The Finance Minister (FM) last week announced a historic decision of reducing the corporate tax rate from 30 per cent to 22 per cent. For new manufacturing companies registered on October 1 or afterwards, tax rate has been reduced to 15 per cent.&nbsp;

These rates are exclusive of cess and surcharge. The companies availing of 22 per cent tax rate cannot benefit from any other exemption/incentives.

The step has been hailed as the second most landmark measure after the 1991 reforms announced by then Finance Minister Manmohan Singh. The Sensex was up nearly 2000 points, the highest rally in a day in a decade. Tax cuts have been a long pending demand of corporates.&nbsp;

This decision increases the competitiveness of industry and brings India’s tax structure on par with the countries with the lowest tax rates in the world. It is expected to activate the animal spirits of our entrepreneurs, resulting in investments and capacity additions, boosting GDP growth.

The whole exercise is expected to result in a loss of Rs 1.45 lakh crore loss to the exchequer. This is likely to push up fiscal deficit from 3.3% levels projected for 2019-20 to 3.6% levels if all other numbers projected are achieved (a big task, given the lag in tax collections this year).&nbsp;

The government has coughed up Rs. 86,000 crore extra from RBI, which will help absorb some of this loss. In the Budget presented in July this year, the Finance Minister had already extended the tax rate cut to 25 per cent for companies with a turnover of up to Rs 400 crore, representing 99.3 per cent of the entire universe.&nbsp;

This cut is expected to accrue to and benefit top 6,000 companies in India, which account for more than 80% of government’s corporate tax revenues.&nbsp;

The 15% tax rate for new manufacturing companies is likely to help India take advantage of the trade war between US and China. It is a big step to woo companies shifting their manufacturing base out of China and will give a boost to our exports while creating thousands of jobs.&nbsp;

Many commentators have hailed it as an early Diwali for corporate sector. It has given a boost to the investor sentiment. The government has fulfilled their wish and now the onus is on the corporates to take advantage of this step and create jobs and take the economy out of slowdown.&nbsp;

The demand for goods and services in the economy has taken a beating due to the liquidity crisis, post the IL&amp;FS default. The demand from biscuits, to shampoos, to automobiles to housing has been badly impacted. Unless this is revived and capacity utilisation ratio of companies goes up to 85%, corporates would tread with caution before investing. So, what do the companies do with this tax gain? Some of them are expected to pass a portion of the gains to the consumer by offering discounts in the hope of reviving demand. Some could even give their employees a Diwali bonus. This also could help putting a break on further job cuts.&nbsp;

Some would just keep the cash and build reserves in anticipation that global headwinds are likely to continue for some time, while others could pare their debt and improve their balance sheet health.&nbsp;

Then there are those who could pay higher dividends, specifically the public sector companies, thus helping government to recoup some of the tax forgone.&nbsp;

While investor sentiment has been restored, there is growing demand now to slash personal income taxes. Income above Rs. 10 lakh for individuals is taxed at 30 per cent. Only a relief would leave more money in the hands of individual taxpayers and give a boost to demand.&nbsp;

However, with the Model Code of Conduct now in place for Maharashtra and Haryana elections, it will be difficult for the government to take any such step. Further, there is not much fiscal room left this year after the bonanza to corporates. In the medium to long term, this step will prove to be a big positive and boost growth. However, this is not the steroid needed to provide immediate relief and improve consumer sentiment.&nbsp;

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-after-tax-boost-companies-need-to-stimulate-indian-economy-2791919">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL) &nbsp; 
&nbsp;

The Finance Minister (FM) last week announced a historic decision of reducing the corporate tax rate from 30 per cent to 22 per cent. For new manufacturing companies registered on October 1 or afterwards, tax rate has been reduced to 15 per cent.

The Finance Minister (FM) last week announced a historic decision of reducing the corporate tax rate from 30 per cent to 22 per cent. For new manufacturing companies registered on October 1 or afterwards, tax rate has been reduced to 15 per cent. These rates are exclusive of cess and surcharge. The companies availing of 22 per cent tax rate cannot benefit from any other exemption/incentives. The step has been hailed as the second most landmark measure after the 1991 reforms announced by then Finance Minister Manmohan Singh. The Sensex was up nearly 2000 points, the highest rally in a day in a decade. Tax cuts have been a long pending demand of corporates. This decision increases the competitiveness of industry and brings India’s tax structure on par with the countries with the lowest tax rates in the world. It is expected to activate the animal spirits of our entrepreneurs, resulting in investments and capacity additions, boosting GDP growth. The whole exercise is expected to result in a loss of Rs 1.45 lakh crore loss to the exchequer. This is likely to push up fiscal deficit from 3.3% levels projected for 2019-20 to 3.6% levels if all other numbers projected are achieved (a big task, given the lag in tax collections this year). The government has coughed up Rs. 86,000 crore extra from RBI, which will help absorb some of this loss. In the Budget presented in July this year, the Finance Minister had already extended the tax rate cut to 25 per cent for companies with a turnover of up to Rs 400 crore, representing 99.3 per cent of the entire universe. This cut is expected to accrue to and benefit top 6,000 companies in India, which account for more than 80% of government’s corporate tax revenues. The 15% tax rate for new manufacturing companies is likely to help India take advantage of the trade war between US and China. It is a big step to woo companies shifting their manufacturing base out of China and will give a boost to our exports while creating thousands of jobs. Many commentators have hailed it as an early Diwali for corporate sector. It has given a boost to the investor sentiment. The government has fulfilled their wish and now the onus is on the corporates to take advantage of this step and create jobs and take the economy out of slowdown. The demand for goods and services in the economy has taken a beating due to the liquidity crisis, post the IL&FS default. The demand from biscuits, to shampoos, to automobiles to housing has been badly impacted. Unless this is revived and capacity utilisation ratio of companies goes up to 85%, corporates would tread with caution before investing. So, what do the companies do with this tax gain? Some of them are expected to pass a portion of the gains to the consumer by offering discounts in the hope of reviving demand. Some could even give their employees a Diwali bonus. This also could help putting a break on further job cuts. Some would just keep the cash and build reserves in anticipation that global headwinds are likely to continue for some time, while others could pare their debt and improve their balance sheet health. Then there are those who could pay higher dividends, specifically the public sector companies, thus helping government to recoup some of the tax forgone. While investor sentiment has been restored, there is growing demand now to slash personal income taxes. Income above Rs. 10 lakh for individuals is taxed at 30 per cent. Only a relief would leave more money in the hands of individual taxpayers and give a boost to demand. However, with the Model Code of Conduct now in place for Maharashtra and Haryana elections, it will be difficult for the government to take any such step. Further, there is not much fiscal room left this year after the bonanza to corporates. In the medium to long term, this step will prove to be a big positive and boost growth. However, this is not the steroid needed to provide immediate relief and improve consumer sentiment. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

After tax boost, companies need to stimulate Indian economy

Gravitas: How to tackle India's growth slowdown?

Finance Minister Nirmala Sitharaman on Saturday said that inflation is under control and there is a clear sign of revival of industrial production.

Addressing a press conference here, Sitharaman said inflation in the range of 2.5 to 4 per cent is considered safe and it has been held under four per cent.

Referring to industrial production, she said there was clear sign of revival in the first quarter of 2019-20.

"Revival of fixed investment is also showing a positive picture," she added.

The minister said there was also a clear sign of revival of Foreign Direct Investment. She said that reserves have gone up in August-end and one of the best-level of reserves was being maintained.

Finance Minister Nirmala Sitharaman on Saturday said that inflation is under control and there is a clear sign of revival of industrial production. Addressing a press conference here, Sitharaman said inflation in the range of 2.

Finance Minister Nirmala Sitharaman on Saturday said that inflation is under control and there is a clear sign of revival of industrial production. Addressing a press conference here, Sitharaman said inflation in the range of 2.5 to 4 per cent is considered safe and it has been held under four per cent. Referring to industrial production, she said there was clear sign of revival in the first quarter of 2019-20. "Revival of fixed investment is also showing a positive picture," she added. The minister said there was also a clear sign of revival of Foreign Direct Investment. She said that reserves have gone up in August-end and one of the best-level of reserves was being maintained.

Inflation under control, clear sign of revival of industrial production: Sitharaman

Finance Minister Nirmala Sitharaman at National Media Centre today addresses media on the Indian economy's state. Let's Listen in...

Finance Minister Nirmala Sitharaman addresses media on the Indian economy's state

Is India Staring At A Prolonged Growth Slowdown?

Gravitas:  State of the Indian Economy

The economic growth slowed to a seven-year low to 5 percent in April to June quarter from 8 percent a year ago, as per the government data. Watch this video to know more.

Domestic factors behind slowdown in Indian economy; Here are the details

The Indian economy in the fourth quarter of 2018-19 witnessed a modest growth of 5.8%. Watch this video to know more.

Indian economy is in grip of a severe slowdown; All you need to know

International Monetary Fund (IMF) on Thursday said that India's economic growth is "much weaker" than expected due to corporate and environmental regulatory uncertainty and "lingering weakness" in some non-Bank financial companies.

"Again, we will have a fresh set of numbers coming up but the recent economic growth in India is much weaker than expected, mainly due to corporate and environmental regulatory uncertainty and lingering weakness in some non-Bank financial companies and risks to the outlook are tilted to the downside, as we like to say," IMF spokesman Gerry Rice told reporters at a news conference.

The economic growth slowed to a seven-year low to 5 per cent in April to June quarter from 8 per cent a year ago, as per the government data.

The International Monetary Fund (IMF) has cut its projection for India's economic growth by 0.3 percentage points to 7 per cent for the fiscal year 2019-20 owing to the "weaker-than-expected outlook" for the domestic demand.

The growth is expected to rise to 7.2 per cent points in FY21, down by the projected growth rate of 7.5 in the earlier report.

The slowdown was largely due to a sharp dip in the manufacturing sector and agriculture output, said the Ministry of Statistics and Programme Implementation in a statement.

The previous low was recorded at 4.9 per cent in April to June 2012-13. Consumer demand and private investment have weakened amid global trade frictions and dampening business sentiment.&nbsp;

International Monetary Fund (IMF) on Thursday said that India's economic growth is "much weaker" than expected due to corporate and environmental regulatory uncertainty and "lingering weakness" in some non-Bank financial companies.

International Monetary Fund (IMF) on Thursday said that India's economic growth is "much weaker" than expected due to corporate and environmental regulatory uncertainty and "lingering weakness" in some non-Bank financial companies. "Again, we will have a fresh set of numbers coming up but the recent economic growth in India is much weaker than expected, mainly due to corporate and environmental regulatory uncertainty and lingering weakness in some non-Bank financial companies and risks to the outlook are tilted to the downside, as we like to say," IMF spokesman Gerry Rice told reporters at a news conference. The economic growth slowed to a seven-year low to 5 per cent in April to June quarter from 8 per cent a year ago, as per the government data. The International Monetary Fund (IMF) has cut its projection for India's economic growth by 0.3 percentage points to 7 per cent for the fiscal year 2019-20 owing to the "weaker-than-expected outlook" for the domestic demand. The growth is expected to rise to 7.2 per cent points in FY21, down by the projected growth rate of 7.5 in the earlier report. The slowdown was largely due to a sharp dip in the manufacturing sector and agriculture output, said the Ministry of Statistics and Programme Implementation in a statement. The previous low was recorded at 4.9 per cent in April to June 2012-13. Consumer demand and private investment have weakened amid global trade frictions and dampening business sentiment.

India's economic growth is 'much weaker' than expected: International Monetary Fund

So there is a global slowdown and it is spilling into India. And the faultlines in the Indian economy could be exposed.&nbsp;

On WION Edit, we raise the question - is economy Narendra Modi government's Achilles heel?

Already, opposition parties have placed the entire blame on the government.&nbsp;

This is not the first time the economy got politicised. It has happened in India before, it happens all over the world.&nbsp;

But surely - &nbsp;this question puts the government in a tight corner? For years, India has had jobless growth. Even during the UPA regime, job creation remained a problem.&nbsp;

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Now, there are no accurate estimates to reflect the state of employment in India. But the reports of job losses are worrying.&nbsp;

The Modi government is facing the twin challenges of reviving growth as well as ensuring job creation.

Politically, Prime Minister Narendra Modi-led government&nbsp;has proved to be a potent force. The re-election shows that this is a government with&nbsp;enormous popular support.

But economic slowdowns can trip up governments if history has any lessons. Despite the growth fears, the government sits on a huge pile of options to tackle the economic troubles.

First, it has got a record payout from RBI. Second, the Indian economy is still resilient. Lastly, the Indian economy is relatively self-dependent.

If the first term of Narendra Modi was about bringing-in bold reforms like GST, insolvency and bankruptcy code, the second term could be about fixing the holes in the economy.

The good thing is the government has got time on its hands. 
 
(Disclaimer: WION Edit is the channel's take on the big events of the world)

So there is a global slowdown and it is spilling into India. And the faultlines in the Indian economy could be exposed. On WION Edit, we raise the question - is economy Narendra Modi government's Achilles heel?

So there is a global slowdown and it is spilling into India. And the faultlines in the Indian economy could be exposed. On WION Edit, we raise the question - is economy Narendra Modi government's Achilles heel? Already, opposition parties have placed the entire blame on the government. This is not the first time the economy got politicised. It has happened in India before, it happens all over the world. But surely - this question puts the government in a tight corner? For years, India has had jobless growth. Even during the UPA regime, job creation remained a problem. × Now, there are no accurate estimates to reflect the state of employment in India. But the reports of job losses are worrying. The Modi government is facing the twin challenges of reviving growth as well as ensuring job creation. Politically, Prime Minister Narendra Modi-led government has proved to be a potent force. The re-election shows that this is a government with enormous popular support. But economic slowdowns can trip up governments if history has any lessons. Despite the growth fears, the government sits on a huge pile of options to tackle the economic troubles. First, it has got a record payout from RBI. Second, the Indian economy is still resilient. Lastly, the Indian economy is relatively self-dependent. If the first term of Narendra Modi was about bringing-in bold reforms like GST, insolvency and bankruptcy code, the second term could be about fixing the holes in the economy. The good thing is the government has got time on its hands. (Disclaimer: WION Edit is the channel's take on the big events of the world)

WION Edit: Is economy Narendra Modi government's Achilles heel?

