annual-report-FY2020

60 COMPANY OVERVIEW BOARD’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE BUSINESS RESPONSIBILITY REPORT STANDALONE ACCOUNTS CONSOLIDATED ACCOUNTS uncertainty has added to the drag on consumer spending and business investment. This could result in a massive drag on GDP growth. Thus, Financial Year 2021 is expected to be exceptionally challenging and unlike any other time before. The RBI and the Government have been coming up with targeted measures and hopes remain pinned on them doing ‘whatever it takes’ till normalcy is achieved. Currently, most Financial Year 2021 forecasts pencil in growth in the range of 0-2% with some even expecting a recession. Expectations of the pandemic fading and allowing a gradual normalisation along with proactive and effective administrative, monetary and fiscal measures could enable a semblance of partial recovery in the latter part of Financial Year 2021. However, the outlook is heavily contingent upon the intensity, spread and duration of the pandemic. Finance Financial Year 2019-20 can at best be described as a ‘Rocky Road’ for the world economy and financial markets. Market sentiments remained volatile since the start of the financial year due to escalating trade tensions between US and China, fears of disruptions to supply chains, prolonged uncertainty on Brexit and geopolitical tensions in Middle East. As the year progressed, trade tensions dragged down international trade, corporate confidence and capital spending, which ultimately led to Global growth rate dropping to a meagre 2.9% in calendar year 2019, the lowest since global financial crisis. While the growth remained robust in United States, most other advanced economies strongly exposed to global trade including Eurozone and Japan stayed weak. At the start of the year 2020, a phase 1 trade deal agreed between U.S. and China and green shoots in manufacturing indicators, raised hopes for a global mini-cycle recovery. However soon thereafter, a virus outbreak in China quickly progressed into the biggest human and economic crisis impacting the world in a century. The COVID-19 outbreak has not only brought considerable human suffering, it has also brought an unprecedented collapse in trade and commerce. The containment efforts have involved quarantines, restrictions on labour mobility and travel, and sharp cutbacks in many manufacturing and service sector activities. Global value chain linkages have amplified the overall macroeconomic effects of the pandemic. There is still a lot of uncertainty on the duration and depth of the virus-induced recession. In its forecasts published in April, IMF projects the global growth in 2020 at –(minus) 3.0%; a mark down by more than 6% relative to the earlier forecasts. Growth in the advanced economies is projected at –(minus) 6.1% in the coming year, whilst emerging economies are expected to contract by –(minus) 1.0% in 2020. Financial markets are sharply hit by the heightened uncertainty and are witnessing a flight to safe assets such as US Dollar and Gold. Markets are also jittery as it is felt that monetary policy has reached its limits with almost all major central banks at the zero lower bound or negative interest rates. Most countries are resorting to aggressive fiscal measures to fight the slowdown. The risk-off sentiment has also led to a rush to hoard liquidity by borrowers on one hand, and risk aversion amongst lenders on the other hand. Commodity Prices especially Crude and Metals, which were soft throughout the year due to slowing global demand, were rattled by both demand and supply shock post the COVID-19 outbreak with Crude prices (US benchmark) briefly plunging to negative territory in April, 2020. On the domestic front, India also faced global headwinds and most growth engines - private consumption, private investment, and exports - showed a sustained slowdown. In addition, tightening lending conditions on account of stressed Balance Sheets of Banks and NBFCs, also impacted demand for goods and services. The Indian rupee came under sustained pressure during the year and saw a 9% depreciation closing the year at 75.38. This was despite healthy fund flows from Foreign Portfolio Investor (FPI) and Foreign Direct Investment (FDI). FPI flows turned negative in March and saw an outflow of Rs. 1,18,203 crores taking the yearly tally to an outflow of Rs. 27,528 crores. Going forward whilst the plunge in crude prices will keep India’s Balance of Payments supported, the ongoing risk-off sentiment and pressure of emerging market currencies will keep Rupee elevated in the short term. In line with most other central banks, Reserve Bank of India cut policy rate of 185 bps including the 75 bps emergency cut to support the economy from COVID-19 related shocks. With limited arsenal remaining in monetary policy, RBI also announced several liquidity- boosting measures and regulatory forbearance including CRR cut, Targeted Long Term Repo Operations (TLTROs), liquidity support for NBFCs and Mutual Funds, etc. Your Company continued to focus on managing cash efficiently and ensured that it had adequate liquidity