Thursday

01


November , 2018
Editorial
12:50 pm

Dr. H. P. Kanoria


Dear Readers,

Happy Diwali!

This is an auspicious time. The festival of Mother of the Universe, Ma Durga, who is the destroyer of evil and the establisher of righteousness (Dharma), was celebrated recently. Mother ignites divinity in every human being, who is the pure and infinite, manifested in the image of God (cosmic infinite entity- cosmic infinite energy).

During this fortnight, we are celebrating the Festival of Light, praying to Mother Laxmi, Goddess for granting prosperity, happiness and righteousness. We are also worshipping Lord Ganesha, Mother Saraswati, and Lord Kartikeya. Lord Ganesha is the beloved son of Lord Shiva and Mother Uma. By the blessing of his parents he is worshiped Pratham (first) over all gods, goddesses, semi gods and semi goddesses, even before His parents. His father had to worship him before starting a journey to kill a giant (daitya). He is the remover of obstacles. He grants success in an enterprise, prosperity, and happiness. He represents humility as he has a rat as his charioteer despite his bulky body and pot belly. His mother Uma has a lion, his father Lord Shiva a bull and his brother Kartika a peacock as their charitoeers.

What a unity in diversity! Nature provides variety and diversity. We have to learn lessons from the family of Lord Shiva and live with harmony, love and peace in the family. Unity is the strength of the family. Each member will have different fate, calibre, talent, spiritual strength and weakness. Lord Ganesha is worshiped globally to make an enterprise a success and for prosperity. Lord Kartikeya is also worshipped as a destroyer of evil. He is the giver of strength, relinquishment, non-attachment and love and unity of the family. Mother Laxmi, the wife of Lord Vishnu, lives in the house of the pure, righteous; those observing austerity and simplicity, engaging in the service of humanity, and are conscious of Lord Vishnu (Narayan) along with Mother Laxmi. The mantra we chant is Om Namo Bhagwate Basudeo and Om Ma Laxmi Namo Namo . Mother Saraswati is expeller of ignorance, granter of wisdom, of power, talent, intuition and the creative arts. All are worshipped irrespective of caste and religion. They are for all and each one is their child. Remember them not only in calamities but also in happiness and prosperity.

On 2nd October, homage was paid to Bapu Mahatma Gandhi on his birthday. He was an emissary of peace, truthfulness and social justice. He was a crusader of the independence of India through non-violence. Real homage would be to follow his message of simplicity, austerity, truthfulness and faith and love in God.

BE’s cover story focuses on shopping during the festive season. Shopping with fabulous discounts is popular. People like to shop with their family for the pleasure of togetherness and to feel the products before final purchase. At the same time, heavy discounts have also provided a huge spurt to online shopping.

Indian Economy: In 1894-95, Swami Vivekananda said that India would be one of the largest economies of the world after 150 years. Presently, in terms of nominal GDP, India’s position is 6th in the world, but India is growing fast and is poised to become the 3rd largest economy after USA and China by 2030. As per a UN report, the world economy will grow at 3% in 2018, whereas India's growth rate will be 7.2%.

Presently, the economy is under stress due to steep devaluation of rupees, rise in crude oil, rising import bills, widening CAD (Current Account Deficit), a looming financial crisis, low investments, outflow of money from stock and debt markets, loss of faith of investors, II&FS crisis, denting reputation of the Non Banking Financial Company (NBFC) sector, obnoxious laws, rules and regulations by various regulatory authorities, rising unemployment, unskilled and under productivity of youth, non-practical businesses and ailing sectors including manufacturing, infrastructure, real estate, and telecommunication. The problems in the power sector are also taking an ominous shape. The fall in the rupee has not helped exports as expected, rather exports have contracted.

