Bharat: The impact of the Covid-19 pandemic’s impact will continue to till February 2021 or more as forecasted by experts.
Aditya Puri, Managing Director, HDFC Bank, said if India grows at 5%, then the rest of the world will grow by 2-3%. India can reach 8-9% if everything is done rightly. The growth should be 7-7.5% if 60% is done rightly. Government should spend on productive resources and promote manufacturing. Semi-urban and rural India need to grow.
The International Monetary Fund (IMF) forecasts a much deeper economic contraction for the financial year 2021.
The government has been giving stimulus to boost the economy and consumption. This stimulus will not burden the citizens with future inflation and put the government debt on a sustainable path as said by the Finance Minister Nirmala Sitharaman. India’s corporate believe that government capex push will have a limited impact on boosting economic activities. The credit rating agency ICRA has estimated that states will have to cut their capital expenditure by `1-3.4 trillion in FY21, despite additional borrowings because of revenue deficits and shortfalls in GST compensation.
Economy: The GDP growth slowed to a 11-year low at 4.2% in 2019-20 against expectation of 7%. It had plunged to 3.1% in the January-March 2021. The financing in all segments has fallen greatly. Banks’ credit flows have fallen. NBFC’s financial resources flows have also fallen steeply. Risk aversion, tightening of lending standards and liquidity crunch have slowed business of NBFCs. The slowing of credit to NBFCs to 17% in August compared to 25% averaged in June-July and less than half the pace in August 2019, is more worrying.
NBFCs have not been getting loan recast from banks though they have to provide moratorium to their borrowers and also allow loan restructuring to their own borrowers.
There is a need to inject funds into the economy and for that, corporate debt market needs to be developed, with instruments like credit default swap (CDS). Public undertakings, which are flush with funds, should invest in the market.
Cover Story: Online platforms are becoming even more popular due to restrictions related to Covid-19. Amazon is the global giant in online retail. They are adding innumerable products daily. Other Indian corporate giants are into online business like Reliance Industries, Aditya Birla Fashion, Trent Hypermarket (a Tata-Tesco enterprise) and other scaled-up start-ups like Flipkart, Myntra, Paytm Mall, etc. Reliance has been in negotiation to purchase online business of Kishore Biyani, Future Group. Amazon has disputed this. They can purchase goods from the manufacturers and suppliers at large discounts. Physical wholesalers and retailers do not have this advantage. As a result, they cannot offer good discounts to the consumers. Consumers go to the mall and to physical retailers alone or with their families to enjoy and check the variety of goods available, but the sale figures offline is lower than online for many living in the cities and towns.
Offline retailers have the advantage of convincing the consumers to buy merchandise through their personal relations.
Online retail companies have been tying up with physical retailers for delivery of the goods to the consumers in their respective areas. This will help some retailers, but not all.
By 2026, India’s e-commerce market is expected to grow to USD 200 billion from USD 38.5 billion in 2017.
There will be a tough competition in online grocery retail marketing. Reliance has launched Jio Mart venture. Tata is buying a stake in online grocery, BigBasket. Offline retail groceries have advantage of giving the goods on credit to the consumers as the consumer pays at the end of the month when they receive their salaries. This benefit is not being given by the online retailers.
Ease of Doing Business and risk aversion due to debts and fear of criminal actions: Corporates and entrepreneurs have been on a debt clearance spree. For this, they have been diluting their stakes with foreign investors. Risk of criminal prosecution is also deterring growth of new business and investment. There is great risk of criminal and civil prosecution under various laws on ‘reasons to believe’. It may lead to violation of Article 21 of the Indian Constitution. Procedure must be in conformity with justice, fairness and reasonableness as per law. There are more than four million cases pending in High Courts and over 33 million in district and taluka courts. More than 48 offences in company laws were decriminalised. More needs to be done. Several people have been dragged into criminal proceedings, causing them physical and mental trauma and harming their family reputation. Much more, businesses have been affected. People have shifted overseas.
World: The World Bank will press hard for more debt relief for low income countries. The US trade deficit has widened to USD 67.1 billion, a 14-year high. Exports of goods have been affected due to depressed economic activities in many countries.
Agriculture: The three bills give Indian farmers the freedom to increase and diversify their crops and shift from mono-crop dependence. This can help increase their income. They can sell their produce to the highest bidder. They will not be in the clutch of the bureaucratic system. If the bid is lower than MSP, they can sell to the government agency. Some countries are depended on agriculture and dairy greatly. Government should not stop the exports of agri products when the price rises. It should be realised that if the overseas markets is lost, it is difficult to get it back. The ` 1 lakh crore agri-infrastructure fund as part of Aatmanirbhar Bharat Abhiyan is to focus on farm entrepreneurs and agri-technical companies and create storage facilities, silos and cold storage. Indian poverty can be eliminated by growth in agriculture. The US’s agri exports were USD 140 billion whereas India’s was USD 38.5 billion in 2018-19.
Healthcare and medical education: The country needs more hospitals and a better healthcare system. Covid-19 pandemic has created a situation where there are not enough beds and treatment facilities. In China, even in South Korea, they have the basic hospitals, where there are more than 10,000-15,000 beds in one hospital. They are ready to meet any health crisis. Our medical education is below capacity. More medical colleges, nursing colleges, even in the rural areas, are required. This should be the priority sector of the government. The government should prioritise investments in the medical education system and provide incentives and facilities to private and corporate entrepreneurs to invest in this area. FDI should also be welcomed. Opportunities in healthcare and life sciences are enormous. These are essential sectors.
Shubho Bijoya and Happy Dussehra. Best wishes to all on this auspicious day of Vijaya Dashmi. May Mother Durga and Lord Rama bless us with virtues and good health.