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Dear Readers

Introduction: Business Economics wishes its readers a joyous and blissful Dusshera – Vijaya Dashami (victory over evil). May all be blessed by Mother Durga (embodiment of power – Shakti). Mother Durga – Mother of Universe, is the beginning of the Universe. She is the creator, sustainer and destroyer. She is the embodiment of power and grantor of boon. The festival in devotion of Maa Durga has been being celebrated globally.

Indian Economy: According to the Reserve Bank of India (RBI) and the Chief Economic Advisor, the economy is expected to expand at a growth rate of 6.5% in the fiscal year 2023-24. The IMF forecasts that India’s economy will grow by more than 6% in the coming years. India’s economic growth as per Larry Summers, former US treasury secretary, can be at 8% which is an imaginable goal with needed policy support and changes in current policies, compared to 7.2% in FY23.

India is set to become a developed Nation by 2047, as forecasted by Swami Vivekananda in 1897.

The RBI has estimated that the economy needs to grow at a CAGR (Compounded Annual Growth Rate) of around 7.6 % over the next 25 years in order to achieve per capita income levels of a mature economy by 2028.

India is aiming to reach USD 5 trillion in gross domestic product (GDP) by 2030. India is the 5th largest economy in the world with a rising young work force with lower labour cost than China. Government is trying to address the problem of increasing unemployment. Additionally, policies to increase the participation of women in the labour force from 24% to 30% will also augur well for the economy.

India has the potential to become an attractive FDI destination. India’s FDI equity inflow in FY23 stood at USD 46.03 billion, whereas in FY22 it was USD 58.77 billion due to slower growth across economies. At present, the majority of FDI inflow goes to the service sector, especially the IT services sector. We need a clear regulatory framework for the promotion of investment for the long-term growth of the Nation.

Forex Reserve increased by USD 4.04 billion in the week ending September 1, reaching USD 598.89 billion, according to the RBI’s weekly statistical supplement. Foreign currency assets, expressed in dollar terms, include appreciation or depreciation of non – US units such as Euro, Pound and Yen held in foreign exchange reserves by RBI.

Master Direction on Treatment of Wilful and Large Defaulters: Non–discriminatory and transparent procedure, while complying with the principle of natural justice as regard to wilful defaulters, will not be practised by the lenders due to their fearsome attitude. Directions should be more precise as to disseminate credit information about willful defaulters and availability of further finance to them.  External factors of an enterprise should be considered before declaring an account as defaulter. Industry and an enterprise can be under severe stress beyond the control of promoters and entrepreneurs due to multiple external factors such as (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) springing up of new industries with large incentives by the government, and (j) incentive like tax holiday etc. in some region in order to promote the setting up of new industry ignoring the impact on existing industries.

Greenfield projects take years (often not less than a decade) for multilevel approvals to commission the project causing the increase in interest and administrative cost.

Since pandemic like Covid-19 not only delays the projects for various reasons but also affects the running with falling demand, infrastructure projects get affected much more with the machines of medium and small contractors being idle. NBFCs were also affected as they could not get the payment from the borrowers that are small, medium and large contractors. RBI granted moratorium to borrowers, but NBFCs (who borrow from banks for further on-lending mostly to the large unbanked segments of the society) were not given any restructuring scope and moratorium.

Around 80–82 % start-ups failed. History tells us about boom and recession in any industry for e.g. steel industry has been affected by highs and lows due to various factors mentioned above. The enterprises of promoters who had either invested in Greenfield projects or have made expansion were sold at rock bottom prices in the process of IBC and they were assigned the name of defaulters.

Guidelines given do not detail the way to determine the capacity of the borrowers to pay and are assessed as defaulters. Further, defaulters are being barred for more borrowings for 5 years for new ventures which becomes a nip in the bud for the next generation of job creators. It’s time for all stakeholders to rally behind this cause, ensuring that India’s insolvency landscape evolves into a realm of coherence, predictability and equity. This will ensure that the IBC platform is not used as a recovery mechanism but more as a resolution tool. Second, there is a need to promote mediation for out – of – court proceedings, with legislative recognition for speedier dispute resolution.

G20: G20 presidency of India declared that the world needs a timeless ideal of “One earth, one family, and one future”. The need of the hour is for global institutions to be truly universal and reflect the realities of the present day with a human centric approach, and to be more responsive towards the needs of developing economies. Work is underway on regulating crypto currency, addressing climate change, taking steps on debt vulnerabilities, poverty reduction and many more. The Summit was graced by many political stalwarts and head of the countries like UK, US, Russia, Germany, France and others. During the meet India’s Prime Minister Narendra Modi emphasized on exploring avenues to make our countries further strong, sustainable and inclusive.

Global Economy: Global demand is expected to weaken this year and into 2024 compared to 2022, although economic activity in developed economies has slowed less than initially anticipated. The combination of high interest rates and weakening demand also implies that global inflation is expected to moderate this year and into next. Fitch, a credit rating agency, has reduced its forecast for China’s GDP growth in 2023 by 80 basis points to 4.8%. The debt crisis is a global concern, particularly for developing countries. People around the world are paying close attention to the decisions made by governments. First-time countries that are going through or have gone through a debt crisis should place greater emphasis on financial discipline.

Cover Story: The core sectors are backbone of any Nation’s economy. Core sectors consists of coal, power, crude oil, natural gas, refinery products, steel, cement etc. growth of core sectors is suffering and needs to be boosted with government support. The core sector industries significantly impact the performance of other industries by supplying inputs and creating demand. The sector is sub – divided into sectors that can be directed by government policy and sectors that are driven more by demand. However, ‘Make in India’ drive seems to have put the country’s core sector industries on a high pedestal with government nurturing the sector with timely policy intervention, financial facilitation, research and development initiatives. The entry of the private sector helped the core industries to expand capacity and production but above all the emerging competition made it imperative to usher in superior technology which is reflected in the sharp rise of core sector output over the years. What is significant is that over the years India has succeeded in becoming a self – sufficient economy. The sector has been doing well after the sharp rise in capex in successive budgets. The index of output of eight core sector industries grew by 7.8% last year and is expected to reach a higher scale.

Conclusion: Entrepreneurs, promoters and founders of even larger conglomerates are reducing their debts by diluting their equity holding. Honourable PM and FM, expressed the need for revival of animal spirit. Direction of the RBI does not consider external factors like global competition, and dumping of goods. The springing up of new industries with large incentives from the government, incentives like tax holidays, changes in government regulations and administrative delays/inaction, changes in banking regulations, global trade threats and others for declaring defaults will affect the risk appetite and seize the entrepreneurial skills of the young family members of the entrepreneurs who are becoming job seekers rather than job creators. Restructuring and moratorium of debts of an enterprise affected by external factors is the need of the hour for economic growth and creating jobs. Promoters / founders and entrepreneurs invest their hard earned funds or mobilize them from their friends and relatives and run the enterprise from generation to generation. The borrowers as directed by the Supreme Court must be heard by the special board having the members across the society including the entrepreneurs.