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Dear Readers
Indian Economy: The Indian Government has set its eyes on making the
country a Developed Nation by 2047, the 100th year of her independence.
Swami Vivekananda in 1897 had said that India would be independent after 50
years, and after 150 years will be one of the major economies in the world. His
predictions came true in the year 1947 when we became independent, and now
we are moving ahead and seem to be well set to figure among the top 3
economies of the world by 2047.
As per World Bank estimates, the Indian economy is expected to grow at 6.3%
in FY24. There will be boost in services exports, but merchandise exports will
be moderate due to a contraction in demand because of a slowing global
economy.
ICRA’s domestic rating agency said that service sector will drive the economic
growth.
Global rating agency Moody’s has said that India’s GDP has crossed the size of
USD 3.5 trillion in 2022 and will continue to be the fastest growing G20
economy, but India’s bureaucracy and slow decision-making will reduce its
attractiveness as a destination for foreign direct investment (FDI), especially
when competing with other developing economies like Indonesia and Vietnam.
Echoing Moody’s, K. V. Kamath, chairperson of the newly formed National
Bank for Financing Infrastructure and Development (NaBFID), said in response
to queries on the state of litigation and tangled tax laws that regulation is tight
and the burden of regulatory compliance is huge, which can lead to litigations.
He added that the issue of litigation needs to be addressed with greater speed in
order to make India more investor-friendly.
RBI governor Shaktikanta Das said that the war of inflation is not yet over. He
expects India growth to be 6.5% in FY24. Agricultural sector has done well and
service sector is contributing well to the economic growth. Mr. Das said that

RBI would take prudent approach for financial stability and will create
substantial environment for economic growth.
Debt and Growth: Wealth and job creators are still having the animal spirit,
but they are not keen to take on any more debts. Even big conglomerates are
reducing their debts by selling part of their investments and inducting overseas
investors into equity.
States and Central Government debts have kept on increasing due to bulk
spending.
Supreme Court of India has dismissed State Bank of India’s petition which
wanted the apex court to clarify whether the March 27 judgment, which makes
it mandatory for banks to accord an opportunity of personal hearing to a
borrower before classifying his loan account as fraudulent. There are many
enterprises engaged in infrastructure development and manufacturing, supplying
to Public Sector Units and government departments, which have not been
receiving payments regularly and not on time, even not getting their dues after
the award of the arbitrator. The Supreme Court has clarified that the personal
hearing and representation of borrowers will meet the principle of natural
justice. Lenders must consider global and domestic external factors and
representation of borrowers before classifications of loan account as fraudulent.
The insolvency proceedings entail heavily both on the lenders and borrowers
leading to wastage of scarce resources of the borrowers. The realization of the
lenders could have been much considerable had they have been given the
opportunity of moratorium and loan restructuring fearlessly.
Lenders should have the analytical acumen to work out multiple scenarios at the
time of lending, and should consider external factors and historical ups and
downs which may affect the enterprise.
IBC resulted in 94% haircut to the lenders in August 2017. Had the borrowers
got opportunity to present their case and had their loans been restructured,
lenders would have surely got a much better recovery
Global Economy and Debt: Mightiest U.S. is having challenge of debt default.
The federal government’s total public debt was just under USD 31.46 trillion as
on February 2023, whereas U.S. GDP was USD 26.13 trillion in the fourth
quarter of 2022. U.S. President Joe Biden and top congressional Republican

