Fiscal update would boost child benefit and wage subsidy, calls for airline refunds

Finance Minister Chrystia Freeland’s plan to prop up the Canadian economy through the second wave of the novel coronavirus pandemic includes a temporary top-up to the Canada Child Benefit (CCB), a boost to the wage subsidy and targeted aid for industries that have been especially hard-hit by the pandemic.

READ MORE: Canada hints at ‘major’ coronavirus recovery plan but still no brakes on spending

The Liberals’ fiscal update — the first spending roadmap the government has provided since the last federal budget in March 2019 — also reiterates that financial assistance to major airlines would come with refunds for cancelled flights, a commitment Transport Minister Marc Garneau made earlier this month.

READ MORE: What the fiscal update does and doesn’t tell us about the coronavirus vaccine roll-out

Supporting the economy until a self-sustaining recovery takes hold will require more spending on aid to individuals and businesses as well as targeted industry and regional help, the government said in its fiscal blueprint on Monday.

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Ottawa releases much-anticipated fall economic statement

Canada Child Benefit top-up and help for veterans

The most significant new aid the Liberals are proposing for individuals would go to families with young children.

The government is pitching a $2.4-billion top-up to the CCB that would provide households with up to $1,200 per child under six in 2021.

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The additional support would come in the form of four tax-free payments of $300 for families with a net income of up to $120,000, the government said. Those with incomes above that threshold would receive half as much, or four payments of $150 totalling an extra $600 in aid.

COMMENTARY: Canadian women are ‘disillusioned and disengaged’ with COVID-19 political response

The first installment would come “shortly after the enabling legislation is passed,” according to the documents, with subsequent payments following in April, July and October 2021.

Currently, households with children under the age of six can receive up to $6,765 a year — or $563.75 per month — through the CCB. The additional $300 payments for 2021 would represent an increase of almost 20 per cent over the maximum annual benefit.

READ MORE: National childcare system would ‘pay for itself,’ report says

Economic data suggests mothers of children under six have been disproportionately affected by the pandemic, having to scale back their work hours or leave their jobs entirely amid child-care and school closures. A recent RBC study, for example, found that more than 20,000 women left the workforce between February and October, with mothers of young children making up two-thirds of that exodus.

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Coronavirus: Canada has recovered nearly 80% of jobs lost in pandemic, Freeland says

Read more: Mothers of kids under age 6 make up majority of workforce exodus amid coronavirus, RBC study says

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The government is also proposing temporary quarterly payments of $300 per child to federal, provincial, territorial and First Nation child protection agencies that care for vulnerable children.

Another initiative to increase support for individuals would see the government giving an additional $600,000 to the Veterans Emergency Fund, which helps veterans, their families and survivors whose well-being is at risk due to an urgent and unexpected situation.

Wage and rent subsidies

The Liberals also envision bringing the rate for the Canada Emergency Wage Subsidy (CEWS), back up to 75 per cent of employee wages for eligible businesses, up from the current maximum rate of 65 per cent.

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Coronavirus: Opposition Leader O’Toole criticizes economic recovery plan, says there is ‘no plan’

The additional support is necessary because of “the ferocity of the second wave and its expected economic impact,” the government argued in its fiscal update.

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READ MORE: The coronavirus rent subsidy caps how much business chains can get. Is that unfair?

The proposed CEWS increase would kick in on Dec. 20 and extend until March 13, 2021.

But the government is holding off on a similar hike for the federal rent subsidy for businesses. Current rates for the Canada Emergency Rent Subsidy (CERS) will stand until March 13, the documents show.

READ MORE: Want to apply for the new coronavirus rent subsidy program? Here’s what to know

Ottawa’s revamped version of the commercial rent subsidy currently covers up to 90 per cent of rent and eligible property expenses for businesses that have seen a significant revenue drop due to COVID-19.

Both the wage and the rent subsidy will run until June 2021, the government reiterated.

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Pollster says Canada’s fiscal update didn’t include much on how it will protect jobs

Support for hard-hit industries and airline refunds

In addition to broad-based cash injections for struggling businesses, the government is also ready to ramp up industry-specific aid to sectors that have proven especially vulnerable to the economic impacts of the pandemic.

