Page 103 - Tata_Chemicals_yearly-reports-2019-20

Integrated report Statutory reportS FInancIal StatementS
Management Discussion and Analysis

• Tight financial conditions: equity markets have sold off • restrictions in free trade or domestic policy measures,
dramatically; high-yield corporate and emerging market leading to import restrictions and providing an opportunity
sovereign spreads have widened significantly; and portfolio to boost domestic industry.
flows to emerging market funds have reversed, particularly Source: IMF World Economic Outlook (WEO), April 2020 released on April 14,
in the case of hard currency bonds and equities. Signs of 2020; KPMG report on Potential Impact of Indian Economy-April 2020, OECD
dollar funding shortages have emerged amid the general Interim Economic Assessment, March 2, 2020
rebalancing of portfolios towards cash and safe assets.
Domestic Economic Outlook
Risks
the January 2020 growth forecast of FY 2020-21 for the Indian
even after the severe downgrade to global growth, downside risks
to the outlook persist. economy has slashed to 1.9% from 5.8%. this comes at a time
when the global economy has hit the worst recession since the
the key risks are:
great depression as a result of the collapse in economic activity
1. the effects of the health crisis on economic activity and due to the coronavirus-induced lockdown.
financial markets could turn out to be stronger and longer
lasting than initially estimated, testing the limits of central In its latest World economic outlook report, the IMF projects a
banks to backstop the financial system and further raising rebound in the growth of the Indian economy in CY 2021, at
the fiscal burden of the shock. a rate of 7.4% and FY 2019-20 growth at 4.2%, down from 4.8%
as estimated in January 2020. India has been placed among the
2. as of mid-May 2020, the path of the Covid-19 pandemic
remains uncertain. Strong containment efforts to slow the fastest-growing emerging economies of the world.
spread of the virus may need to remain in force for longer India is among the handful of countries which is projected to cling
than first half of CY 2020 if the pandemic proves to be more on to a positive growth rate at 1.9% and this is the highest gdp
persistent than assumed in the Weo baseline.
growth rate among the g-20 economies, as estimated by the IMF.
3. For several reasons, the recovery of the global economy
could be weaker than expected even after the pandemic gdp in India is expected to reach uS$ 2,950 billion by the end of
recedes for now. these reasons include lingering uncertainty CY 2020, according to trading economics global macro models and
about the return of the contagion, confidence failing to analysts’ expectations. In the long term, India’s gdp is projected to
improve, establishment closures, massive job losses and trend around uS$ 3,100 billion in CY 2021 and uS$ 3,200 billion in
purchasing power erosion and structural shifts in business CY 2022.
and household behaviour, leading to more supply chain
disruptions and weak aggregate demand. India’s foreign exchange reserves slumped by uS$11.98 billion
during the week ended March 20 and stood at uS$ 469.9 billion as
4. related to the uncertainty around Covid-19, an extended the central bank sold to arrest the slide of the rupee, but it was still
risk-off episode in financial markets and tightening of better compared to uS$ 447.8 billion at end-March 2019.
financial conditions could cause deeper and longer-lasting
downturns in a number of countries. India’s Foreign direct Investment (FdI) equity inflows reached
uS$ 436.47 billion between april 2000 and June 2019 with maximum
nevertheless, governments could help stabilise the economies contribution from services, computer software and hardware,
through the following interventions: telecommunications, construction, trading and automobiles.
• Framing effective policies such as shared economic policy
objectives across countries, substantial targeted fiscal, Merchandise exports and imports (in uS$ terms) declined by 1.9%
monetary and financial market measures to help affected and 8.1%, respectively, in april 2019-January 2020.
households and businesses in advanced economies,
emerging markets as well as developing economies. oil imports declined by 9.2% and non-oil imports declined by
7.7% in april 2019-January 2020. during april 2019-January 2020,
• provision of liquidity and credit guarantees, loan restructuring, merchandise trade deficit was uS$ 133.3 billion, lower as compared
broad-based fiscal stimulus where financing constraints to uS$ 163.3 billion in april 2018-January 2019.
permit (such as public infrastructure investment or across-
the-board tax cuts). this may pre-empt a steeper decline in the fixed investment rate (ratio of gross fixed capital formation
confidence in economies facing financial constraints, help to gdp) is estimated at 27.5% in FY 2019-20 against 29.0% in
lift aggregate demand, curb bankruptcies and avert an even FY 2018-19. the growth in real fixed investment is estimated to
deeper downturn. decline at 0.6% in FY 2019-20 compared to 9.8% in FY 2018-19.

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