While reviving the economy, when conventional solutions don’t give much traction, one may like to listen to voices from below for a change. Most important advantage of distributed income in the hand of millions will be a different kind of consumption pull compared to the gains in far fewer hands. This is a well-known economic principle. But then the majority of discussants have not cared to look at distributed solutions so far, let me try.

Let the government extend advance to all employees to buy the annual stock of grains, pulses, oil, sugar, spices, and other essentials including clothes and furnishings. Let community self-regulate that this advance is not used for any other purpose. Distributed inventory costs less, spoils less and last longer and helps market liquidate the excess inventory. Let it incentivize private sector to buy e-vehicles, essentials on Diwali or Dussehra, all other durables for homes. Massive infusion of capital with tax incentives for the firms to ensure demand-pull for durables.

Let the experiment triggered by NABARD to supply food at a few railway station be urgently replicated to at least half of the stations to generate huge work for women self-help groups and homely food for the passengers. NABARD can extend the advance to such groups to deal with working capital requirements.

All parties and functions in the country for one year at least may serve two dishes of millets, some snacks/juices/jams from north-east and Jammu and Kashmir, and central India. Let market monitor the misery and alleviate the distress by linking potential demand for various goods/services with untapped supply. LTC (leave travel concession) to tourist sites in aspirational districts with strong tent-based stay facilities (because the durable infrastructure will take time to come about, in Kutch whole microcity was created) may be incentivized. Similarly, CSR investment or co-investments with science, tech and educational innovation initiatives in such regions may be incentivized.

All residential college/school/public hospitals messes may be asked to serve healthy multi-grain food, organic vegetables at least once a week, disclosing the list of suppliers on their websites to let others know about such suppliers.

Every notebook and school text book may have printed information about nutrition, child rights and keeping-oneself -safe for girls and boys. But till then, small booklets and posters may be printed with a weekly or bi-weekly wall-newspapers for each village carrying preventive health, sustainable agri and non-farm enterprise tips, specific for each region or sub-region. It may have space for local block level and even village level advertisers. Idea is to stimulate demand for micro-small producers with limited capacity to produce and serve.

All c-class radio stations may be advised to give at least three hour worth of concessional advertising in popular Vividh Bharati program to local entrepreneurs and service providers. Let there be business centres set up at each petrol station with the help of the association of chartered accountants, company secretaries and other commerce post graduates to provide rural entrepreneurs, young and old to use e-market potential for their sale and purchase.

Let post office network of 1.5 lac rural centres serve 650,000 villages and GIAN and SRISTI are willing to provide logistical and conceptual support for these kinds of galvanising unmet demands and untapped supplies for horizontal markets. Today tens of thousands worth of crores rupees worth of saving of self-help groups is not used to buy each other’s products.

Soon after rains, let there be a massive public program to deepen wells, tanks, dig new wells, tanks on private and public lands, planting trees after rains with Sundaram’s one lit water once technology under MNGREA for preparing the country to ensure trillions of gallons worth of distributed water storage capacity and millions of micro forests. After rains, soils will be soft and easier to dig and with less energy, more work can be done as against doing the same in summer which we have failed to do every year.

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/report-reviving-indian-economy-some-suggestions-from-below-for-a-change-2788423">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL) 
&nbsp;

While reviving the economy, when conventional solutions don’t give much traction, one may like to listen to voices from below for a change. Most important advantage of distributed income in the hand of millions will be a different kind of consumption pull compared to the gains in far fewer hands.

While reviving the economy, when conventional solutions don’t give much traction, one may like to listen to voices from below for a change. Most important advantage of distributed income in the hand of millions will be a different kind of consumption pull compared to the gains in far fewer hands. This is a well-known economic principle. But then the majority of discussants have not cared to look at distributed solutions so far, let me try. Let the government extend advance to all employees to buy the annual stock of grains, pulses, oil, sugar, spices, and other essentials including clothes and furnishings. Let community self-regulate that this advance is not used for any other purpose. Distributed inventory costs less, spoils less and last longer and helps market liquidate the excess inventory. Let it incentivize private sector to buy e-vehicles, essentials on Diwali or Dussehra, all other durables for homes. Massive infusion of capital with tax incentives for the firms to ensure demand-pull for durables. Let the experiment triggered by NABARD to supply food at a few railway station be urgently replicated to at least half of the stations to generate huge work for women self-help groups and homely food for the passengers. NABARD can extend the advance to such groups to deal with working capital requirements. All parties and functions in the country for one year at least may serve two dishes of millets, some snacks/juices/jams from north-east and Jammu and Kashmir, and central India. Let market monitor the misery and alleviate the distress by linking potential demand for various goods/services with untapped supply. LTC (leave travel concession) to tourist sites in aspirational districts with strong tent-based stay facilities (because the durable infrastructure will take time to come about, in Kutch whole microcity was created) may be incentivized. Similarly, CSR investment or co-investments with science, tech and educational innovation initiatives in such regions may be incentivized. All residential college/school/public hospitals messes may be asked to serve healthy multi-grain food, organic vegetables at least once a week, disclosing the list of suppliers on their websites to let others know about such suppliers. Every notebook and school text book may have printed information about nutrition, child rights and keeping-oneself -safe for girls and boys. But till then, small booklets and posters may be printed with a weekly or bi-weekly wall-newspapers for each village carrying preventive health, sustainable agri and non-farm enterprise tips, specific for each region or sub-region. It may have space for local block level and even village level advertisers. Idea is to stimulate demand for micro-small producers with limited capacity to produce and serve. All c-class radio stations may be advised to give at least three hour worth of concessional advertising in popular Vividh Bharati program to local entrepreneurs and service providers. Let there be business centres set up at each petrol station with the help of the association of chartered accountants, company secretaries and other commerce post graduates to provide rural entrepreneurs, young and old to use e-market potential for their sale and purchase. Let post office network of 1.5 lac rural centres serve 650,000 villages and GIAN and SRISTI are willing to provide logistical and conceptual support for these kinds of galvanising unmet demands and untapped supplies for horizontal markets. Today tens of thousands worth of crores rupees worth of saving of self-help groups is not used to buy each other’s products. Soon after rains, let there be a massive public program to deepen wells, tanks, dig new wells, tanks on private and public lands, planting trees after rains with Sundaram’s one lit water once technology under MNGREA for preparing the country to ensure trillions of gallons worth of distributed water storage capacity and millions of micro forests. After rains, soils will be soft and easier to dig and with less energy, more work can be done as against doing the same in summer which we have failed to do every year. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Reviving Indian economy: Some suggestions from below for a change

1. The Reserve Bank of India (RBI) has approved the surplus transfer of Rs 1,76,051 crore to the central government. Out of the total sum, Rs 1,23,414 crore was the surplus from the year 2018-2019 and Rs 52, 637 was from the surplus reserves, identified by the committee as per the revised Economic Capital Framework (ECF).

2. The amount is more than 300 per cent of what was transferred last year. The central bank had transferred Rs 50,000 crore in 2017-18

3.&nbsp;Rs 28,000 crore has already been paid as an interim dividend in the previous financial year. Thus, Rs 95000 crore remains to be transferred this fiscal.

4. In simple terms, RBI is sharing a one-time profit with the Indian government. The RBI earns profits through various means including interest on securities held and currency swaps i.e when one nation's currency is used in place of the dollar by another country. Here the RBI provides the Indian Rupee to be used as swap against foreign currencies

5. The top bank's decision is in line with the recommendations of the Bimal Jalan Committee. The committee, in December 2018, tried to find out if the central bank has excess reserves that can be transferred to the Indian government. The committee made observation that economic capital should be between 20 to 24.5 per cent of RBI balance sheet. It was 23.3 per cent in June 2019 proving that RBI was one of the most resilient central banks when it comes to the economic capital or keeping reserves

6. According to the RBI Act, the central government may give such directions to the central bank in the public interest, after consultation with the Governor of the bank. Subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank

7. The Indian government can use this surplus money in many ways including maintaining a fiscal deficit target of 3 per cent of GDP. The 'windfall' can also be used to solve the liquidity crisis behind the current slowdown. Also, the government can increase public investments on welfare schemes and infrastructure development. Government-owned banks can be recapitalised and the excess money can also compensate the government for the low GST collections this year. 
 
(With inputs from agencies)

1. The Reserve Bank of India (RBI) has approved the surplus transfer of Rs 1,76,051 crore to the central government. Out of the total sum, Rs 1,23,414 crore was the surplus from the year 2018-2019 and Rs 52, 637 was from the surplus reserves, identified by the committee as per the revised Economic Capital Framework (ECF).

1. The Reserve Bank of India (RBI) has approved the surplus transfer of Rs 1,76,051 crore to the central government. Out of the total sum, Rs 1,23,414 crore was the surplus from the year 2018-2019 and Rs 52, 637 was from the surplus reserves, identified by the committee as per the revised Economic Capital Framework (ECF). 2. The amount is more than 300 per cent of what was transferred last year. The central bank had transferred Rs 50,000 crore in 2017-18 3. Rs 28,000 crore has already been paid as an interim dividend in the previous financial year. Thus, Rs 95000 crore remains to be transferred this fiscal. 4. In simple terms, RBI is sharing a one-time profit with the Indian government. The RBI earns profits through various means including interest on securities held and currency swaps i.e when one nation's currency is used in place of the dollar by another country. Here the RBI provides the Indian Rupee to be used as swap against foreign currencies 5. The top bank's decision is in line with the recommendations of the Bimal Jalan Committee. The committee, in December 2018, tried to find out if the central bank has excess reserves that can be transferred to the Indian government. The committee made observation that economic capital should be between 20 to 24.5 per cent of RBI balance sheet. It was 23.3 per cent in June 2019 proving that RBI was one of the most resilient central banks when it comes to the economic capital or keeping reserves 6. According to the RBI Act, the central government may give such directions to the central bank in the public interest, after consultation with the Governor of the bank. Subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank 7. The Indian government can use this surplus money in many ways including maintaining a fiscal deficit target of 3 per cent of GDP. The 'windfall' can also be used to solve the liquidity crisis behind the current slowdown. Also, the government can increase public investments on welfare schemes and infrastructure development. Government-owned banks can be recapitalised and the excess money can also compensate the government for the low GST collections this year. (With inputs from agencies)

Reserve Bank of India to transfer surplus of Rs 1.76 lakh crore to government: Key points

In an apparent damage control a day after he described the prevailing economic situation as 'unprecedented'&nbsp;calling for 'extraordinary measures', NITI Aayog Vice-Chairman Rajiv Kumar said that his statement was misinterpreted by the media and government has been taking bold steps to boost economy.

"I would request the media to stop misinterpreting my statement. The government has been taking bold steps to accelerate our economy and will continue to do so. There is no need to panic or spread panic," tweeted Rajiv Kumar.

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The cassendras should now accept that the government is well on top of the situation and will do all it can to revive the 'animal spirits' in the economy. <a href="https://t.co/F1mbV3pwfK">https://t.co/F1mbV3pwfK</a>
— Rajiv Kumar 🇮🇳 (@RajivKumar1) <a href="https://twitter.com/RajivKumar1/status/1164849151030382592?ref_src=twsrc%5Etfw">August 23, 2019</a></blockquote>
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"The cassendras should now accept that the government is well on top of the situation and will do all it can to revive the 'animal spirits'&nbsp;in the economy," he said in a subsequent tweet.

Kumar has termed the ongoing situation in the financial sector as unprecedented and called for extraordinary steps to tackle it.

"This is an unprecedented situation for the government. In the last 70 years, we have not faced this sort of liquidity situation where the entire financial sector is in a churn, and nobody is trusting anybody else," Kumar had said.

"Within the private sector, nobody wants to lend to anybody else. Everyone is sitting on cash," he said while speaking on Thursday at the Mindmine Summit 2019, the flagship event of the Hero Group.

Kumar said the government must do whatever it can to remove apprehensions of the private sector.

"The whole nature of the game has changed in the past four years after demonetization, GST and IBC. In the earlier period, you had 10, 20, 30, 35 per cent of cash sloshing around which used to help people. That has become much less now," he had said.&nbsp;

In an apparent damage control a day after he described the prevailing economic situation as 'unprecedented' calling for 'extraordinary measures', NITI Aayog Vice-Chairman Rajiv Kumar said that his statement was misinterpreted by the media and government has been taking bold steps to boost economy.

In an apparent damage control a day after he described the prevailing economic situation as 'unprecedented' calling for 'extraordinary measures', NITI Aayog Vice-Chairman Rajiv Kumar said that his statement was misinterpreted by the media and government has been taking bold steps to boost economy. "I would request the media to stop misinterpreting my statement. The government has been taking bold steps to accelerate our economy and will continue to do so. There is no need to panic or spread panic," tweeted Rajiv Kumar. The cassendras should now accept that the government is well on top of the situation and will do all it can to revive the 'animal spirits' in the economy. https://t.co/F1mbV3pwfK — Rajiv Kumar 🇮🇳 (@RajivKumar1) August 23, 2019 × "The cassendras should now accept that the government is well on top of the situation and will do all it can to revive the 'animal spirits' in the economy," he said in a subsequent tweet. Kumar has termed the ongoing situation in the financial sector as unprecedented and called for extraordinary steps to tackle it. "This is an unprecedented situation for the government. In the last 70 years, we have not faced this sort of liquidity situation where the entire financial sector is in a churn, and nobody is trusting anybody else," Kumar had said. "Within the private sector, nobody wants to lend to anybody else. Everyone is sitting on cash," he said while speaking on Thursday at the Mindmine Summit 2019, the flagship event of the Hero Group. Kumar said the government must do whatever it can to remove apprehensions of the private sector. "The whole nature of the game has changed in the past four years after demonetization, GST and IBC. In the earlier period, you had 10, 20, 30, 35 per cent of cash sloshing around which used to help people. That has become much less now," he had said.