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One idea is to create a new facility — dubbed the Highly Affected Sectors Credit Availability Program (HASCAP) — to provide cheap, government-backed funding to industries like hospitality, arts and culture and the air sector. The program would give out low-interest loans of up to $1 million over terms of up to 10 years.

READ MORE: Advocacy groups slam airline regulator for saying refunds not required by law

There would also be hundreds of millions of dollars in direct and indirect support for anything such as tourism businesses, local TV and radio stations, the arts, regional air transportation and airports.

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Coronavirus: O’Toole calls for mass rapid testing to ‘preserve’ Canada’s economy

There was little mention of what the Liberals have in mind to help major Canadian airlines, but the fiscal update did say the government will “ensure” Canadians are refunded for cancelled flights as part of any process to channel financial aid to the biggest carriers.

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The Liberals are working on a long-awaited bailout package for the airline industry, which has seen revenues plunge due to travel restrictions and customer anxieties about contagion on planes.

Garneau said in early November that airlines would have to refund the cost of flights cancelled due to COVID-19 in order to access the aid.

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Canada hints at ‘major’ coronavirus recovery plan but still no brakes on spending

The Canadian economic recovery from the coronavirus pandemic will likely not begin until “deep into 2021” but how the government plans to gauge when it is time to turn on — and off — the taps with a “major” recovery program remains hazy.

Deputy Prime Minister and Finance Minister Chrystia Freeland on Monday unveiled the hotly anticipated fall economic statement, which pegged the current deficit projections at $382 billion this fiscal year and confirmed the government plans to issue a formal budget next year.  

The combination of extensive spending on social programs, an economy stifled by pandemic restrictions and plans for roughly $100 billion in recovery stimulus over the next three fiscal years means the federal deficit likely won’t return to pre-pandemic levels until at least 2026.

At the same time, new spending pledges such as a top-up of $1,200 for families receiving the Canada Child Benefit and an emphasis on supporting vulnerable Canadians sharpen the lens on what a recovery plan could look like.

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“Our recovery must be feminist and intersectional,” the fiscal update emphasizes.

READ MORE: What the fiscal update does and doesn’t tell us about the coronavirus vaccine roll-out

The coronavirus pandemic has killed more than 12,000 Canadians since the first cases emerged in this country in March, with more than 373,048 infections reported to date.

The highly infectious virus and the potential for rapid, crippling spread led to a national lockdown earlier in the year, followed by rolling and shifting levels of restrictions in provinces and munici

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Coronavirus: Freeland proposes further financial support for childcare for low, middle-income families

palities in the months since.

READ MORE: Fiscal update would boost child benefit and wage subsidy, calls for airline refunds

With businesses forced into revolving lockdowns, consumers restricting their shopping and spending activities, and millions facing unemployment or the risk of losing their jobs, the pandemic has ravaged the Canadian and global economies.

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In response, the federal government rolled out unprecedented levels of spending on a broad range of benefit programs and subsidies, with new measures including new credit availabilities for sectors impacted particularly badly by the pandemic included in the fiscal update.

But overall, the economic statement is clear: the federal taps will keep pouring out money for years to come, even as the funds shift from crisis mode to an eye on the longer term. 

FEDERAL BUDGETARY BALANCE

Even as the money continues to flow though, one economist said the fiscal update does hint at an acknowledgement of the need to provide more clarity on how long this extraordinary spending will last.

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“I think this is the beginning of starting to put constraints on the system,” said Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa.

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“I think the next phase though is going to look at the quality of that spending … can they make course corrections and can they spend better?”

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Coronavirus: Opposition Leader O’Toole criticizes economic recovery plan, says there is ‘no plan’

Khan noted the recovery plan proposed in the update puts Canada in the upper edge of comparable countries and how allies are responding to the economic ravages of the crisis.

While he called the fiscal update “compelling,” he noted it is still short on important specifics.

“We don’t have a lot of details” he added.

“I think the strong suspicion is those details are going to show up in the budget.”

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Pollster says Canada’s fiscal update didn’t include much on how it will protect jobs

Freeland said in a speech in the House of Commons that there remains “a lot of hard slogging ahead.”