The RBI’s steps to clean up the banking sector with its Asset Quality Review and subsequent recognition of NPAs have created large number of stressed assets. Between FY08 and FY15, overall bank credit grew at a CAGR of 18.2%, but since then, outstanding credit growth has declined to 13.2% between FY15 and FY18. Surjit S. Bhalla, a member of the Economic Advisory Council to the Prime Minister, said that there is concern about bad loans and part of the problem can be attributed to the RBI’s decision to keep the interest rate high. Finance Minister is likely to make a case for relaxing certain norms of the Prompt Corrective Action (PCA). 11 out of the 21 public-sector banks (PSBs) are on the RBI’s watch-list for strained finances. 2 of these - Dena Bank and Allahabad Bank - even face restrictions on lending. These stressed banks make up for 30% of deposits and 29% of advances of all the 21 PSBs.

To ease a liquidity crunch being faced by NBFCs, the RBI has raised the ceiling for lending to a single NBFC until end-December 2018. It is expected to facilitate additional lending of Rs. 59,000 crore to NBFCs and Housing Finance Companies (HFCs). RBI has raised the capital funds lending limit for banks to a single non-infra NBFC from 10% to 15%. However, no bank has 10% of its exposure to an NBFC, thus this hike in limit is unlikely to push them to increase their lending to NBFCs.

Defaults may be due to factors beyond control of the borrowers. Microfinance’s lending will also slow down. Market is under the grip of fear. It will have a toll on the economy. Realty developers and SME sector are facing problems due to NBFC’s shrinking loans.

Cost of funds to NBFCs has risen, and this is hurting the economy and crucial employment-intensive sectors like infrastructure and affordable housing. Power sector, more specifically, thermal power, is already reeling due to variousfactors, especially poor supply of coal even at very high rates. High cost of coal pushes up the cost of generation. Top companies are flocking to debt market with commercial papers.

India’s biggest lender State Bank of India (SBI) has announced that it will buy loan portfolios (up to an amount of Rs. 45,000 crore) of struggling NBFCs presently facing ALM mismatch. It can actually be a well-timed opportunity for many PSBs who have adequate cash reserves. A market facing a correction provides such PSBs to get hold of good quality assets at heavy discounts. As per RBI’s mandate, banks have to lend 40% of their total loan portfolio to priority sectors including agriculture, micro enterprises, education, social housing, etc. Therefore, it is a regular practice where SBI buys loan portfolio from other banks and NBFCs to fulfill the mandated target. This arrangement will also provide NBFCs a temporary respite as they can offload part of their portfolio to reduce the dependence on short term papers, which are not finding many takers due to the fear of default in the market.

Banks are promising to buy loan portfolio of NBFCs to increase their loan book without bearing the cost of marketing and acquiring such loans. In reality it might be happening marginally. Banks are now trying to settle distressed loans out of insolvency process as the seized assets/stressed assets are accumulating.

In India, private debts in 2017 was 54.5% of the GDP and the general government debt was 70.4% of the then GDP, a total debt of 125% of the GDP as reported by the IMF. India’s debt is substantially less than the global debt as percentage of world’s GDP. Global debt has reached a record high of USD 182 trillion in 2017. China’s total debt is $ 247 trillion. India should be vigilant on total debt.

Stock Market – FIIs (Foreign Institutional Investors) sold equity worth USD 2.35 billion so far this month totalling USD 4.4 billion in 2018. Domestic factors such as IL&FS default, drying up liquidity, shaken faith of investors, slowing of government spending due to the forthcoming elections. In addition, IMF’s global financial report also warns of serious risks of capital outflows from the emerging markets including India. In the US, long dated gilts’ yield has moved up to 3.24% from 2.75%. US’s fund investors are mostly moving to this. High oil price has affected the sales of auto sector. Prices of stocks of this sector have also fallen. Investors should wait and watch. Some analysts feel that bottom is yet to be tested. Prices of selected large sector companies have also fallen sharply.

World - World trade war may be intensified. The US President may add more tariffs on Chinese imports. He does not believe that trade war would lead to depression. China is also retaliating by increasing tariffs and imposing tariffs on new products. A trade war between the top two economies can potentially disrupt the global logistics industry and as a consequence many emerging economies will suffer in the process for no fault of their own.

May Mother Lakshmi and Lord Ganesha bless Bharat so all work hard with devotion and prosper thereof. No one should remain hungry.

 

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