India’s economic growth unexpectedly slid to a three-year low in the last quarter, delivering a blow to Prime Minister Narendra Modi who is facing criticism for disrupting business activity through his shock cash squeeze last year.
Gross domestic product grew 5.7 per cent in April-June, its slowest pace since the January-March quarter 2014, government data showed.
It was a marked slowdown from a 6.1 per cent growth in the January-March period and was far worse than the median forecast for a 6.6 per cent in a Reuters poll. It was in line with the poll’s lowest estimate.
Although growth was already slowing, Modi’s decision last November to scrap high-value old banknotes — a bid to flush out the money Indians hide from tax officials — wiped out about 86 percent of currency in circulation virtually overnight.
While his drive to unearth unaccounted wealth did not deliver the desired result, it hurt consumer demand in an economy where most people are paid in — and buy what they need with — cash.
Since then, an improvement in high frequency indicators such as sales of two-wheel vehicles, oil consumption, cargo traffic and rail freight raised hopes that the impact of the cash clampdown had bottomed out.
The GDP data belied those hopes. Confusion ahead of the launch of a new goods and services tax (GST) also seems to have dampened economic activity.
“The numbers seem to suggest that the slowdown from last the quarter has intensified due to the combination of long-term slowdown and temporary shock factors like demonetisation and GST,” said Abheek Barua, chief economist with HDFC in New Delhi. “We have to revise our GDP outlook numbers for the full year.”
A draw-down in inventories in the lead up to the tax change dragged down the manufacturing sector, which slowed to 1.2 per cent in the June quarter from a 10.7 percent growth last year.
With companies still grappling with new tax rules, business surveys are pointing to more pain ahead. Services and manufacturing activity contracted at their fastest rate in years in July, the month that the GST was launched.
After Thursday’s disappointing figures, economists are looking to review their full-year growth estimates.
“These trends will prompt a downward revision,” said Radhika Rao, an economist at DBS Bank in Singapore.
Annual growth in consumer spending, which powers more than half of the $2 trillion economy, slowed to 6.7 per cent in the June quarter from 7.3 per cent a quarter ago. Government spending too slowed. It grew 17.2 per cent year-on-year compared with a near 32 per cent year-on-year growth in the March quarter.
However, in a silver lining for Asia’s third-largest economy, the services sector gathered steam, posting a growth of 8.7 per cent in the latest quarter, up from 7.2 per cent in the previous three months.
Capital investment also rebounded from a 2.1 per cent contraction in the March quarter.
SAP shuts India offices after swine flu hits 2 employees
Amid the coronavirus outbreak, business software solutions major SAP India on Thursday said it has shut all its offices in the country for sanitisation after two of its employees were tested positive for swine flu (H1N1).
SAP India”s offices in Bengaluru, Gurgaon and Mumbai were temporarily closed and all the workers have been asked to work from home till the office premises are sanitised.
“Two SAP India employees based in Bangalore (RMZ Ecoworld office) have tested positive for the H1N1 virus. Detailed contact tracing that the infected colleagues may have come into contact with is underway,” the company said in a statement shared with IANS.
“The health of our employees and their families is of utmost priority, as a precautionary measure, all the SAP India Offices across Bengaluru, Gurgaon and Mumbai have been closed for extensive sanitisation,” the company elaborated.
All SAP employees based in these locations have been asked to work from home till further notice.
Symptoms of swine flu, caused by the H1N1 virus, are like those of any seasonal flu and include fever, cough, runny nose, sore throat, body aches chills and fatigue.
The rising graph of swine flu cases has a direct connection with the drop in temperature. As temperatures drop, the possibility of swine flu cases increases.
Swine flu is still prevalent and both swine flu and Coronavirus have almost similar symptoms.
Last month, Amritsar reported one death owing to swine flu.
Kashmir has not yet seen any case of coronavirus but a spurt in swine flu (H1N1) numbers continues to pose a threat in the region. Officials said last week that as many as 18 cases of swine flu have been admitted to SKIMS, Srinagar.
Gold eases, holds near seven-year peak over virus concerns
Gold prices dipped on Thursday after China unveiled measures to soften the economic impact of the coronavirus outbreak, but the metal held close to a nearly seven-year peak scaled in the previous session as concerns over the epidemic prevailed.
