Virus hits India’s plan to cut import tax on veg. oils

Goldman Sachs, Morgan Stanley, S&P Global predict prolonged slowdown; Experts calls for huge stimulus

New York, March 17: Goldman Sachs Group Inc. and Morgan Stanley economists joined the rush on Wall Street to declare that the coronavirus has triggered a global recession, with the debate now focusing on its likely length and depth.

A day after US President Donald Trump conceded the US slump alone is set to be “a bad one,” economists threw away their forecasts that the world could avoid tumbling into recession for the first time since the financial crisis.

Behind the rethink: The virus’s spread to Europe and the US, as well as new evidence that China — the first to be hit by what is now a pandemic — experienced a harder hit to its economy than originally projected.

Morgan Stanley’s team, led by Chetan Ahya, said a worldwide recession is now its “base case,” with growth expected to fall to 0.9 per cent this year. At Goldman Sachs, Jan Hatzius and colleagues predict a weakening of growth to 1.25 per cent. S&P Global added its voice to the chorus with a report expecting that growth would range per cent to 1.5 per cent.

Such slumps would not be as painful as the 0.8 per cent per cent contraction of 2009, as measured by the International Monetary Fund, but they would be worse than the downturns of 2001 and the early 1990s.

Both Morgan Stanley and Goldman Sachs anticipate a rebound in the second half, but warn that the risk remains of even greater economic pain.

The projections will apply further pressure on policy makers to do more to limit the health emergency and one

● The projections will apply further pressure on policy makers to do more to limit the health emergency and to deliver stimulus that helps companies and consumers.

to deliver stimulus that helps companies and consumers through the shock and then drives a rebound in demand afterward.

Although the US Federal Reserve and fellow central banks have been active in loosening monetary policy, most governments have been slow in responding and are only now crafting fiscal packages that may still fail to pacify worried investors.

“While the policy response will provide downside protection, the underlying damage from both Covid-19’s impact and tighter financial conditions will deliver a material shock to the global economy,” Morgan Stanley’s economists said.

The outlook could darken even further if the virus lasts longer than anticipated, or wields greater economic pain — given factories, schools, restaurants and shops are closing around the world. A freezing up of markets or a continued sluggishness by governments to act are also regarded as threats.

Elsewhere on Wall Street, strategists are laying out what governments should be doing. At JPMorgan Chase & Co., John Normand advocated developed economies repeating their handiwork of the crisis when they delivered fiscal stimulus worth one per cent to two per cent gross domestic product.

George Saravelos, a currency strategist at Deutsche Bank AG, said governments may also need to step in to guarantee support for households and companies.

While the Fed gets “full marks” for its recent response in cutting rates and moving to stabilise credit markets, Northern Trust Corp. chief economist Carl Tannenbaum said US Congress and the White House have so far failed to act boldly enough.

— Bloomberg of

New Delhi, March 17: India has dropped at least three crucial policy initiatives, including lowering import taxes on vegetable oils, as the outbreak of the coronavirus hits government revenue collection, two sources said on Tuesday.

India’s income tax revenues contracted 3.5 per cent in the first 11 months of the current fiscal year, which began in April 2019, and income from other taxes grew by a meagre 3.8 per cent, the finance ministry told parliament on Monday.

The food ministry had proposed lowering import taxes on crude and refined vegetable oils, including palm oil, by 3-7 per cent to keep a lid on domestic prices that leapt more than 11 per cent after India restricted palm oil imports from Malaysia in January.

But the finance ministry rejected that proposal due to revenue concerns, the sources said.

The finance ministry also shelved other proposal by the food ministry that would have raised the supply of highly subsidised rice and wheat to millions of people under the world’s biggest food welfare programme, said the sources.