Media misinterpreted my statement: NITI Aayog Vice-Chairman Rajiv Kumar

The RBI on August 7, 2019, reduced the repo rate by 35 bps from 5.75 per cent to 5.40 per cent. This is the fourth consecutive cut in a row this year. It also tempered the GDP growth estimates to 6.9 per cent in line with CRISIL.

While the rate cut is 10 bps more than street estimates, it highlights that the central bank recognises the severity of the current slowdown. Including this rate cut, RBI has reduced repo rate (the rate at which it lends to banks) by 110 bps this year (1.10 per cent), and it is at its lowest level in the last nine years.

The RBI governor in a press briefing expressed confidence that this cut would give a boost to investment, consumption and growth. While decline in rate cuts are likely to reduce EMIs for individuals and cost of borrowing for corporates, it alone is not likely to spur growth.

Firstly, the banks do not pass on the full benefits of rate cuts to consumers. Out of the 75-bps rate cut before the August announcement, banks have passed on only 29 bps benefit to end consumers, less than 40 per cent.

Generally, it takes two to three months for transmission, some could argue. Even by this logic, banks have passed on only 60 per cent&nbsp;benefit. Private banks have been laggards compared to public sector banks. Also, lenders generally pass on more benefits on new loans rather than existing ones.

Just because the EMIs have come down, people would not be tempted to invest in two-wheelers, cars and real estate as consumption depends a lot on sentiment. Consumer confidence declined in July 2019 due to deterioration in sentiments on jobs, price levels and the general economic situation, according to RBI’s own survey.

For the first time in the last decade, FMCG companies are witnessing a decline in their volumes, 5.5 per cent in Q1 FY20 versus 12 per cent in Q1 FY19, according to a Prabhudas Liladhar report. Rural demand has been badly hit due to low farm incomes and wage growth.

The real estate sector is sitting on an all-time high inventory of 12.76 lakh houses in the top 30 cities. The entire auto industry is witnessing a slowdown as never before. Maruti Suzuki reported its sixth consecutive monthly sales decline with numbers falling 33 per cent in July 2019 while TVS Motors reported a decline of 13 per cent.

Maruti for the sixth month in a row has announced production cuts of 25 per cent. As per reports, 2.3 lakh workers have been laid off. This has had a knock-on effect on OEM and auto ancillary sectors, which employ significant number of contractual workers.

Since auto and real estate sectors contribute 15 per cent-17 per cent to India’s GDP, their slowdown has had a direct impact on other sectors like metals and mining, cement and tyre manufacturing, among others.&nbsp;

The manufacturing industry is operating at a capacity utilisation of 75 per cent. Growth in eight core sectors fell to four-year low of 0.2 per cent in June 2019.&nbsp;

Until and unless the manufacturing industry sees a permanent revival in demand and reduction in idle capacity utilisations, it may not think of fresh investments.

Banks, on the other hand, are still reeling from high NPAs. The delay in IBC insolvency cases is hurting the banks, which continue to adopt a selective and cautious approach to lending. Even the retail portfolio of banks is showing signs of stress. The liquidity crunch, post the IL&amp;FS default and the NBFC crisis has not helped matters.

The Indian economy is facing an acute demand side issue and RBI cannot fix it alone. The government missed the opportunity to leave more money in the hands of people through tax cuts in Budget 2019. Instead, the finance minister increased taxes on the super-rich, which has acted as a dampener.

Since tight fiscal math prevents the government from increasing its spending, like it did, post the global financial crisis, India will need to fall back on private consumption expenditure to boost demand and growth. The new Direct Tax Code, which is expected to propose sweeping changes in tax rates should be implemented next year without fail. Till then, all eyes on the festive season! 
 
(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-are-the-rate-cuts-enough-to-boost-growth-2782948">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp;

The RBI on August 7, 2019, reduced the repo rate by 35 bps from 5.75 per cent to 5.40 per cent. This is the fourth consecutive cut in a row this year. It also tempered the GDP growth estimates to 6.

The RBI on August 7, 2019, reduced the repo rate by 35 bps from 5.75 per cent to 5.40 per cent. This is the fourth consecutive cut in a row this year. It also tempered the GDP growth estimates to 6.9 per cent in line with CRISIL. While the rate cut is 10 bps more than street estimates, it highlights that the central bank recognises the severity of the current slowdown. Including this rate cut, RBI has reduced repo rate (the rate at which it lends to banks) by 110 bps this year (1.10 per cent), and it is at its lowest level in the last nine years. The RBI governor in a press briefing expressed confidence that this cut would give a boost to investment, consumption and growth. While decline in rate cuts are likely to reduce EMIs for individuals and cost of borrowing for corporates, it alone is not likely to spur growth. Firstly, the banks do not pass on the full benefits of rate cuts to consumers. Out of the 75-bps rate cut before the August announcement, banks have passed on only 29 bps benefit to end consumers, less than 40 per cent. Generally, it takes two to three months for transmission, some could argue. Even by this logic, banks have passed on only 60 per cent benefit. Private banks have been laggards compared to public sector banks. Also, lenders generally pass on more benefits on new loans rather than existing ones. Just because the EMIs have come down, people would not be tempted to invest in two-wheelers, cars and real estate as consumption depends a lot on sentiment. Consumer confidence declined in July 2019 due to deterioration in sentiments on jobs, price levels and the general economic situation, according to RBI’s own survey. For the first time in the last decade, FMCG companies are witnessing a decline in their volumes, 5.5 per cent in Q1 FY20 versus 12 per cent in Q1 FY19, according to a Prabhudas Liladhar report. Rural demand has been badly hit due to low farm incomes and wage growth. The real estate sector is sitting on an all-time high inventory of 12.76 lakh houses in the top 30 cities. The entire auto industry is witnessing a slowdown as never before. Maruti Suzuki reported its sixth consecutive monthly sales decline with numbers falling 33 per cent in July 2019 while TVS Motors reported a decline of 13 per cent. Maruti for the sixth month in a row has announced production cuts of 25 per cent. As per reports, 2.3 lakh workers have been laid off. This has had a knock-on effect on OEM and auto ancillary sectors, which employ significant number of contractual workers. Since auto and real estate sectors contribute 15 per cent-17 per cent to India’s GDP, their slowdown has had a direct impact on other sectors like metals and mining, cement and tyre manufacturing, among others. The manufacturing industry is operating at a capacity utilisation of 75 per cent. Growth in eight core sectors fell to four-year low of 0.2 per cent in June 2019. Until and unless the manufacturing industry sees a permanent revival in demand and reduction in idle capacity utilisations, it may not think of fresh investments. Banks, on the other hand, are still reeling from high NPAs. The delay in IBC insolvency cases is hurting the banks, which continue to adopt a selective and cautious approach to lending. Even the retail portfolio of banks is showing signs of stress. The liquidity crunch, post the IL&FS default and the NBFC crisis has not helped matters. The Indian economy is facing an acute demand side issue and RBI cannot fix it alone. The government missed the opportunity to leave more money in the hands of people through tax cuts in Budget 2019. Instead, the finance minister increased taxes on the super-rich, which has acted as a dampener. Since tight fiscal math prevents the government from increasing its spending, like it did, post the global financial crisis, India will need to fall back on private consumption expenditure to boost demand and growth. The new Direct Tax Code, which is expected to propose sweeping changes in tax rates should be implemented next year without fail. Till then, all eyes on the festive season! (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Are the rate cuts enough to boost growth?

A committee of experts headed by Central Board of Direct Taxes (CBDT) member Akhilesh Ranjan on Monday submitted its report on replacing the Income Tax Act with a new Direct Tax Code.

In November last year, the Finance Ministry had appointed Ranjan, Member (Legislation) at CBDT, as convenor of the task force which included Girish Ahuja (a chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY), Mukesh Patel (practicing tax advocate), Mansi Kedia (Consultant at ICRIER) and G C Srivastava (retired Indian Revenue Service and advocate).

The task force was scheduled to submit its report by May 31 but the then Finance Minister Arun Jaitley gave it a two-month extension.

Later the government allowed the task force to submit its report by August 16 as the new members requested for more time to provide further inputs.

The task force was assigned to draft direct tax laws incorporating international best practices and keeping in mind the economic needs of the country.

A committee of experts headed by Central Board of Direct Taxes (CBDT) member Akhilesh Ranjan on Monday submitted its report on replacing the Income Tax Act with a new Direct Tax Code.

A committee of experts headed by Central Board of Direct Taxes (CBDT) member Akhilesh Ranjan on Monday submitted its report on replacing the Income Tax Act with a new Direct Tax Code. In November last year, the Finance Ministry had appointed Ranjan, Member (Legislation) at CBDT, as convenor of the task force which included Girish Ahuja (a chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY), Mukesh Patel (practicing tax advocate), Mansi Kedia (Consultant at ICRIER) and G C Srivastava (retired Indian Revenue Service and advocate). The task force was scheduled to submit its report by May 31 but the then Finance Minister Arun Jaitley gave it a two-month extension. Later the government allowed the task force to submit its report by August 16 as the new members requested for more time to provide further inputs. The task force was assigned to draft direct tax laws incorporating international best practices and keeping in mind the economic needs of the country.

Committee submits report on replacing I-T Act with Direct Tax Code

JRD Tata famously said population was one of India’s biggest liabilities. Ironically, it may turn out to be one of India’s biggest assets.&nbsp;

The fabled demographic dividend is already upon us. The dividend kicks in when the total number of Indians in the “productive” age group of 15-65 years surpasses the number of Indians above the age of 65 and below the age of 15.&nbsp;

India entered this zone in 2018. The productivity dividend is estimated to last till 2055 when the population of over-65s and under-15s will once again overtake the total number of working-age Indians between 15 and 65. The window of India’s demographic dividend will thus remain open for another 36 years.&nbsp;

The United Nations Population Fund (UNFPA), formerly known as the United Nations Fund for Population Activities, says economic growth peaks during the period when a country’s working-age population of 15-65 is greater than the very old and the very young.&nbsp;

Japan’s demographic dividend began in 1964, leading to 25 years of high economic growth and the “Japanese miracle”. Though it technically lasted till 2004, Japan’s growth petered out from the 1990s.&nbsp;

China’s own demographic dividend began in 1996, coinciding with its surging economy and double-digit annual GDP growth, but is expected to last for an even shorter period than Japan’s demographic dividend. The key reason is former leader Mao Zedong’s one-child policy in the 1960s that 50 years later has progressively reduced the number of young Chinese.&nbsp;

The “greying” of China is one of the keys, but relatively unheralded causes of Beijing’s current economic slowdown just 23 years into its demographic dividend.&nbsp;

While the trade war with the United States has contributed to a dip in China’s economic growth, the steep fall in the productive population aged 15-65 constitutes a long-term structural economic weakness for China.&nbsp;

A young productive workforce spurs economic growth, but as a country becomes wealthier, women tend to have fewer children. Lower fertility rates lead to a gradual shift towards an ageing population. Moreover, as people grow richer, they live longer, increasing the ratio of over-65s relative to those in the working-age group of 15-65.&nbsp;

India’s female fertility rate has fallen dramatically since Independence. It was 5.9 children per woman in 1950, 3.8 in 1994 and 2.2 in 2018. The replacement rate, when births and deaths are roughly equal, is around 2.1. Thus India’s population is likely to start plateauing at approximately 1.55 billion within the next two decades. By then India’s total population would have surpassed China’s population, which will have begun to decline as its fertility rates fall further.&nbsp;

The other key metric is the dependency ratio — the percentage of the very old and very young who are supported by those in the productive 15-65 age group of the population. For India, this dependency ratio was as high as 81.5% in 1966. It fell to 60% in 2005 and to 49.8 per cent in 2018 when India formally entered its demographic dividend zone. Thus for the first time since Independence, India has fewer dependents than workers.&nbsp;

The demographic dividend though comes with a health warning: it can quite easily be squandered if education, health and skill development don’t keep pace.&nbsp;

Pessimists speak ominously of a demographic disaster if young workers in the productive age group are not given the skill sets needed in a rapidly changing economy. Poverty is a big handicap. Malnutrition is another. When nearly a quarter of the working-age population lacks education, healthcare and skills, the demographic dividend can be wasted. It is therefore critical to get India’s health and education parameters up to scratch.&nbsp;

Prime Minister Narendra Modi is right to focus on delivering welfare benefits to the poorest Indians — sanitation, health insurance, LPG cylinders, electricity and water. The focus on skill development and vocational training is crucial too. But such micro measures need to be supplemented with macroeconomic initiatives.&nbsp;

Unless the economy returns to an 8 per cent growth trajectory, providing jobs and investment opportunities, India might miss the demographic dividend bus. The window is narrow. Of the 36 years India has, the first 20 years are critical. As China and Japan witnessed, the effects of the demographic dividend taper off after an initial burst.&nbsp;

To reflate the economy, Finance Minister Nirmala Sitharaman must focus on structural reforms — tax, foreign investment, privatisation, labour and land.&nbsp;

Some of these are works in progress (labour and the direct tax code) while others (foreign investment and privatisation) are hostage to politics or ideology. The new direct tax code, to be announced shortly, should rationalise India’s complex and bloated tax regime.&nbsp;

Sitharaman’s most positive remark since her disappointing Union Budget holds promise. Speaking in the Rajya Sabha last week, Sitharaman said: “Reduction in the corporate tax rate is done with an intention. We will bring the corporate tax from the high rate that it was, from 30 per cent&nbsp;down to 25 per cent (for all companies). It was a commitment given in the first Budget in 2014. I have to honour it.”

It is important such intent translates into action. Structural economic reforms — alongside welfare schemes — are imperative if India is to make the fullest use of its once-in-a-generation demographic dividend.&nbsp;

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-india-s-decisive-dividend-2777769">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

JRD Tata famously said population was one of India’s biggest liabilities. Ironically, it may turn out to be one of India’s biggest assets. The fabled demographic dividend is already upon us.