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“There is now light at the end of the tunnel. After winter, comes spring. The seeds we have sown, and will continue to plant in the weeks and months ahead – to protect Canadians’ health and save our jobs and businesses – will help us come roaring back from the coronavirus recession,” Freeland said.

“When the virus is under control and our economy is ready for new growth, we will deploy an ambitious stimulus package to jumpstart our recovery.”

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Coronavirus: NDP to continue pushing for ‘permanent changes’ for supports amid pandemic

That recovery plan, the details of which remain a work in progress, proposes spending between $70 billion and $100 billion over three years on what Freeland billed as “carefully judged, targeted and meaningful investments to create jobs and boost growth.”

Building up Canada’s domestic bio-manufacturing and green technology sectors will be key parts of that plan, as will more immediate boosts to job training programs, though officials say many of the plans can’t be safely rolled out until the virus is under control.

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No clear fiscal anchors or guardrails will be locked in until the coronavirus recovery is complete, but the metrics for that remain unclear.

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Coronavirus: LeBlanc says Canada is in top five to get COVID-19 vaccine

Freeland said on Monday the focus will be on measuring employment, unemployment, and work hours, but would not answer when asked whether the targets for turning off the taps would be a full return to pre-pandemic levels on those benchmarks, or something else.

“As we build our growth plan and as we deploy it, the measure we’re going to be looking at to see if we got the job done is really around jobs,” she said in a press conference with reporters.

”We’re going to roll those out when we roll out more details of our growth plan.”

The total value on those investments is being pegged at between three and four per cent of GDP, a big jump from the stimulus plan in response to the 2008 financial crisis that valued around 2.5 per cent of GDP — roughly $47 billion over two years.

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FEDERAL DEBT-TO-GDP RATIO

“This recession is worse than 2008,” the fiscal update stresses. 

“It stands to reason we will need to invest more, not less.”

None of that $100 billion is baked into current deficit projections yet, with officials stressing the size of the program could still change depending on how bad the second wave gets.

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Coronavirus: Economist says future is “bleak” for many businesses even after Canada’s fiscal update

READ MORE: Freeland says she’s confident coronavirus defeat ‘is not years away’

Finance officials outlined two possible scenarios in the fiscal update that could tamp down economic recovery and require more spending: extended restrictions and escalated restrictions.

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Both would stretch out the time before the start of an economic recovery and require more spending to make up for the potentially sharper hits on regional economies and individuals that would follow longer or tighter lockdowns.

Both also remain possible scenarios as cases continue to spike across the country.

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Coronavirus: O’Toole calls for mass rapid testing to ‘preserve’ Canada’s economy

Conservative Leader Erin O’Toole said the government has failed to outline a clear enough plan for how to get Canadians back to normal and that people are frustrated.

“Canadians are hurting,” he said. “Canadians want their lives back and this fall economic statement shows they cannot rely on this federal government to get their lives back.”

But Freeland warned the country’s most difficult days still lie ahead in the looming winter.

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“Hospitalizations are on the rise and the virus continues to take a terrible toll, particularly on our elders,” she said.

“If we do the right things – if we hunker down and heed public health advice for these last remaining months, we will also be doing the right thing for our economy. And we will bring closer the day when every Canadian can get back to normal life.”

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Coronavirus: Inside Canada’s first post-COVID clinic

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Consumer spending to return to growth in 2021: Fitch

