[splco_heading size=”15″ align=”left” margin=”30″]Sensex dropped 1069 points on Monday and Nifty breached its crucial support of 8,900 level in Mumbai trade on Monday morning.In Contrast European shares bounced on Monday after their worst week in two months, as investors hoped for a gradual economic recovery with many countries easing coronavirus-led lockdowns.[/splco_heading]
Analysts are trying to figure out whether the big package had any cash stimulus at all for the Covid 19-hit economy, which now stares at a worst recession ever.
The stimulus package announced by the government over the past few days is a lost opportunity, said analysts at Bernstein – an investment management firm based in the United States with nearly $623 billion in assets under management (AUM) globally. Their estimates for FY21 GDP contraction in India are the sharpest as compared to other foreign research houses such as Goldman Sachs and Nomura.
“While the package started on important aspects but the need to announce measures that add up to this top-down number, made the entire package aimless, with several generic announcements which should ideally, have been a part of a normal economic agenda. Overall, we see it as a lost opportunity,” wrote Venugopal Garre, Ankit Agrawal, and Ranjeet Jaiswal of Bernstein in a May 17 report.
Goldman Sachs early Monday warned that India was headed for its deepest recession ever after a poor run of data underscored the damaging economic impact of lockdowns in the world’s second-most populous nation.
GDP, it says, will contract by an annualised 45 per cent in the second quarter from the prior three months, compared with Goldman’s previous forecast of a 20 per cent slump.
“The ‘10 per cent of GDP stimulus’ and reform announcements are worth grabbing international headlines. However, it is not clear how many of these reforms are actually linked to the ongoing pandemic,” said broking house Emkay Global.
“In fact, we are not sure about the timeline of implementation of many of the reforms. The immediate need for income support and the real economic stimulus are still outstanding issues yet to be satisfactorily resolved,” it said.
The reforms related to freeing up agricultural markets are fresh and can invigorate the farming industry. Most of the mining sector reforms have been talked about for a while, and the hurdles are well known – and unlikely to be addressed soon, Emkay said, adding that the IBC freeze for 12 months will be a setback for Indian banks.
Ajay Srivastava, Dimensions Corporate Finance Service, told “A lot of us are worried (more than disappointed), wondering whether the government has been taking the right lessons from what has happened in last 5-6 years. The PSU policy, for instance, led to huge value destruction in PSU stocks. At the end of the day, it is a muddled response to what is happening in the economy,” .
“This is not a stimulus package. A stimulus package is something that would increase GDP,” says Swaminathan , Consulting Editor at ETNow.
“The government is afraid of a downgrade by foreign rating agencies. We are facing an economic collapse. So please call it whatever you may like, but do not call it a stimulus. You might at best call it a sedation. You might say that when the patient is crashing, I am trying to ease the pain a little. That is what we have achieved. But aggregate demand is collapsing at a time when supply itself is collapsing, because the lockdowns have interrupted all kinds of production chains. The outlook remains very grim,” said Swaminathan.
An analyst who did not wish to be named asked: “Are we talking about corporate reforms or Covid-19 relief package?” “The direction is hijacked. Where is the need for reforms? Which corporate sector is going to put money when everybody is worried about poor capacity utilisation? Reforms are surely long-term positives, but are no Covid-19 relief,” he said on Saturday.