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Dear Readers,

Indian Economy: After spending 2017 in coping with the after-effect of the seriously flawed demonetisation, in 2018 the India Economy was affected by demonetisation, deeply flawed, un-pragmatic, the inefficient implementation of GST, unrealistic rules and regulations for Banks by RBI, Global Trade War, marginal rather negligible and inadequate investments, rising crude prices, teething problems in implementing the Insolvency & Bankruptcy Code Act, farm distressed, fear psychosis amongst businessmen in terms of regulatory flip-flops and tax rules and the turf-tussle between the Ministry of Finance and RBI. RBI’s ‘one-day default’ rule for borrowers has created havoc to industries, service sectors, infrastructure; real estate sectors rather all sectors. Several sound companies have become victims of this regulation though being innocent. Government was guided with the dogma of collecting more and more taxes for spending for populist measures and exorbitant wasteful expenditure.

Amidst all these, India’s ranking in the World Bank’s ‘Ease of Doing Business’ list improved 23 positions from 100 in 2017 to 77 in 2018, has ranked globally 70th in ease of doing business. The Indian economy continues to be the world’s fastest growing major economy with several ups and downs. NITI Aayog Vice–Chairman, Rajiv Kumar said that it was a rollercoaster ride for our economy in 2018. The government has to expedite reforms with a view to accelerate growth. As per advanced estimates from Central Statistics Office (CSO), Indian economy is estimated to grow at 7.2% in FY19. However, many economists have already lowered their growth forecasts for India in FY19. India’s external debt fell by USD 19.3 billion, or 3.6%, to USD 510.4 billion during the 6-month period ended September, due to a decrease in commercial borrowings, non-resident Indian (NRI) deposits and the valuation gains resulting from the appreciation of the US dollar against the Indian rupee and major currencies. But the industry continues to remain highly indebted. Corporate income has been falling. Industrialists and even new start-ups are not in the mood to take more risks. All are preferring equity. However the stock market is not at all promising for IPOs.

In the latest World Economic Review, the IMF said that India will grow 7.3% in FY2019 and 7.4% in FY2020 while China is expected to will grow at 6.2% in 2019. The global economy is projected to grow at 3.7% in 2019. World Bank’s growth projection for India is a notch lower than the RBI’s 7.4% but slightly higher than CSO’s 7.2%. The government has to take practical measures so that the poor also benefit from the growth. India ranked 103rd, behind Bangladesh and Nepal among 119 countries on the Global Hunger Index (GHI) 2018, by sliding three positions from the 100th rank in 2017.

RBI-Banks: The banking crisis got aggravated due to non–practical approach. Equity price of almost all nationalised banks had fallen by 70 to 80%. Investors lost money too. Banks could have mobilised capital from the market, had the problem been addressed with practical steps at the initial stages. India should have learnt from China and other countries. As economy slows down, China has slashed reserves requirements four times in 2018 to free up more funds to lend and augment incomes. Miracles are expected in 2019. The merger of two Banks, Vijay Bank and Dena Bank, with Bank of Baroda will affect employment, cause delay in disbursement of loans, concentration of authorities and services.

In respect of the 9 PSBs which had aggregate risk weighted assets of approximately Rs. 9.93 lakh crore as of March 2018, this translates into additional capital requirement of approximately Rs. 35,000 crore. According to the parliamentary panel, the stipulated additional capital requirement for these 9 banks (who are already under RBI’s PCA framework with lending restrictions), if waived, can release funds to the extent of about Rs. 5.34 lakh crore, which can lead to a 51% growth in the loan book of these banks. This can generate additional interest income of about Rs. 50,000 crore annually which will obviate the need for additional capital infusion. A waiver of extra capital needs for nine PSBs (without global operations) alone will release funds of Rs. 5.34 lakh crore representing 51% growth in their loan books and generating additional interest income of Rs. 50,000 crore a year. RBI’s stipulation has restricted lending capacity and earning, resulting in mounting losses. Practical policies and rules with Indian’s economy, growth and employment perspective need to be taken urgently. Extra capital requirement should be waived. As per Budget estimates, RBI is likely to pay a bumper dividend of Rs. 54,817.25 crore out of its surplus to the government. This will help the government tide over fiscal deficit to some extent. RBI is open to infuse need-based liquidity into the financial system.

Agriculture: Experts differ on farm loan waivers. A NITI Aayog member Ramesh Chanda feels that farm distress can be addressed by allowing farmers and rural entrepreneurs access to institutional credit, efficient crop insurance scheme and implementation of minimum support prices. Despite a robust procurement system for paddy and wheat, overall procurement was only 30% of the production. 70% of farmers complained of repeated losses because of unseasonal rains, drought, floods and pest attacks. The government schemes are benefiting big farmers having land holding of 10 acres and above. The land holding have been reducing due to increase in population and continuous subdivision of land holdings amongst family members. Due to depletion and exhaustion, poor quality of seeds, yield is the lowest in the world. Better to reconstruct the loan with rate of 8% for instruments in seven years.

NBFCs: The IL&FS fiasco has clouded the operations and future of NBFCs. The government needs to understand and appreciate their role in the economy of Bharat. One rotten egg in a basket does not mean all eggs are rotten. Institutional investors like insurance companies, pension funds should come forward to provide long term loans as banks are reeling under various impractical rules and regulations of RBI. Retail credit of NBFCs at Rs. 8.3 trillion does serve immense service to the nation. However, the prevailing liquidity scenario is likely to slow down its growth 16-18% during FY19. It has registered 25% growth earlier. Realising the reality, the government wanted the RBI to provide relief to NBFCs.

GST: GST is one nation one tax. Several rates as high as 28% on many items including many things consumed by common people and farmers have created unpopularity. Against the announcement of PM Modi to give relief on 99 items, the GST Council has given relief on 23 items. Still 5% GST is imposed on essential items like insulin, parts of wheelchairs, edible oils, pizza bread, branded cereals, snacks, 12% on butter, diabetic foods, feeding bottles, bicycles, 18% on vinegar, paints, plywood, 28% on cement, auto parts affect the common people and processing industries. There should ideally be three rates, 5%, maximum 10% to 12% and a sin tax 40%. Levy of sin tax should be on alcohol, cigarette, etc. Filing returns should be further simplified. Realising the suffering of retailers/small traders/cottage industries, MSMEs, the government has increased the GST exemption limit to Rs. 40 lakh from Rs. 20 lakh and to Rs. 20 lakh from Rs. 10 lakh for north-eastern states.

Social Sector: BE has been advocating reservation based on economic weakness. Prime Minister Modi has announced 10% quota for upper-caste poor based on an annual income of Rs. 8 lakh including agriculture and profession, agricultural lands below 5 acres, residential unit below 1000 sq. ft., residential plot below 100 yards in notified municipal area and 200 yards in non-notified municipal area. This is the bold step of Modi ji. In upper castes, there are very poor people. They can neither beg nor do some menial work.

May Bharat Mata bless Bharatwasi’s rulers, administrators and advisors to follow Chanakya’s advices so that the tax collection drive is pleasing not becoming breeding ground of malfunctioning and suffering of the people and retarding the economic inclusive and sustainability growth. Let Bharatwasis ardently adopt simplicity, austerity, peace and harmony realizing the pains of poverty and hunger of millions of children and people. Let there be light of wisdom in the New Year 2019.