NEW DELHI: After a COVID-19 pandemic-led contraction in consumer spending in 2020, household spending will return to growth in 2021, expanding by as much as 6.6 per cent, Fitch Solutions said on Monday.
Consumer spending is forecast to have contracted by 12.6 per cent in 2020.
“While growth will return to positive in 2021, we do note the recovery will be slower than most countries, as a result of the significant contraction over 2020,” it said. “Unemployment will remain heightened, while the effectiveness of government support measures is questionable.”
Fitch Solutions forecast a return to pre-COVID-19 levels only over the second half of 2021 and 2022.
“We forecast household spending in India to return to growth in 2021 after the COVID-19 pandemic led to a contraction in consumer spending in 2020,” it said.
In nominal terms, total household spending will only be 1.2 per cent higher than what it was in 2019 (Rs 123 lakh crore in 2021, compared to Rs 121.6 lakh crore in 2019), indicating the extent of the impact that the COVID-19 pandemic has had on consumer spending.
Fitch Solutions said all of the main consumer spending categories will return to positive growth in 2021.
However, economic impact of 2020 has created a significant base effect across a number of categories.
Food and non-alcoholic drink spending were prioritised in household budgets in 2020 and so growth in spending of these items, while remaining positive, will be slightly lower than in 2020.
“We forecast food and non-alcoholic drinks spending to grow by 7.9 per cent year-on-year in 2021, from the 10.1 per cent growth we forecast for 2020,” it said.
Spending with other consumer categories is estimated to record significant contractions over 2020 as households cut spending on non-essential items.
As such, these categories will grow from a relatively lower base over 2021 and thus will report stronger growth over the year.
India recorded its first COVID-19 case on January 30, 2020, with the government announcing a country-wide lockdown on March 24, which lasted until late May.
Localised lockdowns are also being used in containment zones and were extended to November 30.
Containment measures and restrictions include travel restrictions, closing educational establishments, gyms, museums, and theatres; bans on mass gatherings and encouraging firms to promote remote work.
The Indian government first announced relaxation measures in geographical areas designated as non-hotspot from April 20, 2020. Domestic air travel resumed on May 25. The gradual easing of restrictions has come under 5 levels.
On September 30, 2020, the government issued ‘Unlock 5.0’ guidelines, which allowed for state governments to decide on reopening schools and other educational institutions, after October 15, in a graded manner.
Entertainment hubs, such as cinemas/theatres/multiplexes, are now open, but under a 50% capacity rule. The ceiling on mass gatherings has been extended to 200 people.
The latest government announcements on October 27 extended localised lockdowns until November 30, under the same guidelines as in ‘Unlock 5.0’.
“Our forecasts take into account risks that are highly likely to play out in the short term, such as the easing of government support. However, there are risks to outlook that if they do start to play out will lead to forecast revisions,” Fitch Solutions said.

S&P Global to buy IHS Markit in deal valued at $44bn

NEW DELHI: Data giant S&P Global Inc has agreed to buy IHS Markit Ltd in a deal worth $44 billion that will be 2020’s biggest merger, creating a heavyweight in the increasingly competitive market in financial information.
The mega deal, which includes $4.8 billion of debt, is a sign that deal-making activity is accelerating as breakthroughs in developing COVID-19 vaccines improve the economic outlook.
Deals touched a record high in the September quarter, with more than $1 trillion worth of transactions, mostly focused on coronavirus-resilient sectors such as technology and healthcare, according to Refinitiv data.
Under the terms of the deal, each share of IHS Markit will be exchanged for a fixed ratio of 0.2838 shares of S&P Global stock, the two companies said in a statement.
Once the deal is completed, S&P Global shareholders will own roughly 67.75% of the combined company on a fully diluted basis, while IHS shareholders will own about 32.25%.
S&P Global is renowned for providing debt ratings to countries and companies, as well as data on capital and commodity markets worldwide. It became a standalone business in 2011 when its then parent McGraw-Hill separated S&P from its education business.
IHS Markit was formed in 2016 when IHS, whose businesses range from data on automotive and technology industries to publishing Jane’s Defence Weekly, bought Markit Ltd for around $6 billion.
Markit, founded by former credit trader Lance Uggla, provides a range of pricing and reference data for financial assets and derivatives.
IHS has a market value of around $36.88 billion based on the stock’s last close on Friday, a Reuters calculation showed, with its share price up around 22% so far this year.
The transaction is likely to face close scrutiny from competition watchdogs as the market for financial information becomes increasingly concentrated.
The Wall Street Journal reported news of the deal earlier on Monday.
The London Stock Exchange is in the final stage of trying to win clearance for its planned $27 billion acquisition of data provider Refinitiv, which has been through a long review process by the European Union’s competition commissioner.
Refinitiv was carved out of Thomson Reuters by private equity giant Blackstone in 2018, when it bought a 55% stake in the business in its biggest bet since the 2008 financial crisis. Thomson Reuters, parent of Reuters News, retains a 45% holding in the business.