JRD Tata famously said population was one of India’s biggest liabilities. Ironically, it may turn out to be one of India’s biggest assets. The fabled demographic dividend is already upon us. The dividend kicks in when the total number of Indians in the “productive” age group of 15-65 years surpasses the number of Indians above the age of 65 and below the age of 15. India entered this zone in 2018. The productivity dividend is estimated to last till 2055 when the population of over-65s and under-15s will once again overtake the total number of working-age Indians between 15 and 65. The window of India’s demographic dividend will thus remain open for another 36 years. The United Nations Population Fund (UNFPA), formerly known as the United Nations Fund for Population Activities, says economic growth peaks during the period when a country’s working-age population of 15-65 is greater than the very old and the very young. Japan’s demographic dividend began in 1964, leading to 25 years of high economic growth and the “Japanese miracle”. Though it technically lasted till 2004, Japan’s growth petered out from the 1990s. China’s own demographic dividend began in 1996, coinciding with its surging economy and double-digit annual GDP growth, but is expected to last for an even shorter period than Japan’s demographic dividend. The key reason is former leader Mao Zedong’s one-child policy in the 1960s that 50 years later has progressively reduced the number of young Chinese. The “greying” of China is one of the keys, but relatively unheralded causes of Beijing’s current economic slowdown just 23 years into its demographic dividend. While the trade war with the United States has contributed to a dip in China’s economic growth, the steep fall in the productive population aged 15-65 constitutes a long-term structural economic weakness for China. A young productive workforce spurs economic growth, but as a country becomes wealthier, women tend to have fewer children. Lower fertility rates lead to a gradual shift towards an ageing population. Moreover, as people grow richer, they live longer, increasing the ratio of over-65s relative to those in the working-age group of 15-65. India’s female fertility rate has fallen dramatically since Independence. It was 5.9 children per woman in 1950, 3.8 in 1994 and 2.2 in 2018. The replacement rate, when births and deaths are roughly equal, is around 2.1. Thus India’s population is likely to start plateauing at approximately 1.55 billion within the next two decades. By then India’s total population would have surpassed China’s population, which will have begun to decline as its fertility rates fall further. The other key metric is the dependency ratio — the percentage of the very old and very young who are supported by those in the productive 15-65 age group of the population. For India, this dependency ratio was as high as 81.5% in 1966. It fell to 60% in 2005 and to 49.8 per cent in 2018 when India formally entered its demographic dividend zone. Thus for the first time since Independence, India has fewer dependents than workers. The demographic dividend though comes with a health warning: it can quite easily be squandered if education, health and skill development don’t keep pace. Pessimists speak ominously of a demographic disaster if young workers in the productive age group are not given the skill sets needed in a rapidly changing economy. Poverty is a big handicap. Malnutrition is another. When nearly a quarter of the working-age population lacks education, healthcare and skills, the demographic dividend can be wasted. It is therefore critical to get India’s health and education parameters up to scratch. Prime Minister Narendra Modi is right to focus on delivering welfare benefits to the poorest Indians — sanitation, health insurance, LPG cylinders, electricity and water. The focus on skill development and vocational training is crucial too. But such micro measures need to be supplemented with macroeconomic initiatives. Unless the economy returns to an 8 per cent growth trajectory, providing jobs and investment opportunities, India might miss the demographic dividend bus. The window is narrow. Of the 36 years India has, the first 20 years are critical. As China and Japan witnessed, the effects of the demographic dividend taper off after an initial burst. To reflate the economy, Finance Minister Nirmala Sitharaman must focus on structural reforms — tax, foreign investment, privatisation, labour and land. Some of these are works in progress (labour and the direct tax code) while others (foreign investment and privatisation) are hostage to politics or ideology. The new direct tax code, to be announced shortly, should rationalise India’s complex and bloated tax regime. Sitharaman’s most positive remark since her disappointing Union Budget holds promise. Speaking in the Rajya Sabha last week, Sitharaman said: “Reduction in the corporate tax rate is done with an intention. We will bring the corporate tax from the high rate that it was, from 30 per cent down to 25 per cent (for all companies). It was a commitment given in the first Budget in 2014. I have to honour it.” It is important such intent translates into action. Structural economic reforms — alongside welfare schemes — are imperative if India is to make the fullest use of its once-in-a-generation demographic dividend. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Economic reforms and welfare schemes are key if India is to make fullest use of its demography

Any nation, developed or developing, carries the accountability of building a sustainable future for its citizens by upholding the environment, maintaining culture and supporting a stable, growing economy. Rapid globalisation has changed the economic structures of developing and developed nations through innovation, increased communication and technology. The model set by the Modi 1.0 and 2.0 governments in particular, has brought about a defining, positive reform process for India's economic stabilisation. India's model aims at resolute economic growth. The Narendra Modi-led NDA 1.0's aggressive push for industrialisation and schemes to bolster several sectors have induced rapid growth. In particular, India focused on cash crops, natural resources, renewable energy, small businesses, entrepreneurship and public capital investment.

However, there were several factors that hindered stable growth and will pose a challenge to growth over the next five years. For India, these factors are monsoon and unpredictability in oil.

Monsoon

The Indian economy is indispensably linked with our monsoon because of water resources. Most of the country gets over 75 per cent annual rainfall in just three to four months which impacts agriculture, in particular, grain crops (legumes, wheat etc). Hydro-electric power also makes up a significant portion of power usage in India. Generating renewable energy from water is especially lucrative for India because monsoon is a consistent season in India even though the amount of water fluctuates. Speaking of which, over the past five years, the economy has faced hard luck in terms of monsoon. Water potential and wind power directly impact the Indian economy. Wind power is used to generate electricity and even to draw water. As for rainfall, the Modi-led NDA's first term was hit by drought, floods or pointedly less rainfall in comparison to previous years. In this time, the population also exploded to 1.3 billion people. The population has increased at a much faster rate than grain production. If this trend continues, India will face a very serious economic crisis.

At the end of the day, we are all hoping for stable and necessary rainfall over the next monsoon season so that the economy can also stabilise in this regard. Additionally, in order to offset shocks from potential years of drought and/or floods, PM Modi can take several steps. The first is to create mechanisms for mass water storage from unused monsoon water in places of largescale irrigation and where hydro-power is generated. A system should be devised where not a drop is wasted. This is especially important because PM Modi has assured to double farmer incomes and this year's Budget depends expressively on agriculture to boost the economy. Simultaneously, one can see the crisis associated with no water in Chennai, for example, over the past four months. The government has also paid farmers during past droughts which puts fiscal deficit under stress. Food accounts for approximately half of India's consumer price index. Therefore, droughts and floods also raise prices on crop which requires more government spending on welfare. Another step PM Modi should take is utilising technological innovation in cultivation and transportation of agriculture. Technology should also be used with more focus in things like soil testing, water allocation and water management. Agricultural innovation should be encouraged and used with full force as well.

Oil

The precariousness of oil prices is a major destabilising factor for the Indian economy. It proves especially poignant for India who imports a significant portion of our oil. Most recently, India has lost 11 per cent of its oil from Iran when we agreed to comply with US sanctions. Oil volatility can lead to large deficits and can force the government to spend money on energy instead of allocating to other necessary areas (water, schemes to help poor, etc). Therefore, it is necessary to build shields to offset volatility shocks over the next five years. There are several methods to do this. PM Modi should focus on more active derivative financial and commodities markets with oil products. This will help India reduce dependence for oil imports and would also bring discipline to the oil market. Another suggestion would be to strengthen the rupee. This would help deflect the surges from oil import bills which are inelastic in nature.&nbsp; Inelasticity in this case refers to consumer buying habits remain unchanged regardless of the price of oil increasing or decreasing.

As a rapidly growing economy over the next five years, it is high time that India understands and acts to buffer the severity of oil prices; especially in light of US sanctions on oil producing countries that India receives exports from. Oil volatility can destabilise our economy and also has the potential to disrupt the global economy by causing a precipitous inflation. If the above measures are implemented, India would be able to not only cushion oil volatility shocks, but also reduce volatile oil prices to a sustainable, predictable level.

Conclusion

Despite these imponderables, India is still well on its way to become a US $5 trillion economy. The development of the energy market will be a determining factor of how fast we reach the target, as will employment generation, water management and sustainable growth. The good news is that PM Modi has placed immense importance on all of these areas respectively.

The number of government job vacancies are expected to grow in the next year through schemes involving industry and government (ie. Sagarmala Port project, road, railway infrastructure across the country, development in the Northeast, etc). A water ministry has already been implemented and there are multiple schemes for environment sustainability. PM Modi's increased focus and expansion on already existing on healthcare (Ayushman Bharat) and education schemes (Beti Bachao, NEP 2019, etc) aim to alleviate overpopulation in the next decade. Now it is up to citizens to also actively join forces with the government. If we work to conserve water, develop innovation (especially in agriculture, renewable energy) and clean up our environment, why just a five trillion economy? We can achieve a ten trillion dollar economy in less than five years.

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Any nation, developed or developing, carries the accountability of building a sustainable future for its citizens by upholding the environment, maintaining culture and supporting a stable, growing economy.

Any nation, developed or developing, carries the accountability of building a sustainable future for its citizens by upholding the environment, maintaining culture and supporting a stable, growing economy. Rapid globalisation has changed the economic structures of developing and developed nations through innovation, increased communication and technology. The model set by the Modi 1.0 and 2.0 governments in particular, has brought about a defining, positive reform process for India's economic stabilisation. India's model aims at resolute economic growth. The Narendra Modi-led NDA 1.0's aggressive push for industrialisation and schemes to bolster several sectors have induced rapid growth. In particular, India focused on cash crops, natural resources, renewable energy, small businesses, entrepreneurship and public capital investment. However, there were several factors that hindered stable growth and will pose a challenge to growth over the next five years. For India, these factors are monsoon and unpredictability in oil. Monsoon The Indian economy is indispensably linked with our monsoon because of water resources. Most of the country gets over 75 per cent annual rainfall in just three to four months which impacts agriculture, in particular, grain crops (legumes, wheat etc). Hydro-electric power also makes up a significant portion of power usage in India. Generating renewable energy from water is especially lucrative for India because monsoon is a consistent season in India even though the amount of water fluctuates. Speaking of which, over the past five years, the economy has faced hard luck in terms of monsoon. Water potential and wind power directly impact the Indian economy. Wind power is used to generate electricity and even to draw water. As for rainfall, the Modi-led NDA's first term was hit by drought, floods or pointedly less rainfall in comparison to previous years. In this time, the population also exploded to 1.3 billion people. The population has increased at a much faster rate than grain production. If this trend continues, India will face a very serious economic crisis. At the end of the day, we are all hoping for stable and necessary rainfall over the next monsoon season so that the economy can also stabilise in this regard. Additionally, in order to offset shocks from potential years of drought and/or floods, PM Modi can take several steps. The first is to create mechanisms for mass water storage from unused monsoon water in places of largescale irrigation and where hydro-power is generated. A system should be devised where not a drop is wasted. This is especially important because PM Modi has assured to double farmer incomes and this year's Budget depends expressively on agriculture to boost the economy. Simultaneously, one can see the crisis associated with no water in Chennai, for example, over the past four months. The government has also paid farmers during past droughts which puts fiscal deficit under stress. Food accounts for approximately half of India's consumer price index. Therefore, droughts and floods also raise prices on crop which requires more government spending on welfare. Another step PM Modi should take is utilising technological innovation in cultivation and transportation of agriculture. Technology should also be used with more focus in things like soil testing, water allocation and water management. Agricultural innovation should be encouraged and used with full force as well. Oil The precariousness of oil prices is a major destabilising factor for the Indian economy. It proves especially poignant for India who imports a significant portion of our oil. Most recently, India has lost 11 per cent of its oil from Iran when we agreed to comply with US sanctions. Oil volatility can lead to large deficits and can force the government to spend money on energy instead of allocating to other necessary areas (water, schemes to help poor, etc). Therefore, it is necessary to build shields to offset volatility shocks over the next five years. There are several methods to do this. PM Modi should focus on more active derivative financial and commodities markets with oil products. This will help India reduce dependence for oil imports and would also bring discipline to the oil market. Another suggestion would be to strengthen the rupee. This would help deflect the surges from oil import bills which are inelastic in nature. Inelasticity in this case refers to consumer buying habits remain unchanged regardless of the price of oil increasing or decreasing. As a rapidly growing economy over the next five years, it is high time that India understands and acts to buffer the severity of oil prices; especially in light of US sanctions on oil producing countries that India receives exports from. Oil volatility can destabilise our economy and also has the potential to disrupt the global economy by causing a precipitous inflation. If the above measures are implemented, India would be able to not only cushion oil volatility shocks, but also reduce volatile oil prices to a sustainable, predictable level. Conclusion Despite these imponderables, India is still well on its way to become a US $5 trillion economy. The development of the energy market will be a determining factor of how fast we reach the target, as will employment generation, water management and sustainable growth. The good news is that PM Modi has placed immense importance on all of these areas respectively. The number of government job vacancies are expected to grow in the next year through schemes involving industry and government (ie. Sagarmala Port project, road, railway infrastructure across the country, development in the Northeast, etc). A water ministry has already been implemented and there are multiple schemes for environment sustainability. PM Modi's increased focus and expansion on already existing on healthcare (Ayushman Bharat) and education schemes (Beti Bachao, NEP 2019, etc) aim to alleviate overpopulation in the next decade. Now it is up to citizens to also actively join forces with the government. If we work to conserve water, develop innovation (especially in agriculture, renewable energy) and clean up our environment, why just a five trillion economy? We can achieve a ten trillion dollar economy in less than five years. (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Can India realistically become US $5 trillion economy?

Union Minister Piyush Goyal has voiced his confidence by saying that India will be a US$5 trillion economy by 2025 and the Centre is well poised towards achieving the target.

"I am very confident that by 2025 we will be a US$5 trillion economy. We are well poised towards achieving that, focused on different aspects of the economy which will take us there," the Union Minister said on Monday at UK-India Joint Economic and Trade Committee meeting in London.

