January , 2023
15:46 pm

Dr. H. P. Kanoria

Dear Readers
Wish you Happy New Year. Hope the New Year brings happiness and prosperity
to all.
Indian Economy: Finance Minister Nirmala Sitharaman said government aimed
for lower inflation and to maintain fiscal deficit target at 6.4% of GDP during
current financial year.
IMF estimated India’s GDP growth at 6.8% in FY23. Slower growth in advanced
countries will affect exports. That is likely to affect India’s growth as well and the
GDP growth is expected to moderate to 6.1% in FY24. It is expected that RBI will
keep the repo rate on hold at 6.25-6.5% through FY24. Government will take steps
to attract greater FDI inflow and will ease and reform in doing business and will
consider temporary closure to stressed assets.
Core inflation is persisting around at 6%. RBI’s forecasts of inflation are still based
on the assumption of high fuel price. Increased repo rate will increase cost of
production and thereby keep inflation elevated. Inflow of FPIs and investment
increases the Foreign Exchange Reserves and outflow on account of fuel and
foreign import depletes the Foreign Exchange Reserves. It is estimated that India’s
CAD to widen by 3.5% of GDP in FY23 from 1.2% of GDP last year. India is
feeling the pain of global slowdown, although exports have fallen. Fitch retains its
sovereign rating for India at lowest investment rate at BBB-with stable outlook.
Maurice Obstfeld is former Chief Economist of IMF and teaches at University of
California. He said that India could be world’s 3rd largest economy in the next
decade. It is having a young labour force and significant human capital with
talented people. India can play key role in global supply chain.
Monetary tightening should be carefully calibrated. Tightening financial condition
can tighten excess money supply and lead to Non Performing Assets. Government
and authorities are committed to bring fiscal deficit to 4.5% of GDP by FY26.
Inflation: Government appeared to be happy with tax collection. Higher rate of
GST which had already dampened demand will further be dampened due to

inflation. Lower rate of tax will increase the demand and lead to higher sales and
therefore higher volume of GST collections.
CAPEX: Animal spirit of wealth and job creators needs to be revived. There are
fear of repayment of delay and temporary default in payments and proceeding due
to external factors. Government and authority have to realize this fact and examine
the external factors affecting the payment. Central government’s PLI scheme for
14 sectors has generated investment commitments of ` 2.34 trillion. It should be
extended to all the sectors of manufacturing.
Former RBI governor Raghuram Rajan, said “India will be lucky to have 5%
growth in FY24. Most independent agencies as International Monetary fund (IMF),
World Bank have predicted India during FY24 growth at 6% plus. Rajan
commented on the concentration of wealth with a few industrialists. RBI has been
consistently raising the repo rate which has gone up from 4 to 6.25%. RBI has
withdrawn excess liquidity and money from the system to restrain the money
supply. Many are of the view that cost of production has remained high because of
rising interest rates and lingering supply chain concerns. Tight liquidity is affecting
the investment and working capital ultimately leading to the supply and demand
Christoph Schweizer, CEO - BCG said India is not only a big economy but also
demographically in a very good spot.
Sandip Patel, MD- IBM India and South Asia region says technology drives
efficiency with or without inflation. Global technology spending is expected to be
moderate owing to high inflation and recessionary fear.
India will remain the fastest growing major economy in 2023. Growth projections
for India by Moody’s for 2022 is 7% while for 2023 is 4.8%; Nomura for FY23 is
6.6% while for FY24 is 5.1%; Goldman Sachs for 2022 is 6.9% while for 2023 is
Global Economy: Global inflation is still quite high. Consumer price inflation has
receded to 7.1% in November 2022 from 7.7% in October 2022 in USA. Inflation
in UK hit a record-high rate in over 41 years when it touched 11.1% in October
2022, thereafter it eased to 10.7% in November. Global inflation seems to have
peaked. Due to lower economic growth it may drop further. Global GDP growth is

slowing down to 2.7% in 2023 from 3.2% in 2022.Global trade is projected to fall
to 1% in 2023 from 3.5% in 2022. US economy is experiencing big challenge in
the forms of surging inflation, high interest rate, end of fiscal stimulus, weak
export market, weak household spending. As the economy weakens, employment
is affected. Economists forecast 70% chance of recession in FY23.
IBC: External factors (global and external) lead to delays and temporary defaults
in payment resulting in temporary stresses assets. Non Performing Assets are in
lakhs of crores, under the proceedings of NCLT. It takes undue time which is being
realized by the government resulting in declining asset quality and eroding the
value. 364 infrastructure projects, each entailing an investment of `150 crore or
more, show cost overrun of about ` 4.52 crore for various reasons and various
delays in getting necessary approvals. This have been resulting in delays and
defaults in payment by the enterprises including small and medium contractors.
Public sector units, public sector banks and financial institutions are being
privatized. However, National Assets Reconstruction Company Ltd (NARCL) is
bidding to acquire assets under the IBC proceedings. The question is whether they
will add the value by making assets perform or liquidate them at a lower price.
G20: India has received the presidency of G20 and also UN Security Council. G20
will concentrate on security, economic co-operation, connectivity and people to
people contact. The slogan for G20 is “one earth, one family, one future” in the
lines of India’s age old belief of “Vasudhaiva Kutukbakam”.
G20 will be decisive, exclusive, action oriented and ambitious, as said by
Honourable PM of India and urged everyone to make the summit a success. 2023
will be the year of India. Heads of many countries will be visiting India twice.
India should push for steps to be taken for climate change and a step to restrain
global warming in G20. G20 also strengthens hope for a joint approach (global) to
finance public health. World Bank can support this ambition.
As per Gita Gopinath, First Deputy Managing Director, IMF said we have a large
number of low income countries that are on debt distress. While we have G20
common framework to help debt resolution, we absolutely need to improve
strength of the mechanism and to get much more timely solution.

India will have an opportunity on pre and up skilling programmes, leading to
digital economy and will affect the employment and increases the need for cyber
security, financing for global economic recovery making a priority and
empowering Small and Medium Enterprises (SMEs) with access to finance and
long term capital for infrastructure development a top priority.
The threat of Covid–19 has resurfaced. If it is an intense one, it can affect India’s
goal of becoming a USD 5 trillion economy. The Archaeological Survey of India
lit up 100 heritage sites for a week to mark administering 100 crore Covid-19
vaccination in the country.
By lower tax rate government and authorities should aim at larger volume growth
and also larger and increasing employment. Increasing unemployment of Blue and
White collar jobs is great challenge to the Nation. To contain inflation, increase the
supply side, allay fears of wealth and job creators, increase liquidity for expansion
and working capital, reduce cost of production by lowering of interest and taxes.
India has a very strong fundamental, significant young population with very
talented people. It needs promotion of investment and must work towards playing a
key role in global supply chain.

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