‘5G connection to reach 350m in India by 2026’

NEW DELHI: 5G connections across the globe are estimated to be 3.5 billion and India will account for 350 million subscriptions by 2026, according to a report by telecom company Ericsson.
India may get its first 5G connection in 2021 if spectrum auctions are held early next year, said Ericsson Head of Network Solutions (Southeast Asia, Oceania and India) Nitin Bansal.
Globally, more than 1 billion people, 15 per cent of the world’s population, are expected to live in an area that has 5G coverage rolled out, according to the ‘Ericsson Mobility Report 2020’ released on Monday.
“In 2026, 60 per cent of the world’s population will have access to 5G coverage, with 5G subscriptions forecast to reach 3.5 billion. In India, 5G subscriptions will surpass 350 million, accounting for 27 per cent of all mobile subscriptions in 2026,” the report said.
Bansal said that based on the reported timeline for spectrum auction for 5G services, he expects India to have its first 5G connection in 2021.
According to the report, India has the highest average traffic per smartphone user per month at 15.7 gb per month.
“Low prices for mobile broadband services, affordable smartphones, and increased time spent by people online contribute to monthly usage growth in India. Accordingly, total traffic is projected to quadruple in India, reaching 35EB (exabyte) per month in 2026,” Ericsson Mobility Report editor and head of strategic marketing Insights States Patrik Cerwall said.
The report said LTE (4G) remains the dominant technology in India in 2020, accounting for 63 per cent of mobile subscriptions and 3G is expected to be phased out by 2026.
“In the India region, LTE subscriptions are forecast to increase from 710 million in 2020 to 820 million in 2026, increasing at a compound annual growth rate (CAGR) of 2 per cent,” the report said.
It added that mobile broadband technologies accounted for 67 per cent of mobile subscriptions in 2020, and this figure is predicted to reach 91 per cent by 2026. “The total number of mobile broadband subscriptions is set to reach close to 1.2 billion by 2026.”
According to an annual report, the number of smartphone subscriptions has increased to 760 million in 2020 in the country and is expected to grow at a CAGR of 7 per cent to reach close to 1.2 billion by 2026.

S&P retains India’s growth forecast at -9% this fiscal

NEW DELHI: S&P Global Ratings on Monday retained its forecast of 9 per cent contraction in the Indian economy for the current fiscal, saying even though there are now upside risks to growth but it will wait for more signs that Covid infections have stabilised or fallen.
S&P, in its report on Asia Pacific, projected the Indian economy to grow at 10 per cent in the next fiscal.
“We retain our growth forecast of negative 9 per cent in fiscal 2020-2021 and 10 per cent in fiscal 2021-2022. While there are now upside risks to growth due to a faster recovery in population mobility and household spending, the pandemic is not fully under control.
“We will wait for more signs that infections have stabilised or fallen, together with high-frequency activity data for the fiscal year third quarter, before changing our forecasts,” S&P said.
According to the official data released last week, Indian economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent. Indian economy had contracted 23.9 per cent in April-June.
The RBI in October projected India’s economy to contract by 9.5 per cent this fiscal. It said the industrial sector is leading and the output is now above levels from a year ago, helped by rising demand for consumer goods.
Investment recovered faster than consumption in the second quarter, partly due to resumption of stalled projects. The private sector drove the recovery as spending resumed and households and firms moved more toward normalised activity.
S&P said inflation should ease from recent highs, albeit gradually.
“We project that headline consumer price inflation just above the mid-point of the Reserve Bank of India’s (RBI) forecast a range of 2 to 6 per cent through 2021. One-off factors should ease, including food-supply disruptions and supply constraints related to earlier lockdowns. But the pass-through to core inflation, currently near 6 per cent, suggests that inflation persistence remains a challenge,” it said.
S&P said it does not expect much fiscal easing in its projections. “Past action has targeted low-income households, with substantial welfare effects, but a broader fiscal effort has been lacking. We do not see this changing. At the same time, the RBI will be constrained from cutting rates and we anticipate rates will start normalising upward from 2021 onwards,” it added.

