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China's economy will continue to recover, with limited COVID-19 effect on its sovereign credit, The Paper reported, citing global credit rating agency Moody's.

Compared with countries with the same rating level, China's government debt will maintain at a medium level, Moody's said at an online seminar held on Tuesday.

Global economy is resuming vitality slowly, and the road to recovery is likely to be prolonged and winding, according to Moody's.

The agency predicted developed economies in the G20 would see their GDP shrink by 6.4 percent this year, and rebound to 4.8 percent in 2021, while emerging economies in the G20 would contract by 1.6 percent this year, then rebound to 5.9 percent in 2021.

Although some countries saw signs of recovery, economic downward risks still remained, the rating agency said, adding the epidemic is likely to come again in the second half of this year.

If so, it could lead to further lockdowns, making it more difficult for governments to help and roll out support measures. Meanwhile, longer or repeated shutdowns could drive up the number of enterprise closures, as well as the unemployment rate.

Most countries' real output in 2021 will be lower than the level before the epidemic, Moody's said.

The credit rating agency said the epidemic will change global credit trends. Developed economies will face heavier debt burden due to slow economic growth and weaker financial capacity.

Due to the epidemic, countries have realized that they should raise the safety of supply chains and reduce dependence on single suppliers.

And the global trade pattern will hence become more scattered, while the reorganization of supply chains will be shorter and more diversified, Moody's said. "Though it could be healthier, however it could also lead to low efficiency and high inventory," it added.China's economy will continue to recover, with limited COVID-19 effect on its sovereign credit, The Paper reported, citing global credit rating agency Moody's.

Compared with countries with the same rating level, China's government debt will maintain at a medium level, Moody's said at an online seminar held on Tuesday.

Global economy is resuming vitality slowly, and the road to recovery is likely to be prolonged and winding, according to Moody's.

The agency predicted developed economies in the G20 would see their GDP shrink by 6.4 percent this year, and rebound to 4.8 percent in 2021, while emerging economies in the G20 would contract by 1.6 percent this year, then rebound to 5.9 percent in 2021.

Although some countries saw signs of recovery, economic downward risks still remained, the rating agency said, adding the epidemic is likely to come again in the second half of this year.

If so, it could lead to further lockdowns, making it more difficult for governments to help and roll out support measures. Meanwhile, longer or repeated shutdowns could drive up the number of enterprise closures, as well as the unemployment rate.

Most countries' real output in 2021 will be lower than the level before the epidemic, Moody's said.

The credit rating agency said the epidemic will change global credit trends. Developed economies will face heavier debt burden due to slow economic growth and weaker financial capacity.

Due to the epidemic, countries have realized that they should raise the safety of supply chains and reduce dependence on single suppliers.

And the global trade pattern will hence become more scattered, while the reorganization of supply chains will be shorter and more diversified, Moody's said. "Though it could be healthier, however it could also lead to low efficiency and high inventory," it added.

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The euro has been in demand in early European trade Wednesday, hitting a four-month high after Federal Reserve Governor Lael Brainard hinted at a need for an even easier monetary policy in the U.S.

The dollar also suffered more broadly from a rise in risk appetite after positive test data for one of the lead candidates for a Covid-19 vaccine late, published late on Tuesday.

At 2:55 AM ET (0655 GMT), EUR/USD gained 0.1% to 1.1408, after reaching its highest level since March 10 at $1.1423 earlier in the session. EUR/GBP dropped 0.2% to 0.9060, with sterling helped by stronger than expected inflation figures in June, but the euro had posted a two-week high of 0.9112 late Tuesday.

Additionally, the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 96.093, GBP/USD gained 0.4% to 1.2595 and USD/JPY was flat at 107.23. 

The single currency has benefited of late--it’s up 1.3% against the dollar over the last month--from the perception that the region has handled the Covid-19 crisis better than most.

"Germany, France and Italy have all taken severe lockdown steps and as a result the coronavirus now appears to be under control. The economy could be gradually recovering," said Bart Wakabayashi, Tokyo Branch manager of State Street (NYSE:STT) Bank and Trust, to Reuters.