Kevin McCarthy have reached a tentative deal to suspend the federal
government’s debt ceiling. But the deal still faces a difficult path to pass
through Congress.
Public and private sectors’ debts have increased to the highest levels and now
financial stability is at risk due to the successive large interest rate hikes by US
Fed Reserve and other central banks. US Fed finally opted for a pause in its last
policy meeting. The high interest rate is the root cause behind the weak
investment sentiment. Germany, the largest European economy and the 4th
largest in the world, slipped into recession. The economic growth in Euro-zone
is projected to slow down to 0.8% in 2023 from 3.5% in the previous year.
Several countries have been facing the risk of sovereignty to pay their debts.
China’s debt-to-GDP ratio rose to a record 279.7% because of a credit boom.
Steel Industry: The steel industry in India had a turbulent History. Global and
domestic demand along with government policies have been affecting the
industry since Independence. Inspired by Swami Vivekananda, Late Jamshedji
Tata had set up first steel plant in the country in the year 1907 namely Tata Iron
and Steel. Tata’s were the pioneer in this sector. The first integrated steel plant
in India was set up in 1960s by the government of India namely Rourkela Steel
Plant, Rourkela, Odisha in the public sector. As back as 2003 – 2004, steel
production of India was around 18 – 20 million tonnes. By 2013 – 14, it was 60
million tonnes and by 2022 – 23 around 25.32 million tonnes steel is being
produced. Government is planning to extend and achieve the target of 300
million tonnes by 2030. Whereas China is producing 950 million tonnes against
the capacity of 1000 million tonnes.
The industry was bleeding from the year 1993 to 2003. SAIL had accumulated
loss of more than 6000 crore during the year 2003. The industry recovered
during 2004 -2010. Tata Steel Company has taken over and acquired the biggest
steel plant in UK the Corus Group Plc in a transaction which made Tata Steel as
one of the world’s largest steelmakers, with a major presence in Europe as well
as Asia. In the year 2003 the end capacity of our country was about 28 million
tonnes whereas China was producing above 300 million tonnes. There was
massive capacity addition from the year 2004, private sectors have entered
largely by investing by way of equity and debt. As per the project norm the
investment ratio of 1: 5 is required for steel units. From 2010, the industry again

started bleeding till 2016 and mid 2017 due to low price steel imported from
China.
During mid August – October 2016, government has imposed dumping duties
on import of steel from china. This has helped the steel industry to revive and
become self-supporting. Before this several small, middle and big steel
enterprises became stressed and were failing to pay their debts with high penal
interest and exuberant service charges. Cancellation of license of coal and iron
ore mines were adding to the woes. Large units like Bhushan Steel and
Electrosteel have been taken over by TISCO and Vedanta respectively, wherein
banks and lenders had to take a beating of 30 – 40%. India started steel
enterprises large and medium which are profit making now. India now have
started exporting to China and to some countries of the European Union. Rise in
cost of production mainly interest cost are denting the profit for the survival of
the industry.
Demand in overseas market has fallen due to recession. The target of achieving
a steel production capacity of 300 million tonnes by 2030 – 31 looks daunting.
The present production capacity is at about 95 million tonnes and there is no
sign of any major pick – up in demand for the steel industry. TISCO is planning
to raise its installed capacity to 30 million tonnes by 2025 from the existing 18.5
million tonnes. But extending capacity or setting up new plants on the basis of
government’s policy will not be able to make survival easy for the borrowers
and lenders.
In the past, some units were termed as frauds who have delayed to serve their
debts accusing with diversion of funds not considering high cost of servicing
debts and tough competition from China. Authority and lenders as well have not
considered the external factors affecting the enterprises.
There is no level playing field when it comes to competing with Chinese
players. Chinese producers get huge incentives and subsidies, to the tune of 13 –
16% of production cost. China’s production is almost 52% of the total world
production. The domestic finished steel consumption is 106 million tonnes at
present and is increasing by 6 – 9% every year. By the end of 10 – 11 years
steel consumption will be around 200 million tonnes.

Targeted production capacity of 300 million tonnes is not good. It will lure the
entrepreneurs to expand capacity and set up new plants. Lenders will ignore
historical facts and extend debts. Plight and owes of entrepreneurs will be
cyclic. Lenders will treat enterprise as fraudulent. Steel import and supply is a
mega threat to the industry. As a raw material, the demand for steel has been
steadily rising. Though there are often concerns about price hike and
environmental factor there’s a promising future for the steel sector in India.
Conclusion: Along with the other Nations, India needs to put private
investments in the forefront and put foreign investments a priority by having
conducive and practical policy and action which will help the country to
become one of the best developed Nation by 2047. The Central Bank should
direct banks to give hearing to the borrowers so that they can restructure their
accounts which are being affected by external factors but have the potential and
the borrowers are having a long decade of goodwill and performance.