India will get vaccine as early as possible: Gadkari

NEW DELHI: Union minister Nitin Gadkari on Monday expressed confidence that India will get a Covid-19 vaccine “as early as possible” and overcome the pandemic to win the economic war.
The minister for micro, small and medium enterprises and road transport & highways said that currently, “majority of countries are not interested to deal with China”; they are rather interested in India.
He said such a situation is advantageous for the country’s manufacturing sector to ramp up its capabilities to boost exports from India.
“I am confident that we will get a vaccine as early as possible and 100 per cent we will win this war against Covid-19 and also win economic war,” Gadkari said this at a virtual event organised by Dun & Bradstreet.
He said disbursement of loans to the tune of Rs 1.48 lakh crore has been completed so far, out of the Rs 3 lakh crore worth of collateral-free automatic loans for businesses announced by the Centre earlier.
“We have already reduced our imports from China and already our (India’s) exports are increasing. The trends are positive and I am expecting good results in this field,” said the minister.
He said the MSMEs are doing an excellent job despite facing an economic crisis.
Eligible borrowers for the scheme include MSME units, business enterprises, individual loans for business purposes and MUDRA borrowers.
Talking about schemes for the MSME sector, he said, “We have sanctioned some 93 schemes and more than 100 schemes are in the pipeline. We want to clear them as early as possible.”
He said efforts are underway for reducing India’s dependence on import of items such as crude oil.
The minister said emerging areas where MSMEs can work include artificial intelligence, robotics, sustainability, green manufacturing, waste to wealth, development of smart villages, e-mobility, and virtual reality based solutions.
Gadkari said the MSME ministry is working on setting up a number of centers of excellence in collaboration with educational and research institutions like IITs and NIITs.
Pointing out that the current annual turnover of the khadi and village industries stands at Rs 80,000 crore, he said the plan is to increase this to Rs 5 lakh crore in two years.
At a separate event, the minister said the whole world, including India, is facing the crisis of Covid-19 and the situation is challenging.
“We need to create positivity and self confidence in the mind of the people. Negativity and suspicion will create more complication,” Gadkari said this at the Virtual Horasis Asia Meeting 2020.
He also said that on the basis of the latest statistics, “we can say that we are coming to the normal situation”.
At the same time in the manufacturing sector also, particulary trade and business, a lot of opportunities are up, he said.
Gadkari said that as compared to China, India has got the huge potential, as the young talented manpower is available in India.
He added that there is availability of raw material in India and policy is favourable. “I feel that it is appropriate opportunity for the investor to invest in India,” said.
“Presently, we are facing some crisis due to Covid-19. But, 100 per cent, we are now on a proper track. The manufacturing sector is progressing. In the highway construction, we are on the same foot,” the minister said.
Horasis Chairman Frank Jurgen Richter said, “Asia as a region is making impressive progress in containing Covid-19, and at the same time is using the pandemic as a means for transformation to make their respective economies more resilient and sustainable.”

AI pilots seek ‘urgent meeting’ with Puri over wage cuts

NEW DELHI: Two pilots’ unions on Monday wrote to Union minister of civil aviation Hardeep Singh Puri seeking an urgent meeting with him to discuss the “indefinite and unilateral” salary deductions faced by the pilots of Air India.
The two unions — the Indian Commercial Pilots’ Association and the Indian Pilots’ Guild — wrote a letter to Puri informing him that workers of Air India, Air India Express and Alliance Air pilots are facing wage cut of up to 70 per cent and sought his immediate intervention.
“The frontline workers of Air India, Air India Express and Alliance Air pilots continue to be shackled with an indefinite and unilateral wage cut of up to 70 per cent while the indifferent company top management contributes a namesake 10 per cent,” the letter said.
It said the unions, through their representations and meetings, had shown how Air India management’s cost-cutting is mala fide and disproportionate and asked why barbaric austerity measures apply only to Air India pilots.
“Sir, you have expressed confidence that air travel would reach pre-Covid levels by the end of the year. In our meetings in the month of September 2020, you had given us an assurance to look into our grievances positively,” the letter said.
“Kindly note that while the other airlines are rolling back the austerity pay cuts for their pilots, the wage cut for Air India pilots further increased from October. This is completely divorced from market reality and equally unfair to pilots of Air India and its subsidiaries,” it added.
The unions, in their letter, also said the airline’s top management has let the pilots down tremendously and that they have expressed their displeasure and are extremely troubled by this unwarranted ordeal.
“Pilots who test positive for Covid-19 need to undergo quarantine/ hospitalisation. This has to be followed by a NOC, mandatory Medical checks and DGCA approval. The entire process to get back to flying takes more than a month. Is it fair to deny these pilots their livelihood due to an occupational hazard? Is this how MoCA wants to treat the workmen who are making the Vande Bharat Flights possible?” it asked.