The economic picture still is grim, however. Only last week, the European Commission downgraded its outlook for the EU economy, saying it would now contract by 8.3% in 2020. However, recent confidence data have tended upward, with Tuesday’s German ZEW survey pointing to continued optimism over the next six months.

Looking ahead, “the forthcoming ECB meeting should not change much, with the discussion/progress on an EU Recovery Fund being a more important short-term driver for the EUR/USD,” said analysts at ING, in a research note.

There still remain doubts about whether the EU leaders will reach agreement on a 750-billion-euro pandemic recovery fund at this week's summit, amid resistance from more frugal member states.

That said, German Chancellor Angela Merkel, who now holds the presidency of the EU Council, was in no doubt of the need of the fund and the importance of its size.

"Because the task is enormous, the answer must also be huge," she said Monday, after hosting Italian Prime Minister Giuseppe Conte for talks.

"It must be particularly powerful in order to signal clearly that Europe wants to hold together in this difficult time. There is a political dimension to it".

Any potential progress on the recovery fund at the EU summit “should translate into support for EUR/USD for the remainder of the week, with the ECB meeting playing second fiddle,” ING added.

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 The dollar was down on Wednesday morning in Asia, with investors continuing the previous session’s retreat from the safe-haven asset as data released on Tuesday indicated increased U.S. inflation.

The U.S. Consumer Price Index (CPI) posted a 0.6% increase month-on-month, its highest in almost eight years. The figure beat analyst forecasts prepared by Investing.com, which predicted a 0.5% increase as well as May’s 0.1% decrease.

The data eased investor fears of deflationary pressures on the U.S. economy from the COVID-19 economic downturn.

Meanwhile, investors also cheered Tuesday’s report that U.S. biotech firm Moderna 's (NASDAQ:MRNA) experimental COVID-19 vaccine is safe and generated immune responses in all 45 volunteers who are part of the ongoing study.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies fell 0.11% to 96.073 by 9:50 PM ET (2:50 AM GMT).

The USD/JPY pair was up 0.01% to 107.23. The Bank of Japan is due to release its policy statement later in the day, with monetary policies widely expected to remain unchanged.

The USD/CNY pair was down 0.09% to 7.0000. U.S. President Donald Trump said on Tuesday that he has issued the order to end Hong Kong’s preferential trade status. Trump also signed legislation sanctioning Chinese entities involved with enacting the city’s national security laws.

The AUD/USD pair gained 0.49% to 0.7008 and the NZD/USD pair was up 0.32% to 0.6561. The two risk-sensitive Antipodean currencies benefitted from improved investor sentiment.

The GBP/USD pair gained 0.28% to 1.2584.

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The euro rose to a four-month high against the dollar on Wednesday on hopes European Union leaders may agree on stimulus and deepening fiscal integration to shield the economy from the pandemic.

The dollar was on the defensive, particularly against other growth-leveraged currencies such as the Australian dollar, following an uptick in U.S. inflation and news of progress in vaccine development for COVID-19.

The euro rose to $1.1400 (EUR=), after reaching its highest level since March 10 at $1.1423 earlier in the trade.

Against the yen, the common currency hit one-month high of 122.47 (EURJPY=) while it had scaled a two-week high of $0.91125 British pound the previous day and last stood at 90.690 pence (EURGBP=D4).

"Germany, France and Italy have all taken severe lockdown steps and as a result the coronavirus now appears to be under control. The economy could be gradually recovering," said Bart Wakabayashi, Tokyo Branch manager of State Street (NYSE:STT) Bank and Trust.

The euro has been helped by hopes the European Union could agree at its summit later this week on a rescue financing package that will limit the economic damage to the bloc from the coronavirus pandemic.

The euro's strength helped to push the dollar index (=USD) to one-month low at 96.056. The index last stood at 96.225.

The dollar extended losses on Tuesday after U.S. consumer prices rebounded 0.6% month-on-month, the most in nearly eight years, in June, easing worries about deflationary pressures from the economic downturn.

Further boosting investors' risk appetite, Moderna Inc's (O:MRNA) experimental vaccine for COVID-19 showed it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study, U.S. researchers reported on Tuesday.

Against that backdrop, the risk-sensitive Australian dollar rose 0.24% to $0.6992 .

Sterling, however, underperformed after data showed Britain's economy was recovering more slowly than forecast.

