures to rural population and migrants, Fiscal measures (Rs billion) in FY21 % of GDP and certain executive and legislative reforms/actions with Round 1 1,928 1,548 0.74 medium to long term structural benefits. Government has Round 2 - Tranche 1 5,946 940 0.45 been swift to act and the follow-on steps with regards to Round 2 - Tranche 2 3,100 100 0.05 certain measures (such as MSME credit guarantee, Round 2 - Tranche 3 1,500 240 0.11 NBFC and banning of select defence goods imports). Round 2- Tranche 4 81 81 0.04 • Nearly 15 measures of the total 66 measures were Round 2- Tranche 5 400 400 0.19 towards weaker section of society followed by agriculture RBI measures 8,016 - - (12) and MSMEs (8). Total 20,971 3,308 1.58 Relief measures for weaker sections of the society takes Government unleashes key structural reforms, entailing front seat long term benefits 20 20 15 17 15 15 12 15 12 8 11 10 4 10 3 3 3 3 5 2 2 2 1 1 1 1 1 1 1 1 1 4 4 3 5 0 Rural poor and migrants Agriculture MSMEs Civil Aviation Corporate Affairs Health Tax measures EPFO Mining NBFCs/HFCs/MFIs Power Atomic Energy Contractors Defence Power discoms PSEs Real Estate Revenue loss Social Infrastructure State Government 0 long term benefits) (entails no fiscal cost) Liquidity Support to businesses/farmers Farmers/Business/w Credit guarantee terms of increased Compliance Relaxations Reform (entailing Fiscal support (in Executive Actions Relief actions to expenditure) eaker sections actions various No. of measures announced (Sector-wise) No. of measures announced Source: Ministry of Finance, SBIMF Research; * Liquidity injection of Rs 900 billion to DISCOMs via PFC and REC; NABARD to provide Rs 300 billion as refinance support to rural co-op banks & RRBs and Rs 1 trillion for funding Agri infra projects Rs 400 billion to be incurred by quasi sovereign agencies for MSME fund of funds.
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