He added, "We have opened up opportunities for single-brand retail and are easing some detrimental clauses of our policy in next few weeks which will help single brand retail come in a bigger way to our country."

Commerce and Industry and Railways Minister Goyal further said that the Centre has restrictions on multi-brand retail and have requested companies around the world to respect Indian sensitivities on restrictions of foreign investment and multi-brand retail.

"Particularly e-commerce companies coming to India would have to ensure that they stay within the letter and spirit of the law when it comes to multi-brand retail and our policies around that," he said.

Goyal is on a three-day visit to the UK to attend the India Day conclave.&nbsp;

Union Minister Piyush Goyal has voiced his confidence by saying that India will be a US$5 trillion economy by 2025 and the Centre is well poised towards achieving the target.

Union Minister Piyush Goyal has voiced his confidence by saying that India will be a US$5 trillion economy by 2025 and the Centre is well poised towards achieving the target. "I am very confident that by 2025 we will be a US$5 trillion economy. We are well poised towards achieving that, focused on different aspects of the economy which will take us there," the Union Minister said on Monday at UK-India Joint Economic and Trade Committee meeting in London. He added, "We have opened up opportunities for single-brand retail and are easing some detrimental clauses of our policy in next few weeks which will help single brand retail come in a bigger way to our country." Commerce and Industry and Railways Minister Goyal further said that the Centre has restrictions on multi-brand retail and have requested companies around the world to respect Indian sensitivities on restrictions of foreign investment and multi-brand retail. "Particularly e-commerce companies coming to India would have to ensure that they stay within the letter and spirit of the law when it comes to multi-brand retail and our policies around that," he said. Goyal is on a three-day visit to the UK to attend the India Day conclave.

India will be $5 trillion economy by 2025: Piyush Goyal

Prime Minister Narendra Modi on Saturday said that those who are casting doubt over the target of making India a five trillion dollars economy were professional pessimists and asserted that the goal was achievable.

"We are very confident about achieving the goal of 5 trillion dollar economy in the next five years but there are some who are casting doubts over the competence of Indians. They ask what the need for it is and why it is being done. We can call such people professional pessimists," he said.

Prime Minister Modi, who was addressing BJP workers after launching the party's membership campaign at an event here, talked at length about the first Budget of his second tenure that was presented in the Lok Sabha on Friday by Finance Minister Nirmala Sitharaman.

He also released a toll-free mobile number 8980808080 for the membership drive and launched a tree plantation drive.

The launch of the BJP's membership drive coincides with the birth anniversary of Jana Sangh founder Syama Prasad Mookerjee.

Modi said that these "professional pessimists" keep grumbling about things but do not do anything to change them.

"They have mastery in turning solutions into a problem. The country needs to be vigilant of these pessimists," he said.

The Prime Minister, however, said that he welcomed positive criticism of his ideas, schemes, and plans to execute them.

"The opinion of critics and analysts are important for us. But saying that something cannot be done or achieved is not good," he said.

He said that the new opportunities for development and dreams of New India are deeply linked to the 5-trillion dollar economy.

"It is about doubling the Indian economy in the next five years. The target looks difficult but can be achieved with a firm determination," he said."What does 5 trillion dollars economy mean? You all must know and tell people about it because there are some people who doubt on our will. They say we cannot achieve this target," added Modi.

Talking about the role of farmers and traders in realising the dream grand target, Prime Minister Modi said, "The Union Budget includes measures which will facilitate agriculture exports as well greater social security for small traders and firms through pensions and other benefits."

The Prime Minister also read out a poem to enthuse BJP workers to work hard and spread awareness about the government's ambitious plan.

He cited the example of "bigger the cake, bigger the share" to highlight the benefits of a bigger economy to uplift the lives of the citizens.

"If a family's income is high, its members'&nbsp;income will also be high. If we look at the history of developed nations, they did not have a high per capita income earlier. But these countries witnessed a period when their per capita income jumped, leapfrogging them into the club of developed nations. India can also do it, especially when it is the youngest nation of the world," he said.

The Prime Minister said that his government has made provisions in the budget to make farming profitable and turn farmers into exporters.

"We have taken many decisions to ensure additional income for farmers. We look at farmers as potential exporters. The Budget has focused on making an environment to export farm products. We are trying to develop a cluster so that all government departments can make export easier," he said.

Modi also emphasised the role of a blue economy, a reference to resources available in the sea, and said the government has taken several initiatives in food processing and water security for the sustainable economic progress of the country.

Highlighting his government's scheme to provide housing for every citizen, Prime Minister Modi said that Rs 100 lakh crore would be invested in infrastructure development.

"Our government is focusing on the export of defence and electronic equipment," he added.

Backing the move to encourage adoption of electric vehicles as a clear mobility medium, he claimed that India can save over Rs 5 lakh crore by reducing petroleum imports bill per year.

"The establishment of an electronic fundraising platform has been announced in the Budget on the lines of the Stock Exchange. NGOs can list themselves on it and raise fund as per their needs," he said.

Prime Minister Modi urged BJP workers to reach out to every section of the society and enrol them as the party members.BJP Working President J P Nadda, who also spoke on the occasion, gave credit to grassroots party workers, PM Modi's leadership and party president Amit Shah's strategy to defy anti-incumbency factor and retained power with a bigger mandate in the General Elections.

Nadda also urged BJP workers to work religiously to strengthen the party at the booth level. 
&nbsp;

Prime Minister Narendra Modi on Saturday said that those who are casting doubt over the target of making India a five trillion dollars economy were professional pessimists and asserted that the goal was achievable.

Prime Minister Narendra Modi on Saturday said that those who are casting doubt over the target of making India a five trillion dollars economy were professional pessimists and asserted that the goal was achievable. "We are very confident about achieving the goal of 5 trillion dollar economy in the next five years but there are some who are casting doubts over the competence of Indians. They ask what the need for it is and why it is being done. We can call such people professional pessimists," he said. Prime Minister Modi, who was addressing BJP workers after launching the party's membership campaign at an event here, talked at length about the first Budget of his second tenure that was presented in the Lok Sabha on Friday by Finance Minister Nirmala Sitharaman. He also released a toll-free mobile number 8980808080 for the membership drive and launched a tree plantation drive. The launch of the BJP's membership drive coincides with the birth anniversary of Jana Sangh founder Syama Prasad Mookerjee. Modi said that these "professional pessimists" keep grumbling about things but do not do anything to change them. "They have mastery in turning solutions into a problem. The country needs to be vigilant of these pessimists," he said. The Prime Minister, however, said that he welcomed positive criticism of his ideas, schemes, and plans to execute them. "The opinion of critics and analysts are important for us. But saying that something cannot be done or achieved is not good," he said. He said that the new opportunities for development and dreams of New India are deeply linked to the 5-trillion dollar economy. "It is about doubling the Indian economy in the next five years. The target looks difficult but can be achieved with a firm determination," he said."What does 5 trillion dollars economy mean? You all must know and tell people about it because there are some people who doubt on our will. They say we cannot achieve this target," added Modi. Talking about the role of farmers and traders in realising the dream grand target, Prime Minister Modi said, "The Union Budget includes measures which will facilitate agriculture exports as well greater social security for small traders and firms through pensions and other benefits." The Prime Minister also read out a poem to enthuse BJP workers to work hard and spread awareness about the government's ambitious plan. He cited the example of "bigger the cake, bigger the share" to highlight the benefits of a bigger economy to uplift the lives of the citizens. "If a family's income is high, its members' income will also be high. If we look at the history of developed nations, they did not have a high per capita income earlier. But these countries witnessed a period when their per capita income jumped, leapfrogging them into the club of developed nations. India can also do it, especially when it is the youngest nation of the world," he said. The Prime Minister said that his government has made provisions in the budget to make farming profitable and turn farmers into exporters. "We have taken many decisions to ensure additional income for farmers. We look at farmers as potential exporters. The Budget has focused on making an environment to export farm products. We are trying to develop a cluster so that all government departments can make export easier," he said. Modi also emphasised the role of a blue economy, a reference to resources available in the sea, and said the government has taken several initiatives in food processing and water security for the sustainable economic progress of the country. Highlighting his government's scheme to provide housing for every citizen, Prime Minister Modi said that Rs 100 lakh crore would be invested in infrastructure development. "Our government is focusing on the export of defence and electronic equipment," he added. Backing the move to encourage adoption of electric vehicles as a clear mobility medium, he claimed that India can save over Rs 5 lakh crore by reducing petroleum imports bill per year. "The establishment of an electronic fundraising platform has been announced in the Budget on the lines of the Stock Exchange. NGOs can list themselves on it and raise fund as per their needs," he said. Prime Minister Modi urged BJP workers to reach out to every section of the society and enrol them as the party members.BJP Working President J P Nadda, who also spoke on the occasion, gave credit to grassroots party workers, PM Modi's leadership and party president Amit Shah's strategy to defy anti-incumbency factor and retained power with a bigger mandate in the General Elections. Nadda also urged BJP workers to work religiously to strengthen the party at the booth level.

Those casting doubt on 5 trillion dollars economy target are professional pessimists: PM Narendra Modi

The Economic Survey 2018-19 was presented in the Parliament, as is the practice, a day before the Union Budget.&nbsp;

The survey points out that amid weak global growth during the last five years, India took a few giant strides forward becoming the sixth largest economy as well as the fastest growing major economy in the world.&nbsp;

The average inflation was less than half the level of the preceding five years, lowest in post-independence history.&nbsp;

According to the survey, the Indian economy is projected to grow at 7 per cent&nbsp;in 2019-20, up 0.2 per cent&nbsp;from 2018-19, on the back of political stability, which is likely to push up economic activity in the country (activate the animal spirits).&nbsp;

To achieve the Prime Minister’s dream of India becoming a $5 trillion economy by 2025, India needs to attain and sustain a real GDP growth of 8% per annum. “This can be achieved by a ‘virtuous cycle’ of savings, investment and exports catalysed and supported by a favourable demographic phase,” says the survey.

Low oil prices compared to 2018-19 is expected to push the consumption, while low real interest rates are expected to provide a boost to investment; the two key levers of the Indian economy.&nbsp;

Investment is the ‘key driver’ of the Indian economy, accounting for 32 per cent&nbsp;of the GDP. The survey points out that the investment rate, which was declining from 2011-12, seems to have bottomed out. Fixed investment growth has increased from 8.3 per cent&nbsp;in 2016-17 to 9.3 per cent&nbsp;in 2017-18 and 10.0 per cent&nbsp;in 2018-19.&nbsp;

Investment is expected to pick up further on the back of higher credit growth, facilitated by lower interest rates and improved demand facilitated by a strong mandate, clearing all theories of political uncertainty.

Higher investments are likely to foster job creation; unemployment being a major issue facing the economy at a 45-year-high.&nbsp;

As per a CRISIL report, system-wide NPAs have declined to 9.3 per cent&nbsp;as of March 2019 after tripling to 11.5 per cent&nbsp;in the four fiscals till March 2018.&nbsp;

The continuing resolution of stressed assets in the banking sector highlighting the success story of the Insolvency and Bankruptcy Code is expected to give a fillip to the capex cycle, as per the Economic Survey.

India, unlike China, is a consumption-led rather than export dependent economy. India witnessed a deceleration in private final consumption in Q3 and Q4 of 2018-19, thus resulting in a slowdown in GDP growth.

The survey points out that this could have been due to low farm incomes in rural areas arising from low food prices and also due to the stress in non-banking financial companies (NBFCs), which affected its lending.

Private final consumption expenditure accounts for 60 per cent&nbsp;of India’s GDP with its growth rate mostly being higher than the overall GDP growth rate.&nbsp;

Consumption is likely to pick up with an increase in rural wages, higher food prices (higher MSPs) and income support scheme of Rs 6,000 per year to farmers. All these measures are likely to boost rural demand.&nbsp;

However, a weak monsoon and spill over impact of stress in the NBFC sector, present downside risks to consumption, says the survey.

June 2019, the first month of the monsoon season, recorded a 33% deficient rainfall — the worst in the last five years. Although IMD expects a near normal rainfall, region wise imbalances are expected to arise impacting crop production and agriculture growth.&nbsp;

The liquidity crunch faced by the NBFC sector due to IL&amp;FS default, loss of investor confidence and recent default by DHFL, shows that the sector is under stress.&nbsp;

Non-performing loans are rising, currently at 6.1%, while the credit disbursements fell by 31 per cent&nbsp;in Q4 2018-19. All this is likely to lead to lower credit offtake from NBFCs, which may dampen growth in consumption spending, the survey stresses. &nbsp;

As per the Economic Survey, the growth rate of the world output is projected to fall further to 3.3 per cent&nbsp;in 2019 (-0.3 per cent). The US and China trade war, the outcome of Brexit and downside risk to China’s growth, all point towards weak global cues. In this light, export growth could remain weak, which in turn could impact India’s GDP growth. &nbsp;The survey lays out a strategic blueprint for fructifying #Economy@5trillion. Now over to the Budget today!

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-don-t-underestimate-global-economic-impact-on-india-s-gdp-2768191">original article)</a>

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp;

The Economic Survey 2018-19 was presented in the Parliament, as is the practice, a day before the Union Budget. The survey points out that amid weak global growth during the last five years, India took a few giant strides forward becoming the sixth largest economy as well as the fastest growing major economy in the world.