Gross domestic product rose by 1.8% in May after falling by a record 20.8% in April, well below forecasts in a Reuters poll.

The pound last traded at $1.2567 .

The yen stood at 107.28 yen per dollar , little changed after the Bank of Japan kept monetary policy steady and maintained its stance that the economy would gradually recover from the COVID-19 pandemic.

The market has so far taken the latest heightening in U.S.-China tensions in its stride.

President Donald Trump signed legislation and an executive order to hold China "accountable" for the national security law it imposed on Hong Kong.

Trump also signed a bill approved by the Congress to penalise banks doing business with Chinese officials who implement the new security law.

In response, the Chinese foreign ministry said on Wednesday it will impose retaliatory sanctions on U.S. individuals and entities.

"While there are increasing doubts on whether Hong Kong will remain an open market, investors think this is a very long-term issue," said Ayako Sera, senior market economist at Sumitomo Mitsui (NYSE:SMFG) Trust Bank.

Diplomatic battles between the two big powers have intensified on several other fronts, such as the COVID-19 pandemic, military operations in the South China Sea and trade.

The onshore yuan ticked up 0.05% to 7.0040 per dollar

The Canadian dollar bounced back from a two-week low, changing hands at C$1.3604 per U.S. dollar , despite the prospect of travel restrictions between Canada and the United States being extended.

The Canadian central bank is expected to leave rates on hold at a policy announcement on Wednesday, with investors likely to focus on the bank's outlook for the economy and potential guidance on its bond-buying program.

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The government is working on creating a "genuine" single window clearance mechanism and mapping the entire land bank available for the industry and industrial development, Commerce and Industry Minister Piyush Goyal said on Tuesday. The minister also said that the government is looking at ways to promote manufacturing of electronic products like LED televisions, CCTVs and is "very keen" to have a semiconductor FAB plant in India.

Besides, to capture  IT services exports data, the ministry is thinking of creating a framework by which it can capture that data.

Goyal said that he has tasked the officers to look at some framework by which the ministry can capture data of IT services exports.

"We are working in DPIIT (Department for Promotion of Industry and Internal Trade) to create the framework of a genuine single window where you do not open doors behind that single window. We are also working on mapping the entire land bank available for industry and industrial development," he said while addressing industry representatives of electronics and software exports.

The minister said that sufficient land is available and "we can make sure that it is available at competitive prices, we can even talk to states".

He added that states can be consulted on issues like affordable power and water supply if the electronics industry wants to set up an entire ecosystem in a state.

"Talk to DPIIT, pick up an area of your choice, where the entire ecosystem can be created and supported and we are willing to go that extra mile whatever it takes to create such a cluster of industry and it should be world-class," he said.

Regarding the demand of export incentives under MEIS (merchandise exports from India scheme), he said the ministry is working on Remission of Duties or Taxes on Export Product (RoDTEP), "so I do not know whether MEIS can really sustain or continue beyond December 2020 or when RoDTEP come to your industry".

He said that no industry can sustain in the long run on "these clutches" and industries which are not dependent on the government are flourishing.

The success of IT, BPO and software is largely because they remain free of government intervention and "to my mind that is what we should gradually move and push towards in the electronics sector also".

He added that the government does not have that kind of endless resources to be able to give that to any and every sector, "so we will have to gradually move towards more and more self-sustainable projects".

He asked the industry to work on creating some clusters where the whole ecosystem can be created with all necessary testing labs, common services, getting plug and play infrastructure to units and ensuring online clearances".

"We really want to see (semiconductor) FAB (plant) coming up quickly. I would urge you to apply your mind and tell us what the government needs to do for that," he said adding "We can even think of setting up a plant near a power plant," he added.

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Given the severity of the country's economic situation due to the COVID-19 pandemic, there is a scope for more near term fiscal support in India, especially for vulnerable households and SMEs, a top IMF official said.

A comprehensive and successful implementation of the existing support measures (in particular, food provision to households) is of paramount importance, said Vitor Gaspar, Director of the International Monetary Fund's Fiscal Affairs Department to PTI.

“Given the severity of the economic situation, in the near-term there is room for more fiscal support, particularly for vulnerable households and SMEs (Small and Medium-Sized Enterprises),” he said.

