December , 2020
21:19 pm

Dr. H. P. Kanoria

Dear readers,

Wish you all an ensuing Christmas and a prosperous new year.  

Prime Minister (PM) Narendra Modi and Finance Minister (FM) Nirmala Sitharaman have been giving stimulus to boost the growth. The FM said that the economy is recovering. Government has announced a new stimulus package of Rs 2.65 trillion stimulus package, focusing on job creation, access to credit and farm support for economic recovery. It may help the economy, which contracted by 23.9% y-o-y in the June quarter.

The Kanoria Foundation and the Srei Foundation along with Business Economics and the Universal Spirituality and Humanity Foundation will be organising the thirteenth World Confluence of Humanity, Power and Spirituality on 18 and 19 December, 2020, the first time on a virtual platform. A galaxy of global spiritual political leaders will spread the message of spirituality and humanity - which is needed more than ever in these testing times.

Moody’s revised India’s gross domestic product (GDP) growth rate to contraction of 8.9% for calendar 2020, from a 9.6% contraction estimated earlier. Under the Atmanirbhar Bharat Rozgar Yojana, the central government will provide EPF subsidy for ‘new eligible employees’ employed between 1 October 2020 and 30 June 2021 for a period of two years.

The emergency credit line guarantee scheme 2.0 will be offered to support the for healthcare and 26 stressed sectors, including power, construction, real estate, iron and steel manufacturing identified by the Reserve Bank of India (RBI)-appointed K.V. Kamath Committee.

The economy is recovering from the lows but the pace is slow. It is below pre-Covid levels. Credit Suisse reported corporate stressed debt dipped 37% in the September quarter, but it has happened only with a few sectors and not largely with MSME and service sectors.


NITI Aayog CEO Amitabh Kant said that India’s economic turnaround is gaining momentum. The recovery will be sustained. The productivity linked incentive (PLI) scheme of Rs 1.96 lakh crore (USD26 billion) has a huge role to play. MSMEs investment limit was increased. India has jumped forward 79 positions in the World Bank’s Ease of Doing Business index during PM Modi’s tenure. There is a great potential in healthcare and education.

The RBI's Internal Working Group (IWG) has recommended for bank license to large corporate houses, after necessary amendments in the Banking Regulation Act 1949. The other significant proposal is to allow large non-banking financial companies (NBFCs) with a minimum asset size of Rs 50,000 crore (including those owned by corporate houses) and with a track record of minimum 10 years, to convert to banks. Time frame for Payment Bank to convert to a Small Finance Bank has been proposed to be reduced to 3 years from 5 years. Capital level for licensing new universal banks have been proposed to be increased to Rs 1000 crore from the existing Rs 500 crore and the same for Small Finance Banks from Rs 200 crore to Rs 300 crore. The terms and conditions are very stringent. It will not be easy. The criterion of a minimum asset size of Rs 50000 assets for NBFCs will leave very few players eligible. A minimum asset size of Rs 20000-25000 crore will be a more practical suggestion. Bajaj Finance, Sriram Transport, Aditya Birla Corporation and other may go for bank licenses. NBFCs have been ruling semi-urban areas, to small and middle contractors who are engaged in infrastructure development, small and medium entrepreneurs, start-ups. It is to be seen whether big NBFCs or the corporates will go for banking license. Already several experts from the financial sector, including former RBI Governor Raghuram Rajan and former deputy governors like Viral Acharya, NS Vishwanathan and SS Mundra have expressed their reservations about corporate houses owning banks. Their concerns include conflict of interest and potential for misuse. In fact, Vishwanathan and Mundra have went one step ahead and said that they oppose NBFCs owned by corporate houses being converted into banks as according to them it is the same as a bank owned by a corporate house.  

The above decision of the RBI committee may facilitate liquidity and better service to the people. It may also promote small business and start-ups who are starving for funds. Urban cooperative banks and payment banks have also been allowed to apply for converting to small financial banks. In the rural area, they will take the position of private lenders. 

All sectors are starved of fund. Before nationalisation in 1969, several private banks owned by corporate houses were functioning well. They had contributed to the industrial development of India.  

 Health sector : The National Health Policy 2017 has set a target of government expenditure on healthcare up to 2.5% of GDP by 2025 from just 1.15% in 2017. In rural and semi-urban areas – health care infrastructure is very poor. Government should also give financial support for hospitals, which have come into operation within three years and/or are in want of finance as their initial cost of project had exceeded due to inordinate delay in multi-fold approvals and compound rate of high interest.


Employment: Government incentive for job creation is unlikely to create more jobs. Job losses in May-August 2020 has been high -totally 33 million- 12.4 million in manufacturing and 12.8 million in service sector. Large firms have been cutting cost for performance and for survival.

Cover Story – Even before Covid-19, the Indian economy was on a slow path. It has worsened after Covid-19. Negligible investment and lower exports and demand contraction have affected the economy. Due to the impact of Covid-19, economic activities were disrupted.

In its latest report, the RBI indicated that India’s GDP growth is likely to have contracted to 8.6% in the second quarter. It also suggests the country might well be in recession.

Principal Economic Advisor Sanjeev Sanyal believes that most agencies have underestimated the economic growth of India for the fiscal year 2021-22.


NBFCs : They are facing the problem of cash flow as the RBI has put the moratorium on the repayment of the borrowers while not providing NBFCs for moratorium from their lenders. The sector is using different regulatory windows to infuse liquidity. The sector is exploring multiple sources to raise long term debts from stable sources.

World: The UN reported that 250 million people across 20 countries face risks of malnutrition and hunger. Covid-19 has restricted trade, travel and employment. With the renewed flare-up of active cases in US and Europe, new restrictions are being imposed on economic activities. This will prolong the uncertainty on the global trade and commerce front. 

Renewable energy:  The PM said that India is moving forward with the goal of reducing its carbon footprint by 30-35%. Efforts are being made to increase the share of natural gas in meeting the country's energy needs by four times in this decade and double the oil refining capacity in the coming five years. There is a commitment to generate 175 gigawatt in renewable energy before 2022.

Let us Bharatwasis perform our duties with joy and devotion, righteously, selflessly, and fearlessly, to the best of our ability, for growth and employment and wealth generation, and the eradication of hunger and malnutrition of children. 

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