Business Economics wishes a Joyous and Blissful Durga Puja greetings and Happy Diwali to all the readers and advertisers. Bharatwasi pray with devotion to Lord Ganesha, Mother Lakshmi and Lord Narayana and seek their blessing for sustainable and inclusive growth for all.
Bharat Economy: Indra Nooyi, former chairman and CEO of PepsiCo said, “India is a very desirable destination with lots of talent and understands capitalism. But India can also be a frustrating country to do business. I think the government is working on this. I am in awe of the entrepreneurial ecosystem in India”. It is a pity that India is faltering on the ease of doing business index. About 35,000 high net wealth creators have left the country to create and generate wealth overseas globally. Bharatwasi wealth creators have oceanic risk appetite to create and generate wealth and thereto employment. Prime Minister and Finance Minister of India have said that wealth creators have to revive their risk appetite. All need to make efforts to find a solution for the reason of falling risk appetite and why glorified entrepreneurs - CEO of a large multinational company comments.
India’s growth lost its stride even before it was impacted by COVID-19 due to the flight of high net worth creators, unstable policies and regulatory framework, multiple (500 odd) approvals for Greenfield projects.
It is doubtful how the current USD 2.7 trillion GDP will rise to USD 5 trillion by 2025. Even the foreign capital and backdoor taking over the enterprises in manufacturing sectors, service sectors and financial sectors will not lead to growth.
Many big ticket investment plans did not materialise or were shelved due to difficulty in doing business, regulatory uncertainty and other problems.
Around 35,000 high net worth individuals have left to other countries in the past six years during 2014 – 2020. As claimed by Bengal Finance Minister, Amit Mitra based on 3 reports, India ranked no.1 in exodus in the world. Why? Fear Psychosis?
Ford India has exited its manufacturing unit in India causing a loss of `2000 crore to its dealers and 40,000 employees lost their jobs. Is it due to fear psychosis or any other external factor?
Forex reserve rose by USD 1.492 billion to reach USD 641.008 billion as of on October 15th. Current account is under pressure due to oil, gold and coal imports. Current account deficit was USD 8.1 billion (or 1% of GDP) in the fourth quarter of FY2021. However, it registered a surplus of USD 6.5 billion (0.9% of GDP) in the first quarter of FY 2022. Disinvestment plan would not contribute to growth.
Start-ups have been able to raise the money; will they be able to face the multifarious external factors?
Financial: In the last 11 years through 2018-19, government has infused over ` 3.15 trillion into public sector banks. In the year 2019-20, the infusion of capital to Public Sector Banks was ` 70,000 crore. In 2020-21, the government infused another ` 20,000 crore in five public sector banks. Budget of 2021-22 included another capital infusion of ` 20,000 crore in the state-owned banks. Government is contemplating more capital support due to rise in stresses assets.
The output of the eight crore sectors grew by 11.6% in August, mainly due to an increase in the production of cement, coal and natural gas. These sectors had contracted by 6.9% in August 2020 due to impact of COVID -19 pandemic.
Finance Minister Nirmala Sitharaman said that India’s external debts continue to be sustainable and prudently managed despite the COVID-19 pandemic. Total external debt was USD 570 billion at the end of March’21, up 2.1% year on year. External debt ratio to GDP was 21.1 %.
The members of RBI policy committee express concern over uncertainty prevailing over growth. Repo rate at 4% remains unchanged.
NITI Aayog reported that Indian economy is to grow by 10.5% or more in FY22 despite several constraints. Global trade has grown substantially. India’s share in trade has not grown. India needs to focus on service sectors like health, education and tourism.
Except the giants, medium and small wealth creators run the business with a limited own capital, stake holders fund and debts. Due to multifarious external forces the enterprise may suffer the loss. Temporary delay and default leads to IBC and criminal investigation.
Chief Economic Advisor K.V. Subramaniam expects an average annual GDP growth between 6.5-7 % in
Growth and employment, rather than inflation, need to be focused. To boost the risk appetite wealth creators need protection by way of restructuring and moratorium rather than pushing them to NCLT process. For Greenfield projects all the approvals need to be given in one window. Lenders (banks / financial institutions / government) need to give interest waiver and moratorium for the time taken in green field projects. NBFCs need moratorium and restructuring as their borrowers have been given moratorium and restructurin. So far, NBFCs have had to honour their duties as lenders. The regulator also needs to appreciate the NBFCs’ role as are borrowers too, and thus they also need some relief, especially when their revenue sources are affected by Regulation and other factors though assets are substantial more than liabilities. Any drastic action would set back the goal of achieving the USD 5 trillion economy size. India needs to protect the wealth of its enterprises, especially as foreign funds are picking them up at rock bottom valuation through IBC and other means in the name of growth. To boost the economic growth and employment, the government and regulatory authorities have to be realistic with fewer regulations and facilitate wealth creators to operate with ease. Wealth creators who are in distress need to be supported just as the RBI and government extend help to the Public Sector Banks and Public Sector Undertakings. Related party transactions need to be redefined vis-a-vis global views/rules and to achieve economic growth of USD 5 trillion and employment. Banks are having excess liquidity which will affect their profitability. It is like water, water everywhere but not a drop to drink.