Spot gold was down 0.3% at $1,606.62 per ounce, as of 0749 GMT. U.S. gold futures dipped 0.1% to $1,609.60.
“It seems to be a bit more corrective mostly because … it’s not just in gold that we are seeing a bit of a walk-back in risk-off dynamics, but across a variety of assets,” said DailyFx currency strategist Ilya Spivak.
China’s central Hubei province had 349 new confirmed cases of coronavirus on Wednesday, the province’s health commission said, down from 1,693 a day earlier and the lowest since Jan. 25, although it was accompanied by a change in methodology.
Beijing cut its benchmark lending rate to support an economy hit by the epidemic, keeping Chinese stocks supported.
Also limiting any uptick in gold prices, the dollar was sucking up funds across Asia after a steep and sudden slide in the Japanese yen called into question its safe-haven status. The U.S. currency .DXY rose to a near three-year high against key rivals.
Analysts, however, said concerns over the outbreak capped losses in bullion, keeping prices close to a high of $1,612.62 hit on Wednesday, its highest since March 25, 2013.
There’s still a lot of haven-based buying of gold, said Jeffrey Halley, senior market analyst at OANDA.
“I suspect this means not everybody is buying into the hype that China is on the verge of controlling this virus.”
Actions by the Federal Reserve would also continue to determine gold’s trajectory, analysts said.
U.S. Fed policymakers were cautiously optimistic about their ability to hold interest rates steady this year, minutes of the central bank’s last policy meeting showed on Wednesday, even as they acknowledged new risks caused by the epidemic.
“Gold is getting its lions share of equity hedge-related buying, which is clearly showing up in the gold exchange traded funds (ETFs), which are increasing,” Stephen Innes, chief market strategist at AxiCorp, said in a note.
Elsewhere, deficit-hit palladium fell 0.9% to $2,688.40 an ounce, having touched a record high of $2,841.54 in the previous session.
Silver eased 0.5% to $18.30, but hovered near its highest in more than a month, hit on Wednesday.
Platinum slipped 1.2% to $993.40.
Locust attack: India mulls purchase of drones, equipment
India is buying drones and specialist equipment to monitor the movement of locusts and spray insecticides to ward off a new outbreak that could ravage crops, government officials said.
Earlier this year, Indian authorities were able to bring swarms of desert locusts under control, but an outbreak in neighbouring Pakistan has again raised concerns about the safety of crops such as wheat and oilseeds in India.
“Other than ensuring the availability of large quantities of insecticides, we’re buying drones and sprayers to beef up our readiness to deal with the attack,” one of the sources said.
Locust swarms can fly up to 150 km (90 miles) a day with the wind, and adult insects can consume roughly their own weight in fresh food per day. A small swarm eats as much in one day as about 35,000 people.
The plague has already caused extensive damage to pastures and crops and threatened food security in several countries over the Indian Ocean in east Africa, including Somalia, Ethiopia, Kenya Eritrea and Djibouti. Swarms have also spread into Tanzania, Uganda and now South Sudan.
Pakistan, which is facing the worst locust infestation in two decades, has declared a national emergency.
New Delhi is also sending civil servants to some of the most vulnerable areas in western and northern India to asses how prepared local authorities are to deal with any likely invasion of desert locusts, said the officials who cannot be named in line with government rules.
“We’re also monitoring the situation in Pakistan,” the first source said.
Indian and Pakistani authorities have met a number of times to review the overall situation, the sources said.
Asked if India would supply insecticides to Pakistan to help Islamabad deal with the locust outbreak, the first official said: “So far we haven’t received any request from Pakistan.”
India is already selling them to multiple countries.
“If Pakistan needs and our government allows, we can supply to Pakistan. We have manufacturing units in various countries. We can ramp up production of a particular insecticide depending on the demand,” said an official from an Indian pesticide company, who declined to be named.
Islamabad could overlook a ban on trade with its arch-rival to import insecticides from India.
Villages in India’s western states of Gujarat and Rajasthan states, which share a border with Pakistan’s desert areas, are especially susceptible to the locust invasion.
The last major surge was in 1993, when heavy rains created favourable breeding conditions for locusts along the India-Pakistan border.
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