The Economic Survey 2018-19 was presented in the Parliament, as is the practice, a day before the Union Budget. The survey points out that amid weak global growth during the last five years, India took a few giant strides forward becoming the sixth largest economy as well as the fastest growing major economy in the world. The average inflation was less than half the level of the preceding five years, lowest in post-independence history. According to the survey, the Indian economy is projected to grow at 7 per cent in 2019-20, up 0.2 per cent from 2018-19, on the back of political stability, which is likely to push up economic activity in the country (activate the animal spirits). To achieve the Prime Minister’s dream of India becoming a $5 trillion economy by 2025, India needs to attain and sustain a real GDP growth of 8% per annum. “This can be achieved by a ‘virtuous cycle’ of savings, investment and exports catalysed and supported by a favourable demographic phase,” says the survey. Low oil prices compared to 2018-19 is expected to push the consumption, while low real interest rates are expected to provide a boost to investment; the two key levers of the Indian economy. Investment is the ‘key driver’ of the Indian economy, accounting for 32 per cent of the GDP. The survey points out that the investment rate, which was declining from 2011-12, seems to have bottomed out. Fixed investment growth has increased from 8.3 per cent in 2016-17 to 9.3 per cent in 2017-18 and 10.0 per cent in 2018-19. Investment is expected to pick up further on the back of higher credit growth, facilitated by lower interest rates and improved demand facilitated by a strong mandate, clearing all theories of political uncertainty. Higher investments are likely to foster job creation; unemployment being a major issue facing the economy at a 45-year-high. As per a CRISIL report, system-wide NPAs have declined to 9.3 per cent as of March 2019 after tripling to 11.5 per cent in the four fiscals till March 2018. The continuing resolution of stressed assets in the banking sector highlighting the success story of the Insolvency and Bankruptcy Code is expected to give a fillip to the capex cycle, as per the Economic Survey. India, unlike China, is a consumption-led rather than export dependent economy. India witnessed a deceleration in private final consumption in Q3 and Q4 of 2018-19, thus resulting in a slowdown in GDP growth. The survey points out that this could have been due to low farm incomes in rural areas arising from low food prices and also due to the stress in non-banking financial companies (NBFCs), which affected its lending. Private final consumption expenditure accounts for 60 per cent of India’s GDP with its growth rate mostly being higher than the overall GDP growth rate. Consumption is likely to pick up with an increase in rural wages, higher food prices (higher MSPs) and income support scheme of Rs 6,000 per year to farmers. All these measures are likely to boost rural demand. However, a weak monsoon and spill over impact of stress in the NBFC sector, present downside risks to consumption, says the survey. June 2019, the first month of the monsoon season, recorded a 33% deficient rainfall — the worst in the last five years. Although IMD expects a near normal rainfall, region wise imbalances are expected to arise impacting crop production and agriculture growth. The liquidity crunch faced by the NBFC sector due to IL&FS default, loss of investor confidence and recent default by DHFL, shows that the sector is under stress. Non-performing loans are rising, currently at 6.1%, while the credit disbursements fell by 31 per cent in Q4 2018-19. All this is likely to lead to lower credit offtake from NBFCs, which may dampen growth in consumption spending, the survey stresses. As per the Economic Survey, the growth rate of the world output is projected to fall further to 3.3 per cent in 2019 (-0.3 per cent). The US and China trade war, the outcome of Brexit and downside risk to China’s growth, all point towards weak global cues. In this light, export growth could remain weak, which in turn could impact India’s GDP growth. The survey lays out a strategic blueprint for fructifying #Economy@5trillion. Now over to the Budget today! (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Don’t underestimate global economic impact on India’s GDP

The Indian economy has been clearly losing traction and needs a decisive monetary policy to promote growth, said Reserve Bank of India Governor Shaktikanta Das while voting for a 25 basis points (bps) rate cut along with other five members at the MPC meet earlier this month.

Das, as per the minutes of the June 3-6 Monetary Policy Committee, said that since the last meeting of the rate-setting panel in April 2019, greater clarity has emerged about the evolving macroeconomic situation.

The RBI released the minutes of the meeting Thursday.

Overall, there is clear evidence of economic activity "losing traction" with the GDP growth in the fourth quarter of the last financial year slowing to 5.8 per cent, he said.

"In sum, growth impulses have clearly weakened, while the headline inflation trajectory is projected to remain below 4.0 per cent throughout 2019-20 even after considering the expected transmission of the past two policy rate cuts.

"Keeping in view the evolving growth inflation dynamics, there is a need for decisive monetary policy action. Hence, my vote is to reduce the policy repo rate by 25 basis points," he said.

He also favoured shifting the stance of monetary policy from neutral to accommodative to send a clear signal, indicating that more measures could be taken in the near future to boost growth.

It was for the third time in a row that the RBI cut the key lending rate (repo) by 25 bps.

MPC member and RBI Deputy Governor Viral Acharya said the mixed picture on economic growth has morphed into one where at least some aspects have weakened considerably over the past two quarters. He also flagged some upside risks, including deficiency in monsoon and volatality in crude oil prices, to inflation.

"In spite of my dilemma, I vote 'albeit with some hesitation'&nbsp;to frontload the policy rate cut from 6 per cent to 5.75 per cent..." the minutes quoted him as saying.

Another member and Executive Director Michael Debabrata Patra said the risks to the primary target of monetary policy are distinctly on the ebb.

Inflation expectations, he said, are also better anchored than before.

"In fact, if one were to step back a little in time, it is evident that if the 2019-20 projections materialise, the MPC would have steered inflation at or below target on average for four years in a row in its five-year term of office," he said.

Other three members of the MPC -- Ravindra H Dholakia, Pami Dua, and Chetan Ghate -- also voted in favour of reducing the key lending rate.

Das also said quite a sizable part of loan portfolio of banks continues at the base rate, which impedes monetary transmission.

Interest rates on small savings are also higher than the prescribed formula, he said.

The transmission of the cumulative reduction of 50 basis points in the policy repo rate in February and April 2019 to fresh rupee loans has been 21 basis points.

However, the weighted average lending rate on outstanding loans has increased by 4 basis points.

"Going forward, the transmission is expected to improve, given the lags with which banks adjust their deposit and lending rates in response to changes in the policy rate," the RBI governor said.

The Indian economy has been clearly losing traction and needs a decisive monetary policy to promote growth, said Reserve Bank of India Governor Shaktikanta Das while voting for a 25 basis points (bps) rate cut along with other five members at the MPC meet earlier this month.

The Indian economy has been clearly losing traction and needs a decisive monetary policy to promote growth, said Reserve Bank of India Governor Shaktikanta Das while voting for a 25 basis points (bps) rate cut along with other five members at the MPC meet earlier this month. Das, as per the minutes of the June 3-6 Monetary Policy Committee, said that since the last meeting of the rate-setting panel in April 2019, greater clarity has emerged about the evolving macroeconomic situation. The RBI released the minutes of the meeting Thursday. Overall, there is clear evidence of economic activity "losing traction" with the GDP growth in the fourth quarter of the last financial year slowing to 5.8 per cent, he said. "In sum, growth impulses have clearly weakened, while the headline inflation trajectory is projected to remain below 4.0 per cent throughout 2019-20 even after considering the expected transmission of the past two policy rate cuts. "Keeping in view the evolving growth inflation dynamics, there is a need for decisive monetary policy action. Hence, my vote is to reduce the policy repo rate by 25 basis points," he said. He also favoured shifting the stance of monetary policy from neutral to accommodative to send a clear signal, indicating that more measures could be taken in the near future to boost growth. It was for the third time in a row that the RBI cut the key lending rate (repo) by 25 bps. MPC member and RBI Deputy Governor Viral Acharya said the mixed picture on economic growth has morphed into one where at least some aspects have weakened considerably over the past two quarters. He also flagged some upside risks, including deficiency in monsoon and volatality in crude oil prices, to inflation. "In spite of my dilemma, I vote 'albeit with some hesitation' to frontload the policy rate cut from 6 per cent to 5.75 per cent..." the minutes quoted him as saying. Another member and Executive Director Michael Debabrata Patra said the risks to the primary target of monetary policy are distinctly on the ebb. Inflation expectations, he said, are also better anchored than before. "In fact, if one were to step back a little in time, it is evident that if the 2019-20 projections materialise, the MPC would have steered inflation at or below target on average for four years in a row in its five-year term of office," he said. Other three members of the MPC -- Ravindra H Dholakia, Pami Dua, and Chetan Ghate -- also voted in favour of reducing the key lending rate. Das also said quite a sizable part of loan portfolio of banks continues at the base rate, which impedes monetary transmission. Interest rates on small savings are also higher than the prescribed formula, he said. The transmission of the cumulative reduction of 50 basis points in the policy repo rate in February and April 2019 to fresh rupee loans has been 21 basis points. However, the weighted average lending rate on outstanding loans has increased by 4 basis points. "Going forward, the transmission is expected to improve, given the lags with which banks adjust their deposit and lending rates in response to changes in the policy rate," the RBI governor said.

Economic activity clearly losing traction: RBI Governor Shaktikanta Das at MPC meet

With the National Democratic Alliance (NDA) romping home easily for another five-year tenure, the first test is barely a few weeks away.&nbsp;

Having steered choppy economic waters during its first term, the none-too-rosy state of the economy was seldom a binding constraint since security issues in the aftermath of Pulmawa, trumped bread-and-butter issues, including agrarian distress and lack of employment.

The scattered opposition parties failed to galvanise themselves on any major economic issue, other than beating about the bush on the alleged corruption in the purchase of advanced aircraft, Rafale.&nbsp;

Now that Prime Minister Narendra Modi has proved beyond a pale of doubt that he is a past-master in outmanoeuvring opponents at their own game, he will now have to devote time and energy in reviving the domestic economy and stoking demand so that the core sectors get kick-started to realise their optimal potential. No sooner has the new Finance Minister Nirmala Sitharaman assumed office, problems have come knocking at her door.

With the Central Statistics Office’s (CSO) revealing that the economy lost further momentum to grow just by 5.8 per cent in the fourth quarter (Jan-Mar), the country’s gross domestic product (GDP) growth for fiscal 2018-19 at 6.8 per cent has understandably undershot even sanguine forecasts.&nbsp;

To boot, the unaudited/interim accounts of the central government for 2018-19, also released alongside, presented the obverse and adverse side of the economic slowdown.&nbsp;

Thus, the Centre compassed Rs 16,66,055 crore (91.40 per cent of corresponding revised estimate 2018-19 of total receipts) during 2018-19, comprising Rs 13,16,951 crore as tax revenue (net to Centre), Rs 2,46,219 crore of non-tax revenue and Rs 1,02,885 crore as non-debt capital receipts, which consists recovery of loans (Rs 17,840 crore) and disinvestment of public sector undertakings at Rs 85,045 crore.

Against the receipts, the total expenditure incurred by the Centre was Rs 23,11,422 crore (94.07 per cent of the corresponding revised estimate of 2018-19) out of which Rs 20,08,463 crore was on revenue account and Rs 3,02,959 crore on capital account.&nbsp;

What is particularly noteworthy is that out of the total revenue expenditure, as much as Rs 5,82,675 crore was on account of interest payments of past debt and Rs 1,97,066 crore on major subsidies.&nbsp;

In a nutshell, the gap between revenue and expenditure is not only widening, but also the quality of expenditure, particularly capital expenditure available, is too tiny to make a discernible dent on development.&nbsp;

Interestingly, even as the interim estimates were lower than the Budgeted estimates — euphemistically described as revised estimates — the interim Budget (2019-20) presented by the NDA government on February 1, before the poll bugle was sounded, assumed a leap of faith increase in total receipts for the current fiscal that began on April 1.

Now that the BJP government is back in the saddle and is to present a full-fledged Budget on July 5, the new finance minister must find ways and means to raise resources to match the pre-poll estimated surge in receipts.

This is especially daunting when the economy has lost the mojo to fire on all cylinders, what with both agriculture and manufacturing performing poorly.&nbsp;

Many reputed economists had argued that both tight monetary and fiscal policies fashioned simultaneously by the NDA authorities, when they had to institute inflation-targeting goal for the apex bank and also clean up the banking system that was stymied by whopping non-performing loans (assets), led to a growth slowdown in the recent past.

No doubt, there is merit in clearing the backlog so that the financial system can operate on a clean slate, but the need to keep the banks recapitalised so that they can resume their lending activities to productive segments at affordable rates of interest, should not be lost sight of.&nbsp;

The government could not infuse adequate capital to re-energise the banks from undertaking their core dharma, though it ostentatiously put in place a recapitalisation plan in phases.

As the Modi-1 government was preoccupied with economic experiments like demonetisation that kept the banking system busy, financial institutions parked their funds with the apex bank rather than lend, lest they should get compelled to handle potential problems of loan defaults over and above what they are already exposed to!&nbsp;

Simultaneous pursuit of austerity when growth slowdown is visible and financial stress escalating has proved to be a lethal cocktail.&nbsp;

As the private sector is proverbially slow to initiate steps on its own in the absence of affordable capital, it is time that the authorities disabuse themselves of the notion that more funds to lubricate the engines of the economy should flow from the coffers of the government only.&nbsp;

A modest cut in the cash reserve ratio (CRR) will help banks to augment their credit flow to industry and the non-banking finance companies (NBFCs), which are in dire straits today for want of wherewithal to help small industries and housing sectors to find alternative finance.

Much is expected of the finance minister to revive growth sentiments in the economy, push up public expenditure in both physical and social infrastructure and help find finances for private investment to restart with dynamism.&nbsp;

As prudence is a virtue mostly attributed to women than men, one may hope Nirmala Sitharaman will balance growth and inflation without the associated trauma of trade-off in her maiden Budget. &nbsp; 
&nbsp;

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-tough-calls-on-budget-day-2758999">original article)</a>

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp;

With the National Democratic Alliance (NDA) romping home easily for another five-year tenure, the first test is barely a few weeks away. Having steered choppy economic waters during its first term, the none-too-rosy state of the economy was seldom a binding constraint since security issues in the aftermath of Pulmawa, trumped bread-and-butter issues, including agrarian distress and lack of employment.