Over the medium-term, India will continue to have a very limited fiscal space, and a credible and well-communicated consolidation plan will be urgently needed once the coronavirus pandemic subsides, Gasper said.

The economic impact of the COVID-19 in India has been substantial and broad-based, he said, adding that high frequency indicators point to a sharp decline in economic activity, as reflected in the industrial production, business sentiment (in the purchasing managers index), vehicle sales and trade.

In the June World Economic Outlook (WEO), growth in fiscal year 20/21 was revised down to -4.5 per cent, he said.

The downward revision compared with the April WEO was driven primarily by the continued rise in the number of COVID-19 cases in India.

“This led the International Monetary Fund to make specific two adjustments. First, the assumed length of the partial lockdown was extended somewhat. Second, and more important, we made more conservative assumptions about the speed of recovery given that the health crisis has not yet been contained,” Gasper said in response to a question.

He said that the near-term growth outlook in India continues to be clouded by the global and domestic slowdown and uncertainties relating to the evolution of the coronavirus pandemic.

According to the senior IMF official, India's general government fiscal deficit is projected to reach 12.1 per cent of the GDP in fiscal year 20/21, primarily due to weak tax revenues, as well as a denominator effect associated with the negative projected nominal GDP growth -- as with all other macro variables, estimates are highly uncertain.

“Consistent with this, and the deterioration in economic activity, India's public debt-to-GDP ratio is projected to reach about 84 per cent this fiscal year,” Gasper added.

According to Johns Hopkins Coronavirus Resource Center, the contagion has infected over 12 million people and killed more than 554,000 across the world.

The US is the worst affected country with over 3.1 million cases and more than 1,33,000 deaths. India's COVID-19 caseload stands at 7,93,802 with 21,604 deaths.

The COVID-19, which originated in China's Wuhan city in December last year, has also battered the world economy with the International Monetary Fund saying that the global economy is bound to suffer a "severe recession".

Scientists are racing against time to find a vaccine or medicine for its treatment.

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The Union Cabinet on July 8 approved, among many other things, the proposal to extend the scheme for payment of the employer and employee's provident fund (PF) contribution for three months until August. Under this, the government will make the entire 24 percent contribution towards Employees' Provident Fund (EPF).

The move will offer huge relief to around 3.67 lakh employers and 72.22 lakh employees.

The proposal for extension of this scheme had been announced by Finance Minister Nirmala Sitharaman in May. She had, at the time, announced that the scheme under the Pradhan Mantri Garib Kalyan Yojana (PMKGY) would be extended for another three months till August.

Addressing media persons following a Cabinet meeting earlier on July 8, Union Minister Prakash Javadekar said the decision has been taken in order to facilitate a higher take-home salary for employees and to provide them a breather in payment of PF dues.

Under the Pradhan Mantri Garib Kalyan package, the payment of 12 percent of employer and 12 percent employee contribution was made into EPF accounts by the Centre. The benefit was earlier available for the months of March, April and May.

For the salary months of June, July and August, the scheme will cover all the establishments having up to 100 employees, with 90 percent of such employees earning a monthly wage less than Rs 15,000.

The idea behind the move, according to the government, is to offer support to workers and businesses who continue to face financial hardships in light of the coronavirus pandemic and the lockdown that followed.

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The shipping ministry will push domestic companies to manufacture cranes used for cargo handling at ports to replace annual imports worth Rs 1,000 crore of such equipment as well as work towards increasing the country's share in global shipping recycling business to 60 percent, according to Union Minister Mansukh L Mandaviya.

The efforts are aimed at boosting ports-led industries and make India as a key destination for recycling warships and other ships under 'Aatma Nirbhar Bharat', the Shipping Minister said.

Under the 'Aatma Nirbhar Bharat Abhiyan' or 'Self-reliant India Mission', global tenders up to Rs 200 crore were recently disallowed.

"We will aggressively work towards 'Aatma Nirbhar Bharat' by promoting port-led industries and industrialisation. We will boost ship repair and recycling facilities.

"And among many such initiatives, we have decided to procure 'Made in India' cranes for cargo handling at ports. So far, India used to buy cranes worth abut Rs 1,000 crore annually," Mandaviya told PTI in an interview.

