Contact Your Financial Adviser Money Making MC
01
January 2018
 |
India
(The Total Investment & Insurance Solutions)
India remained ahead of China to retain the
tag world's fastest growing large economy withstanding several ups and downs,
spike in oil prices and global trade war like situation during 2018. Indian
economy's roller-coaster ride during the year gone by was best captured by the
GDP growth. In the first quarter of 2018-19 ending June 30, it grew at an
impressive 8.2 per cent, after 7.7 per cent in the first three months of the
year. Then it slipped to 7.1 per cent in the next quarter ending September 30.
Fitch
Ratingsslashed India's GDP growth forecast to 7.2 per cent for the current
fiscal, from 7.8 per cent projected in September, citing higher financing cost
and reduced credit availability. According to Niti Aayog Vice-Chairman Rajiv
Kumar, the focus of the government in 2019 will be to expedite reforms with a
view to accelerate growth. "India will grow at around 7.8 per cent in the
next calendar year and investment cycle that has already started picking-up
will gather further strength and we will see more private investments,"
Kumar said. Experts, however, expect that moderating growth can force the
government to spend more before the next general elections and that could lead
to fiscal pressures
Global factors such as sudden zoom in crude
prices (which are now easing), strengthening US dollar, slowing growth in the
wake of US-China trade war and the US Federal Reserve hiking interest rate for
the fourth time in a year did take the toll on India's economy.
The banking sector ruled the headlines in
2018. The year opened with India's biggest banking scam coming to light. On
February 14, state-owned Punjab National Bank NSE 2.18 % said it had detected a
Rs 11,400 crore scam where billionaire-jeweller Nirav Modi allegedly acquired
fraudulent letters of undertaking from a branch in Mumbai to secure overseas
credit from other Indian lenders. The case has gathered a long political
traction, with the government making little progress in bringing back the
absconding accused. The year ended with a rare face-off between the Reserve
Bank of India and the Central government. Urjit Patel's resignation a few weeks
later was seen as a culmination of the tussle in December.
The
main trigger was government's demand to relax restrictions on weak
public-sector lenders, which slowed down credit growth. For the first time, the
government threatened to use its special powers under Section 7 of the RBI Act.
The cycle of events at the RBI brought to the fore concerns about the RBI's
autonomy. The RBI-government tussle sent shock waves far and wide. The
country's leading infrastructure finance company IL&FS defaulted on
payments to lenders. It triggered panic among a large number of investors,
banks and mutual funds associated with the company. The IL&FS defaults were
even being seen as India's Lehman Brothers moment that had triggered the global
financial crisis in 2008. The government wanted the RBI to provide relief to
non-banking finance companies impacted by the IL&FS defaults.The Total Investment & Insurance
Solutions
However, the economy witnessed a big positive
development — the progress made under the Insolvency and Bankruptcy Code.
Tasked with helping recover unpaid corporate loans, the National Company Law
Tribunal (NCLT) has helped resolve insolvency and bankruptcy proceedings
involving more than Rs 60,000 crore (during Apirl-September 2018-19), and the
kitty is expected to swell beyond Rs 1 lakh crore in 2019 with several
big-ticket default cases pending. A rapidly depreciating rupee and steeply
rising petrol prices played havoc with India's current account deficit (CAD).
It
widened to 2.9 per cent of the GDP in the second quarter of the fiscal compared
to 1.1 per cent in the year-ago period, mainly due to a large trade deficit.
"The widening of the current account deficit amidst tighter global
financing conditions should put downward pressure on the currency, and we
forecast the INR to weaken to 75 against the dollar by end-2019," said
rating agency Fitch in a report. A good news for the economy was India's
improved ranking on the World Bank's 'ease of doing business' report for the
second straight year, jumping 23 places to the 77th position on the back of
reforms related to insolvency, taxation and other areas. Collection of the
Goods and Services Tax (GST) crossed the Rs 1 lakh crore mark in October, after
a gap of five months, but again slipped below the mark to Rs 97,637 crore in
November. Yet, it was higher than the average monthly collection in the year.
Steady increase in average collection raised hopes of monthly collection to
remain above Rs 1 lakh crore next year.
Inflation has remained well below the
forecasts by the RBI, which targets to keep inflation at 4 per cent in the
medium term. During the April-October period, industrial output grew 5.6 per
cent as compared to 2.5 per cent in the same period of the previous fiscal. In
October, it stood at a 11-month high of 8.1 per cent. On inflation, Dun &
Bradstreet in a report said: Going forward, there are concerns over fiscal
slippage due to likely expenditure on pre-poll sops before the Lok Sabha elections
next year.
The Congress party's promise of universal
farm loan waiver, if it comes to power is likely to force the hand of the BJP
government, which has so far stuck to fiscal prudence. Having witnessed
controversy over host of issues like demonetisation, implementation of GST and
the government's handling of banking sector woes, the year also witnessed
political slugfest over revised GDP data, which showed that growth during the
previous Congress-led UPA's regime was less than what was estimated earlier. Recalibrating
data of past years, using 2011-12 as the base year instead of 2004-05, the
Central Statistics Office (CSO) lowered the country's economic growth rate
during the previous Congress-led UPA's regime.
No comments:
Post a Comment