With the National Democratic Alliance (NDA) romping home easily for another five-year tenure, the first test is barely a few weeks away. Having steered choppy economic waters during its first term, the none-too-rosy state of the economy was seldom a binding constraint since security issues in the aftermath of Pulmawa, trumped bread-and-butter issues, including agrarian distress and lack of employment. The scattered opposition parties failed to galvanise themselves on any major economic issue, other than beating about the bush on the alleged corruption in the purchase of advanced aircraft, Rafale. Now that Prime Minister Narendra Modi has proved beyond a pale of doubt that he is a past-master in outmanoeuvring opponents at their own game, he will now have to devote time and energy in reviving the domestic economy and stoking demand so that the core sectors get kick-started to realise their optimal potential. No sooner has the new Finance Minister Nirmala Sitharaman assumed office, problems have come knocking at her door. With the Central Statistics Office’s (CSO) revealing that the economy lost further momentum to grow just by 5.8 per cent in the fourth quarter (Jan-Mar), the country’s gross domestic product (GDP) growth for fiscal 2018-19 at 6.8 per cent has understandably undershot even sanguine forecasts. To boot, the unaudited/interim accounts of the central government for 2018-19, also released alongside, presented the obverse and adverse side of the economic slowdown. Thus, the Centre compassed Rs 16,66,055 crore (91.40 per cent of corresponding revised estimate 2018-19 of total receipts) during 2018-19, comprising Rs 13,16,951 crore as tax revenue (net to Centre), Rs 2,46,219 crore of non-tax revenue and Rs 1,02,885 crore as non-debt capital receipts, which consists recovery of loans (Rs 17,840 crore) and disinvestment of public sector undertakings at Rs 85,045 crore. Against the receipts, the total expenditure incurred by the Centre was Rs 23,11,422 crore (94.07 per cent of the corresponding revised estimate of 2018-19) out of which Rs 20,08,463 crore was on revenue account and Rs 3,02,959 crore on capital account. What is particularly noteworthy is that out of the total revenue expenditure, as much as Rs 5,82,675 crore was on account of interest payments of past debt and Rs 1,97,066 crore on major subsidies. In a nutshell, the gap between revenue and expenditure is not only widening, but also the quality of expenditure, particularly capital expenditure available, is too tiny to make a discernible dent on development. Interestingly, even as the interim estimates were lower than the Budgeted estimates — euphemistically described as revised estimates — the interim Budget (2019-20) presented by the NDA government on February 1, before the poll bugle was sounded, assumed a leap of faith increase in total receipts for the current fiscal that began on April 1. Now that the BJP government is back in the saddle and is to present a full-fledged Budget on July 5, the new finance minister must find ways and means to raise resources to match the pre-poll estimated surge in receipts. This is especially daunting when the economy has lost the mojo to fire on all cylinders, what with both agriculture and manufacturing performing poorly. Many reputed economists had argued that both tight monetary and fiscal policies fashioned simultaneously by the NDA authorities, when they had to institute inflation-targeting goal for the apex bank and also clean up the banking system that was stymied by whopping non-performing loans (assets), led to a growth slowdown in the recent past. No doubt, there is merit in clearing the backlog so that the financial system can operate on a clean slate, but the need to keep the banks recapitalised so that they can resume their lending activities to productive segments at affordable rates of interest, should not be lost sight of. The government could not infuse adequate capital to re-energise the banks from undertaking their core dharma, though it ostentatiously put in place a recapitalisation plan in phases. As the Modi-1 government was preoccupied with economic experiments like demonetisation that kept the banking system busy, financial institutions parked their funds with the apex bank rather than lend, lest they should get compelled to handle potential problems of loan defaults over and above what they are already exposed to! Simultaneous pursuit of austerity when growth slowdown is visible and financial stress escalating has proved to be a lethal cocktail. As the private sector is proverbially slow to initiate steps on its own in the absence of affordable capital, it is time that the authorities disabuse themselves of the notion that more funds to lubricate the engines of the economy should flow from the coffers of the government only. A modest cut in the cash reserve ratio (CRR) will help banks to augment their credit flow to industry and the non-banking finance companies (NBFCs), which are in dire straits today for want of wherewithal to help small industries and housing sectors to find alternative finance. Much is expected of the finance minister to revive growth sentiments in the economy, push up public expenditure in both physical and social infrastructure and help find finances for private investment to restart with dynamism. As prudence is a virtue mostly attributed to women than men, one may hope Nirmala Sitharaman will balance growth and inflation without the associated trauma of trade-off in her maiden Budget. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Much is expected of finance minister Nirmala Sitharaman to revive economic growth

India Inc Thursday said BJP-led NDA's stupendous performance in Lok Sabha polls is an endorsement of Prime Minister Narendra Modi's decisive leadership, asserting that NDA 2.0 must unleash bold initiatives to transform the economy.

Several corporate honchos, including Anand Mahindra, Adi Godrej, Anil Agarwal and Sunil Mittal cheered as trends pointed towards the BJP and allies returning to power with a thumping majority, saying it was the time for deep reforms entwined with India's ambition to emerge as a global superpower.

"The government will now re-ignite its reforms agenda to push growth, tackle critical issues like creating more jobs, usher in more tax-friendly laws, strengthen India's position in global trade while protecting domestic industry from dumping and create more conducive environment to attract FDI in critical segments like mining and Oil &amp; Gas," Vedanta Resources Chairman Anil Agarwal said.

Bharti Enterprises Founder &amp; Chairman Sunil Bharti Mittal said the phenomenal mandate clearly underlines the nation's unambiguous confidence in Prime Minister Modi's decisive and visionary leadership.

This solid verdict would further strengthen his resolve to drive forward the economic agenda to ensure that the fruits of the economic momentum continue to reach the poor, so visible during the last five years, he added.

Mahindra Group Chairman Anand Mahindra said that Modi is set to become the most powerful democratically-elected leader in the world after the thumping win.

"Size of the country (Land mass+population) X Size of the Economy X Size of the election mandate = Leader's Power Quotient. By the measure of this crude formula, @narendramodi is about to become the most powerful, democratically elected leader in the world today...," Mahindra tweeted.

CII Director General Chandrajit Banerjee termed the verdict as a mandate for development and said, "The election results will reinvigorate the strong and constructive government-industry partnership and dialogue for growth built by the government in its previous term..."

In a blog post, Biocon Chairperson and MD Kiran Mazumdar-Shaw said the NDA 1.0 succeeded in formulating a five-year strategic plan which has been well appreciated by the country as is evident from the poll results.

"Therefore, NDA 2.0 must focus on the implementation of this plan in order to unlock opportunities for inclusive economic growth. Over the next five years NDA 2.0 must introduce policies that are bold, innovative and transformational to translate the economic potential into prosperity for all," she said.

Dalmia Bharat Group Managing Director Puneet Dalmia said, "The results are a clear indication that the country and its people are all for progress and stability."

Terming the NDA victory as a "strong mandate for continuity", JK Organisation Director Harsh Pati Singhania said, "I hope the government will redouble its efforts and continue the process of economic and social reforms and build on the strong foundations laid in its first term."

PHD Chamber of Commerce and Industry (PHDCCI) President Rajeev Talwar said the majority mandate has laid a heavy responsibility on the government to take unprecedented economic and social decisions that will transform the Indian economy from its current size of USD 2.6 trillion towards a growth rate of 8 to 10 per cent each year in the next five years.

RPG Enterprises Chairman Harsh Goenka said the resounding victory of BJP reinforces voter's choice of their most able leader to lead the nation.

"Markets got off to a roaring start, reflecting the sentiment of the nation. Unfinished agendas will get continuity and time to usher in prosperity and growth, both for Bharat and India," he tweeted.

Mahindra &amp; Mahindra Managing Director Pawan Goenka hoped that with the results in, Budget will come out very quickly, adding there is a need "to bring back government spending in a big way" as it had slowed down from the fourth quarter of the last financial year.

Assocham President B K Goenka said, "a strong and stable government would bring in more foreign investment even as domestic firms are witnessing renewed confidence. We are in for a virtuous cycle where consumption and investment drive each other."

Raymond Ltd CMD Gautam Hari Singhania said a decisive leadership and political stability is good for the country and a major boost for the fast-growing national economy and the victory should usher in a new era of industrial growth and policy reforms, including a significant fillip to the manufacturing sector.

Expressing similar sentiments, noted banker Uday Kotak said in a tweet, "Time for the transformation of India. Time for deep reform. I dream of us as a global superpower in my lifetime. Heartiest congratulations to @narendramodi, the BJP, and the NDA."

Godrej Group Chairman Adi Godrej said the new government is expected to take steps to ensure that India's gross domestic product (GDP) growth improves.

Dabur India Ltd Chief Financial Officer Lalit Malik said the new government should focus on overall economic development and employment creation, which would go a long way in accelerating consumer demand and improving overall GDP growth.

Surendra Hiranandani, Founder and Director at House of Hiranandani, said a stable government at the centre will further boost the growth in the real estate sector and hoped that it would take concrete action to push investments, increase growth and generate employment.

"The decisive mandate for the new government is a welcome development, which will allow undivided attention to national priorities like boosting employment and creating more enterprises across the country," a Snapdeal Spokesperson said.&nbsp;

India Inc Thursday said BJP-led NDA's stupendous performance in Lok Sabha polls is an endorsement of Prime Minister Narendra Modi's decisive leadership, asserting that NDA 2.

India Inc Thursday said BJP-led NDA's stupendous performance in Lok Sabha polls is an endorsement of Prime Minister Narendra Modi's decisive leadership, asserting that NDA 2.0 must unleash bold initiatives to transform the economy. Several corporate honchos, including Anand Mahindra, Adi Godrej, Anil Agarwal and Sunil Mittal cheered as trends pointed towards the BJP and allies returning to power with a thumping majority, saying it was the time for deep reforms entwined with India's ambition to emerge as a global superpower. "The government will now re-ignite its reforms agenda to push growth, tackle critical issues like creating more jobs, usher in more tax-friendly laws, strengthen India's position in global trade while protecting domestic industry from dumping and create more conducive environment to attract FDI in critical segments like mining and Oil & Gas," Vedanta Resources Chairman Anil Agarwal said. Bharti Enterprises Founder & Chairman Sunil Bharti Mittal said the phenomenal mandate clearly underlines the nation's unambiguous confidence in Prime Minister Modi's decisive and visionary leadership. This solid verdict would further strengthen his resolve to drive forward the economic agenda to ensure that the fruits of the economic momentum continue to reach the poor, so visible during the last five years, he added. Mahindra Group Chairman Anand Mahindra said that Modi is set to become the most powerful democratically-elected leader in the world after the thumping win. "Size of the country (Land mass+population) X Size of the Economy X Size of the election mandate = Leader's Power Quotient. By the measure of this crude formula, @narendramodi is about to become the most powerful, democratically elected leader in the world today...," Mahindra tweeted. CII Director General Chandrajit Banerjee termed the verdict as a mandate for development and said, "The election results will reinvigorate the strong and constructive government-industry partnership and dialogue for growth built by the government in its previous term..." In a blog post, Biocon Chairperson and MD Kiran Mazumdar-Shaw said the NDA 1.0 succeeded in formulating a five-year strategic plan which has been well appreciated by the country as is evident from the poll results. "Therefore, NDA 2.0 must focus on the implementation of this plan in order to unlock opportunities for inclusive economic growth. Over the next five years NDA 2.0 must introduce policies that are bold, innovative and transformational to translate the economic potential into prosperity for all," she said. Dalmia Bharat Group Managing Director Puneet Dalmia said, "The results are a clear indication that the country and its people are all for progress and stability." Terming the NDA victory as a "strong mandate for continuity", JK Organisation Director Harsh Pati Singhania said, "I hope the government will redouble its efforts and continue the process of economic and social reforms and build on the strong foundations laid in its first term." PHD Chamber of Commerce and Industry (PHDCCI) President Rajeev Talwar said the majority mandate has laid a heavy responsibility on the government to take unprecedented economic and social decisions that will transform the Indian economy from its current size of USD 2.6 trillion towards a growth rate of 8 to 10 per cent each year in the next five years. RPG Enterprises Chairman Harsh Goenka said the resounding victory of BJP reinforces voter's choice of their most able leader to lead the nation. "Markets got off to a roaring start, reflecting the sentiment of the nation. Unfinished agendas will get continuity and time to usher in prosperity and growth, both for Bharat and India," he tweeted. Mahindra & Mahindra Managing Director Pawan Goenka hoped that with the results in, Budget will come out very quickly, adding there is a need "to bring back government spending in a big way" as it had slowed down from the fourth quarter of the last financial year. Assocham President B K Goenka said, "a strong and stable government would bring in more foreign investment even as domestic firms are witnessing renewed confidence. We are in for a virtuous cycle where consumption and investment drive each other." Raymond Ltd CMD Gautam Hari Singhania said a decisive leadership and political stability is good for the country and a major boost for the fast-growing national economy and the victory should usher in a new era of industrial growth and policy reforms, including a significant fillip to the manufacturing sector. Expressing similar sentiments, noted banker Uday Kotak said in a tweet, "Time for the transformation of India. Time for deep reform. I dream of us as a global superpower in my lifetime. Heartiest congratulations to @narendramodi, the BJP, and the NDA." Godrej Group Chairman Adi Godrej said the new government is expected to take steps to ensure that India's gross domestic product (GDP) growth improves. Dabur India Ltd Chief Financial Officer Lalit Malik said the new government should focus on overall economic development and employment creation, which would go a long way in accelerating consumer demand and improving overall GDP growth. Surendra Hiranandani, Founder and Director at House of Hiranandani, said a stable government at the centre will further boost the growth in the real estate sector and hoped that it would take concrete action to push investments, increase growth and generate employment. "The decisive mandate for the new government is a welcome development, which will allow undivided attention to national priorities like boosting employment and creating more enterprises across the country," a Snapdeal Spokesperson said.

India Inc hails 'NaMo again', watches for bold reforms in NDA 2.0

Though all of India is waiting to see who wins the ongoing 2019 Lok Sabha elections, or better still, who will form the next government, it is pretty certain to me that whoever wins will have a challenge on hands to run the administration, because the economy is in a strange shape.

It is fashionable for any new government to blame its predecessor and also try to come out with new policies, and we saw a lot of it when Prime Minister Narendra Modi's NDA government did and said things that fixed responsibility on the previous UPA rule. It is true that the BJP-led government ended what was perceived to be a policy paralysis on several fronts and took measures to revive the power sector, fix a controversial spectrum allocation scheme in telecommunications and did a lot to make investing in India easier. Steps like the MUDRA loan scheme for entrepreneurs and brand-name schemes like Digital India and Startup India gave (at least in the eyes of the government itself) a fancy packaging edge to the economy.