He also said that so far there is no crane manufacturer here but Indian companies can very well build these under 'Make in India' either independently or through the joint venture route.

India has a 7,500-kilometre coastline and the cargo handled by the country's top 12 major ports had risen marginally to nearly 705 million tonnes (MT) over the 699.10MT cargo handled in 2018-19.

Besides, procuring cranes locally, importance will be given to attaining self-reliance in port infrastructure development, jetty, terminal construction and cruise terminal, he added.

This will also boost employment by creating demand for the skilled manpower, he said, adding that plans are afoot to double the ship repair business in the next two years.

"About 30,000 vessels come to Indian ports with cargo per annum. Their maintenance is compulsory in 3-5 years. We are working towards boosting ship repair facility set up. We are aggressively working towards this. At present India repairs only about 1,200 ships per annum," he said.

The country will strive for about 60 percent of the global ship recycling business share. Within two years, the share would reach 50 percent, he added.

India's share in global ship recycling business at present is 40 percent.

"European Union and Japan have started sending their ships for recycling to India. At present a total of 300 to 400 ships come to India for recycling. The trend has been encouraging but COVID-19 has impacted it but still we expect about 350 ships for recycling including from EU and Japan," the Minister said.

According to him, Gujarat's Alang, the world's biggest shipyard, is ready to cater to projected increase in the number of ships for recycling.

Currently, India recycles around about 400 of the 1,000 ships which are demolished per annum globally. However, countries like Japan, Europe and the US were not sending their ships for recycling to the country in the absence of ratification of a global convention. The scenario changed with the Recycling of Ships Act, 2019, the Minister said.

The Act ratifies the Hong Kong convention and facilitating environment friendly recycling process of ships and adequate safety of the yard workers.

"The US and other countries do not send their ships to India for recycling but now that we have ratified the Hong Kong conventions, we expect the numbers to swell," the Minister said.

India, Bangladesh, China and Pakistan account for recycling about 90 percent of the global ships.

India's share at present stands around 40 percent or about 70 lakh gross tonnage of ships per annum which is bound to go to at least 60 percent given 95 of the 131 plots at Alang (are) developing these as per Hong Kong conventions, paving way for ships from Europe, Japan, US and other countries to be recycled here, he said.

The Act is expected to raise the brand value of ship recycling yards located at Alang in Gujarat, Mumbai Port, Kolkata Port and Azhikkal in Kerela and will also enhance availability of steel.

Another area of focus will be increasing the number of seafarers as India with 12 percent of the world's population has just about 7 percent of the seafarers market.

On the other hand, countries like Philippines with just 2 percent of the world's population has grabbed 20 percent global share.

"The number of seafarers in 2014 was 94,000 which has reached 2.4 lakh now. We want to take it to 5 lakh in five years," he said.

India has 12 major ports -- Deendayal (erstwhile Kandla), Mumbai, JNPT, Mormugao, New Mangalore, Cochin, Chennai, Kamarajar (earlier Ennore), V O Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia) under the control of the Centre. These major ports handle about 60 percent of the country's total cargo traffic.

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The retail inflation for industrial workers dipped to 5.1 percent in May due to lower prices of certain food items and kerosene oil.  The retail inflation for industrial workers is measured through Consumer Price Index for Industrial Workers (CPI-IW).

"Inflation based on all items stood at 5.10 percent for May, 2020 as compared to 5.45 percent for the previous month (April 2020) and 8.65 percent during the corresponding month ( May 2019) of the previous year," a labour ministry statement said.

Similarly, as per the data, food inflation stood at 5.88 percent against 6.56 percent in the previous month and 5.21 percent in May 2019.

The All-India CPI-IW for May 2020 increased by 1 point and stood at 330. On 1-month percentage change, it increased by 0.30 percent between April and May, 2020 compared to 0.64 percent increase between the same months of the previous year.

The maximum upward pressure in current index came from Food group contributing 0.67 percentage points rise to the total change.