Banks to see capital decline over 2 yrs: Moody’s

NEW DELHI: Moody’s Investors Service on Monday said the bank capital will moderately fall in emerging Asia over the next two years, with India seeing larger capital decline without further infusion.
In a report, Moody’s said the uncertain trajectory of asset quality is one of the biggest threats for emerging market banks, as operating conditions remain challenging amid the current Covid pandemic.
The 2021 outlook for banks in emerging markets is negative, while the outlook for insurers is stable, it said.
“In the Asia Pacific region, banks’ rising nonperforming loans and insurers’ volatile investment portfolios are in focus. Capital will moderately fall in emerging Asia over the next two years, and banks in India and Sri Lanka will post larger capital declines without public or private injections,” Moody’s said.
It said non-performing loans (NPLs) will rise most for banks in India and Thailand because of the greater shock to their economies and historically poor performance of certain loan types.
In India, stress among non-bank financial institutions will also curtail their capacity to lend, Moody’s noted.
“Profit growth will be modest because of low-interest rate and subdued lending, but lower loan volumes should aid capital,” Moody’s managing director Celina Vansetti-Hutchins said in the ‘Emerging Markets Financial Institutions Outlook’ report.

LVB customers can access all services: DBS

NEW DELHI: DBS Bank India on Monday said customers of Lakshmi Vilas Bank (LVB), which has now been merged with it, can continue to access all banking services, and interest rates on savings and fixed deposits are unchanged as of now.
Lakshmi Vilas Bank has now been amalgamated with DBS Bank India Ltd (DBIL), the wholly-owned subsidiary of DBS Group Holdings Ltd, DBS Bank India said in a statement.
The amalgamation of LVB into DBS Bank India came into effect from November 27 under the special powers of the government and the Reserve Bank of India under Section 45 of the Banking Regulation Act, 1949.
The amalgamation provides stability and better prospects to LVB’s depositors, customers and employees following a period of uncertainty. The moratorium imposed on LVB was lifted from November 27, and the banking services were restored immediately with all branches, digital channels and ATMs functioning as usual.
LVB customers can continue to access all banking services. The interest rates on savings bank accounts and fixed deposits are governed by the rates offered by the erstwhile LVB till further notice,” DBS Bank said.
All LVB employees will continue to be in service and are now employees of DBIL on the same terms and conditions of service as under LVB, it added.
The Indian arm of Singapore’s DBS said its team is working closely with LVB colleagues to integrate LVB’s systems and network into DBS over the coming months.
Once the integration is complete, customers will be able to access a wider range of products and services, including access to the full suite of DBS digital banking services that have won multiple global accolades, it added.
DBIL chief executive officer Surojit Shome said, “The amalgamation of LVB has enabled us to provide stability to LVB’s depositors and employees. It also gives us access to a larger set of customers and cities where we do not currently have a presence.”
He added that the bank looks forward to working with its new colleagues towards being a strong banking partner to LVB’s client.
The bank said it is well capitalised and its capital adequacy ratio (CAR) will remain above regulatory requirements even after the amalgamation.
Additionally, DBS Group will inject Rs 2,500 crore (SGD 463 million) into DBIL to support the amalgamation and for future growth. This will be fully funded from DBS Group’s existing resources.
DBS has been in India since 1994 and converted its India operations to a wholly-owned subsidiary, DBIL, in March 2019.
On November 17, a 30-day moratorium was imposed on the crisis-ridden LVB restricting cash withdrawal at Rs 25,000 per depositor.
The Reserve Bank of India (RBI) simultaneously placed in public domain a draft scheme of amalgamation of LVB with DBIL, a banking company incorporated in India under the Companies Act, 2013, and having its registered office at New Delhi.
LVB is the second private sector bank after Yes Bank that has run into rough weather during this year. In March, capital-starved Yes Bank was placed under a moratorium.
The government rescued Yes Bank by asking state-owned State Bank of India to infuse Rs 7,250 crore and take 45 per cent stake in the bank.