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Dear Readers

Happy New Year. May God bless us to perform our duties righteously and honestly to the best of our abilities to enable Bharat to grow to a USD 5 trillion economy size despite restraints, multiple rules and regulations, lack of support from lenders and from external factors.

Jesus Christ had said, “Don’t do to others what you wouldn’t like to do to yourself.” “Love God and your neighbour as you would like to be loved”. “Seek justice in your thoughts and deeds”. “Nature provides justice in the form of life-giving water, clean air, and natural products that balance the whole earth.” Listen to your own feeble voice of conscience.

Cover Story: Tech Funding in India has declined to its lowest level in 5 years, with the Tech start-ups in India raising a total of USD 7 billion in 2023. This is 72% less than the USD 25 billion being raised in the previous year. Since the beginning of the year, Tech Funding has been declining every quarter.

In addition to fintech, where growth was driven by the exponential growth in use of smart phones and the shift to a digital economy, enterprise apps and retail saw the biggest growth in funding this year along with environment tech and space tech receiving good investor attention as compared to other sectors. Top investors for start-ups are Accel Partners, Blume Ventures and LetsVenture.

Economy: According to Goldman Sachs, India is projected to become the world’s second largest economy by 2075 despite various challenges. The contribution of the private sector to capex has decreased over the last few years. Capex has been largely driven by the government. There can also be a lag effect, and as demand increases, this will necessitate creation of more capacity. Looking at rural demand over a three-year period, it remains at a good long-term average of high-single-digit growth.

As per IMF, despite widespread global uncertainty, India is expected to grow over 6% for the next 5 years driven by continuous strong investment, private consumption and digitalization leading to productive gain.

RBI has revised upward its forecast for India’s growth in FY23-24 to 7%. Credit supply for micro and small business has been thinning with lenders turning

cautious. They are avoiding any risk of increasing regulatory scrutiny.

IMF warned that Indian government debt might exceed 100% of its GDP in the medium term. However, Union FM reported that general government debt of both of centre and state declined from about 88% of gross GDP in FY20-21 to 81% in FY22-23.

India’s forex reserve has surged to USD 616 billion, the highest in two months. The surge is due to the remittance by FDIs, FPIs and NRIs deposits and remittances and reduction of imports.

India G20 presidency has demonstrated the country’s important role in advancing multilateral policy priorities to boost global growth amid multiple global conflicts.

India’s imports from Russia increased by 64% in April-October to USD 36.27 billion on higher shipments of crude oil and fertiliser, in comparison with USD 22.13 billion during the same period last year. It is not known how much export with Russia has been settled in Rupees, but the rupee payment has helped.

India’s foreign trade remains affected due to geopolitical tension, global high interest rates and surging inflation. India’s goods exports from April-November’23 declined by 6.3% to USD 278.80 bn from USD 298.21 bn in the same period of 2022.

Global Economy: US economy grew 5.2% in the 3rd quarter, fuelled by robust investment in factories, equipment and strong consumer demand. Janet Yellen, US Treasury Secretary, said that; “there is no unusual sign of weak labour market that would make us fear of any recession ahead”.

Moody’s, the rating agency, kept China sovereign rating at A1. It has changed its outlook for the country to negative from stable citing surging municipal debts and property market woes. The revised GDP figure exposing a shrinking of the UK economy in the third quarter puts it at a risk of technical recession or a

longer slump.

IBC: Promoters, wealth and job creators take the risk of doing their job to the best of their abilities. RBI, lenders and government have to consider whether to continue with 80% haircut selling the enterprise under IBC process at 20-25% of the capital invested and / or at 10-15% of the required capital for setting up any new project. It is throwing out the entrepreneurs despite their best efforts, investing their hard earned saved and borrowed money from their friends and relatives and working tirelessly. It is causing perils to the medium and small enterprises. Only few conglomerates are being benefitted. Authorities must consider external factors affecting the enterprises as well. Government authorities should introduce survivor-led credit resolution for the enterprises affected by the external factors.

Many external factors can be as given below:

1. External effects ― (a) Global competition, (b) dumping of goods, (c) go slow, strikes, low productivity, (d) unions’ militancy, (e) non-payment or delayed payment by debtors, internal and external, (f) fall in demand, (g) rise in cost of production, (h) creation of excess capacity, (i) non-availability of fund to manage the rising cost of raw materials, inventories, rising debtors, (j) springing up of new industries with large incentives by the government, and (k) incentives like tax holiday, etc. in some regions in order to promote the setting up of new industry ignoring the impact on existing industries.

2. Changes in government regulations and administrative delays/no action ― (a) Frequent policy changes, (b) cancellation of license like that of coal mines, (c) non-payment or long delays in payment by the government and their agencies, (d) reneging on contracts by the government and their agencies, and changing perceptions/assumptions, (e) multi-level and multi-fold approvals leading to administrative delays, (f) fear psychosis in decision taking, and (g) public hearing for green environment.

3. Changes in Banking regulations ― (a) Inadequate funding, (b) stopping of fund or treating as NPA even for one day default now, (c) high rates of front charges compounded every month and penal rules of interest, (d) stringent RBI provisioning norms not aligned to market realities, (e) frequent policy changes and compliance norms by regulatory authority, (f) administrative delays leading to heavy cost overrun, (g) errors in judgments by professionals in loan evaluations, and (h) inadequate fund given for modernisation and/or balancing equipment.

4. Global trade threats – Imports are allowed despite the campaign of ‘Make in India’, impacting the capacity utilisation and price realisation of an industrial sector.

Conclusion: Though capex-led growth has been mainly driven by the government, central capex outlay stood at 2.7% of GDP in FY22-23 and is expected to be about 3.3% of GDP in FY23-24. Government has to take measures to boost the private capex as well which needs reduction of multiple approvals for the greenfield projects and within stipulated time.

Authorities and lenders should support an enterprise seized by external factors. India has to become one of the largest developed economies by 2047 as predicted by Swami Vivekananda. Animal spirit which runs feeble now must be revived. The start-up sector is undergoing retrenchment and consolidation. Urgent support is required for IT sector also.