At commodity level, Arhar Dal, Masur Dal, Moong Dal, Urd Dal, Groundnut Oil, Mustard Oil, Fish Fresh, Goat Meat, Poultry (Chicken), Milk, Cabbage, French Bean, Green Coriander Leaves, Potato, Country Liquor, Refined Liquor, Cooking Gas, Petrol, etc. are responsible for the increase in index, the data showed.

However, this increase was checked by Rice, Wheat, Garlic, Onion, Bitter Gourd, Coconut, Gourd, Lady Finger, Mango, Parval, Tomato, Torai, Banana, Kerosene Oil, etc, putting downward pressure on the index, it stated.

At centre level, Warangal, Chhindwara and Ahmedabad recorded the maximum increase of 6 points each. Among others, 4 points increase was observed in 6 centres, 3 points in 11 centres, 2 points in 9 centres and 1 point in 8 centres.

On the contrary, Doom-Dooma Tinsukia recorded the maximum decrease of 10 points followed by Salem (9 points), Munger-Jamalpur (8 points) and Lucknow (7 points).

Among others, 5 points decrease was observed in 1 centre, 4 points in another 1 centre, 3 points in 6 centres, 2 points in 9 centres and 1 point in another 9 centres. Rest of 11 centres' indices remained stationary.

The indices of 33 centres are above All-India Index and 45 centres' indices are below national average.

The Labour Bureau, an attached office of the Ministry of Labour & Employment, has been compiling CPI-IW every month on the basis of the retail prices of select items collected from 289 markets spread over 78 industrially important centres in the country.

The index is released on the last working day of succeeding month.

Labour Minister Santosh Gangwar said ,"The fall in inflation during the month in general and food in particular due to free supply of cereals to households across the country under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) during lockdown had put less burden on the pockets of 130 crore people in the country."

Lauding the efforts of the Labour Bureau, he said, "Our labour bureau is doing a great job by bringing out the inflation data during these challenging times under lockdown. This will help policy makers."

The hike in dearness allowance and dearness relief for over one crore central government employees and pensioners is worked out on the basis of CPI-IW.

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The country has avoided steel imports worth over Rs 20,000 crore following DMISP policy since its launch in 2017, Union Steel Minister Dharmendra Pradhan said on Monday. In 2017, the government launched the National Steel Policy (NSP) with an aim to scale up India's steel making capacity to 300 million tonnes by 2030 with an additional investment of Rs 10 lakh crore.

The government also rolled out the domestically manufactured iron and steel products policy (DMISP) policy to boost the use of domestic steel products in government organisations.

"From a small capacity of 22 million tonne (MT) in FY 1991-92, India has now become the second largest steel producer in the world with a production of 111 MT in 2019, surpassing Japan and the US.

"Through the DMISP Policy, we are giving a boost to domestic sourcing of iron and steel products by central government organisations by mandating preference. Through this DMISP Policy, steel imports worth over Rs 20,000 crore have so far been avoided," Pradhan said.

The minister also said the government's thrust on infrastructure development will have a positive bearing on driving steel consumption in the country.

The national infrastructure plan of Rs 102 lakh crore will generate steel demand across sectors like civil aviation, roads, railways, energy etc, and the government will continue to promote maximum usage of home-made steel in projects that would come in these industries, he added.

The ministry has also envisaged setting up of steel clusters to enhance the downstream ecosystem in the steel sector. This will significantly enhance employment opportunities in the sector. This move would also encourage the MSMEs in the steel sector to produce more value-added products.

Pradhan was speaking during the launch of India's first continuous galvanized rebar (CGR) manufacturing facility in Mandi Gobindgarh, Punjab, set up by Madhav Alloys with support from International Zinc Association.

In the virtual event, he also emphasised on the importance of the usage of zinc in the steel sector.

Under the galvanisation process, a protective zinc coating applied to iron or steel, to prevent rusting.

India, Pradhan said, is the fourth largest producer of zinc in the world and contributes around 6 per cent to the global production. Approximately 75 per cent of the zinc used in the country finds application in galvanising of steel products like sheets, pipes, structural, wires etc.

"With our (government's) focus on large-scale expansion in infrastructure sectors and driving steel intensity, the demand for galvanised steel is set to rise," he added.

Pradhan further said the facility launched on Monday is the country's first CGR facility in India and will support the much awaited need of supplying galvanised rebar to the construction industry.