But then, I ask myself, what if Modi leads the new government formed over the next few weeks? My view is that this time, it would be difficult for him to go back seven years or 70 to buy himself more time. Democracy works on the principle that if you have five years to rule, you do your best in those five years in a manner that those who voted for you get a good enough impression to elect you for another five. In the case of Modi, given his decisive steps on several fronts and his incredible capacity to articulate things, where he seemed to lack in the outcome, he made up in persuasion to buy more time. However, a second chance in politics is like a second inning. It gives elbow room to score runs but getting a second chance on a second chance is no option.

The strange thing about the Indian economy now is that there are two narratives that do not seem to intersect. One is that of investors, industries and infrastructure seekers. The other is of farmers and job seekers. To please the former you need good, clean policies and spending to boost the things that help industries. However, there is no guarantee that the investment that flows in generates jobs for tens of millions of youths in the short run. Any government that comes to power will have to make its choice carefully.

The Modi government reined in the fiscal deficit, but Rahul Gandhi-led Congress has made a big deal out of a shortage of jobs, an agrarian crisis and the goods and services tax (GST). Demonetisation of high-value notes by Modi has not really yielded fruits. All this leaves a big challenge to him if he gets re-elected. His current campaign has focused primarily on his being the leading "Chowkidar" of the nation with the Balakot air strikes and decisive promises to check terrorism. But, with 125 crore people in the world's fastest-growing major economy, the focus has to come back to investment, inflation management and jobs.

There is a controversy now that GDP growth may have been slower than estimated in recent years because the government's data estimates took into account a large chunk of shell companies that showed no real activity. Meanwhile, the NDA government's plan to introduce the Insolvency and Bankruptcy Code has run into rough weather. What this means is that it is taking longer for banks to get money out of companies that need to pay them back. The Supreme Court has got involved in the matter, adding obstacles in the administrative process. Indian businessmen love to fight in courts and particularly fight the government. Groups with state blessings, such as IL&amp;FS are in deep trouble, while a slew of brand name companies are in various states of crisis, such as Essar Steel, builder groups Jaypee and Amrapali, and, of course, the high-profile Jet Airways. These names are only symbolic of a deeper crisis in the economy in which too many people took too big bets on money taken from state-run banks in a manner that hurt both growth and jobs.

India's economic growth slowed down in 2018-19 due to declining growth in private consumption, slow growth in fixed investment, and muted exports. This happened even as agriculture suffered. Unemployment, meanwhile rose to 7.6 &nbsp;per cent in April, up from 6.7 per cent in March.&nbsp;

Loans that either did not yield interest or not paid back, called non-performing assets (NPAs), added up to more than Rs 10 lakh crore at the end of March. As much as 86 per cent of this was in public sector banks.

The next government needs to spend more taxpayer money to revive its banks so they can lend to help industries and agriculture. But fiscal deficit ran out of control this year after what seemed like a fine period of fiscal consolidation. Fiscal deficit crossed 134 per cent of the government's budget estimate for 2018/19 by the end of February, against 120 per cent a year earlier and the Centre upped its fiscal deficit target to 3.4 per cent from 3.3 per cent.

If Congress comes anywhere near power - either as the leader of a coalition or as part of it - it has to deliver on agriculture and jobs, and that requires fiscal spending muscle. If Modi comes back to power, he has to revive banking and industry and hope that translates into well-being for common Indians in rural areas.&nbsp;

While all that happens, China is having a trade war with the US, which is also pressuring India to follow its sanctions on Iranian oil, which is key for India. The US has prohibited India from importing oil from Iran after the waiver for India ran out on May 1.

Neither the fiscal situation nor the international trade environment is easy for the next government -- whoever that is. As they say in cricket, it would be a tough wicket to bat on, especially for any government that wants to keep both farmers and unemployed youths happy.

&nbsp;(This article was originally published on The ZeeNews. Read the <a href="https://zeenews.india.com/blogs/paisa-paisa-paisa-whoever-wins-the-2019-lok-sabha-elections-the-economy-will-be-their-biggest-challenge-2203594.html">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp; 
&nbsp;

Though all of India is waiting to see who wins the ongoing 2019 Lok Sabha elections, or better still, who will form the next government, it is pretty certain to me that whoever wins will have a challenge on hands to run the administration, because the economy is in a strange shape.

Though all of India is waiting to see who wins the ongoing 2019 Lok Sabha elections, or better still, who will form the next government, it is pretty certain to me that whoever wins will have a challenge on hands to run the administration, because the economy is in a strange shape. It is fashionable for any new government to blame its predecessor and also try to come out with new policies, and we saw a lot of it when Prime Minister Narendra Modi's NDA government did and said things that fixed responsibility on the previous UPA rule. It is true that the BJP-led government ended what was perceived to be a policy paralysis on several fronts and took measures to revive the power sector, fix a controversial spectrum allocation scheme in telecommunications and did a lot to make investing in India easier. Steps like the MUDRA loan scheme for entrepreneurs and brand-name schemes like Digital India and Startup India gave (at least in the eyes of the government itself) a fancy packaging edge to the economy. But then, I ask myself, what if Modi leads the new government formed over the next few weeks? My view is that this time, it would be difficult for him to go back seven years or 70 to buy himself more time. Democracy works on the principle that if you have five years to rule, you do your best in those five years in a manner that those who voted for you get a good enough impression to elect you for another five. In the case of Modi, given his decisive steps on several fronts and his incredible capacity to articulate things, where he seemed to lack in the outcome, he made up in persuasion to buy more time. However, a second chance in politics is like a second inning. It gives elbow room to score runs but getting a second chance on a second chance is no option. The strange thing about the Indian economy now is that there are two narratives that do not seem to intersect. One is that of investors, industries and infrastructure seekers. The other is of farmers and job seekers. To please the former you need good, clean policies and spending to boost the things that help industries. However, there is no guarantee that the investment that flows in generates jobs for tens of millions of youths in the short run. Any government that comes to power will have to make its choice carefully. The Modi government reined in the fiscal deficit, but Rahul Gandhi-led Congress has made a big deal out of a shortage of jobs, an agrarian crisis and the goods and services tax (GST). Demonetisation of high-value notes by Modi has not really yielded fruits. All this leaves a big challenge to him if he gets re-elected. His current campaign has focused primarily on his being the leading "Chowkidar" of the nation with the Balakot air strikes and decisive promises to check terrorism. But, with 125 crore people in the world's fastest-growing major economy, the focus has to come back to investment, inflation management and jobs. There is a controversy now that GDP growth may have been slower than estimated in recent years because the government's data estimates took into account a large chunk of shell companies that showed no real activity. Meanwhile, the NDA government's plan to introduce the Insolvency and Bankruptcy Code has run into rough weather. What this means is that it is taking longer for banks to get money out of companies that need to pay them back. The Supreme Court has got involved in the matter, adding obstacles in the administrative process. Indian businessmen love to fight in courts and particularly fight the government. Groups with state blessings, such as IL&FS are in deep trouble, while a slew of brand name companies are in various states of crisis, such as Essar Steel, builder groups Jaypee and Amrapali, and, of course, the high-profile Jet Airways. These names are only symbolic of a deeper crisis in the economy in which too many people took too big bets on money taken from state-run banks in a manner that hurt both growth and jobs. India's economic growth slowed down in 2018-19 due to declining growth in private consumption, slow growth in fixed investment, and muted exports. This happened even as agriculture suffered. Unemployment, meanwhile rose to 7.6 per cent in April, up from 6.7 per cent in March. Loans that either did not yield interest or not paid back, called non-performing assets (NPAs), added up to more than Rs 10 lakh crore at the end of March. As much as 86 per cent of this was in public sector banks. The next government needs to spend more taxpayer money to revive its banks so they can lend to help industries and agriculture. But fiscal deficit ran out of control this year after what seemed like a fine period of fiscal consolidation. Fiscal deficit crossed 134 per cent of the government's budget estimate for 2018/19 by the end of February, against 120 per cent a year earlier and the Centre upped its fiscal deficit target to 3.4 per cent from 3.3 per cent. If Congress comes anywhere near power - either as the leader of a coalition or as part of it - it has to deliver on agriculture and jobs, and that requires fiscal spending muscle. If Modi comes back to power, he has to revive banking and industry and hope that translates into well-being for common Indians in rural areas. While all that happens, China is having a trade war with the US, which is also pressuring India to follow its sanctions on Iranian oil, which is key for India. The US has prohibited India from importing oil from Iran after the waiver for India ran out on May 1. Neither the fiscal situation nor the international trade environment is easy for the next government -- whoever that is. As they say in cricket, it would be a tough wicket to bat on, especially for any government that wants to keep both farmers and unemployed youths happy. (This article was originally published on The ZeeNews. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Whoever wins the 2019 Lok Sabha elections, the economy will be their biggest challenge

India's goods exports picked up in March, boosted by the weaker rupee despite a slowdown in global trade growth, helping the country to contain its trade deficit despite a surge in oil imports.

Merchandise exports rose 11.02 per cent to $32.55 billion in March from a year earlier, while imports were up 1.44 per cent to $43.44 billion during the same period, a statement by the trade ministry said on Monday.

Oil imports, the biggest item in the import bill, rose 5.55 per cent to $11.75 billion, driven by a rise in Indian demand and increases in global crude prices.

India meets nearly 80 per cent of its fuel demand through imports.

The ministry does not issue separate data for trade in services. That is issued in about a month's time by the Reserve Bank of India.

However, the ministry did issue estimates for goods and services trade in the year to March 31, based on the full-year merchandise trade figures and the first 11 months of services trade.

Total exports of goods and services were estimated at $535.45 billion in the financial year, up 7.97 per cent from a year earlier, compared with estimated imports of $631.29 billion, up 8.48 per cent, the statement said.

Prime Minister Narendra Modi in 2015 set a target to double India's exports of goods and services to $900 billion, raising the country's share of global exports to 3.5 per cent from about two per cent, by 2020.

Modi, who is seeking a second term in a general election that began last week, has been criticised by industry and opposition parties for not doing enough to boost exports and create jobs in the manufacturing sector.

"The prospects for exports look very challenging going forward," said Ravi Sehgal, chairman of the Engineering Export Promotion Council, who referred to a slowdown in global trade amid trade tensions between the United States and China.

Exporters said the new government should make exports its top priority, as this sector has a huge potential for creating jobs, the most pressing need for the country.

India's elections will end on May 19 and the results are expected to be announced on May 23. The latest polls show Modi's party, with support from allies, is likely to form the next government.

India's goods exports picked up in March, boosted by the weaker rupee despite a slowdown in global trade growth, helping the country to contain its trade deficit despite a surge in oil imports.

India's goods exports picked up in March, boosted by the weaker rupee despite a slowdown in global trade growth, helping the country to contain its trade deficit despite a surge in oil imports. Merchandise exports rose 11.02 per cent to $32.55 billion in March from a year earlier, while imports were up 1.44 per cent to $43.44 billion during the same period, a statement by the trade ministry said on Monday. Oil imports, the biggest item in the import bill, rose 5.55 per cent to $11.75 billion, driven by a rise in Indian demand and increases in global crude prices. India meets nearly 80 per cent of its fuel demand through imports. The ministry does not issue separate data for trade in services. That is issued in about a month's time by the Reserve Bank of India. However, the ministry did issue estimates for goods and services trade in the year to March 31, based on the full-year merchandise trade figures and the first 11 months of services trade. Total exports of goods and services were estimated at $535.45 billion in the financial year, up 7.97 per cent from a year earlier, compared with estimated imports of $631.29 billion, up 8.48 per cent, the statement said. Prime Minister Narendra Modi in 2015 set a target to double India's exports of goods and services to $900 billion, raising the country's share of global exports to 3.5 per cent from about two per cent, by 2020. Modi, who is seeking a second term in a general election that began last week, has been criticised by industry and opposition parties for not doing enough to boost exports and create jobs in the manufacturing sector. "The prospects for exports look very challenging going forward," said Ravi Sehgal, chairman of the Engineering Export Promotion Council, who referred to a slowdown in global trade amid trade tensions between the United States and China. Exporters said the new government should make exports its top priority, as this sector has a huge potential for creating jobs, the most pressing need for the country. India's elections will end on May 19 and the results are expected to be announced on May 23. The latest polls show Modi's party, with support from allies, is likely to form the next government.

India's March exports pick up, help contain trade deficit

WION Wallet: Auto sales at their worst, signs of worry for Indian Economy

India’s passenger vehicle industry reported its worst performance in five years in the just-ended fiscal as higher fuel prices, increase in insurance costs, lack of financing options and farm distress crimped demand. Scooter sales grew at the slowest pace in 14 years, underscoring a slowdown in demand in urban markets.

India’s <a href="https://www.wionews.com/business-economy/in-2018-indias-gdp-to-grow-at-73-china-to-grow-at-65-world-bank-189117">GDP growth</a> is expected to accelerate moderately to 7.5 per cent in Fiscal Year 19-20, driven by continued investment strengthening, particularly private-improved export performance and resilient consumption, the World Bank has said.

The real GDP growth is estimated at 7.2 per cent in FY18/19, the World Bank said in its latest report on South Asia on Sunday ahead of the spring meeting of the World Bank and the International Monetary Fund. Data for the first three quarters suggest that growth has been broad-based. Industrial growth accelerated to 7.9 per cent, making up for a deceleration in services.

Balanced growth

Meanwhile, agriculture growth was robust at four per cent. On the demand side, domestic consumption remained the primary growth driver, but gross fixed capital formation and exports both made growing contributions. Over the last quarter, growth is expected to remain balanced across sectors, the report said. Inflation dynamics have been subdued over most of the FY18/19, the report said.

The World Bank said India’s GDP growth is expected to accelerate moderately to 7.5 per cent in FY19/20, driven by continued investment strengthening-particularly private- improved export performance, and resilient consumption. With robust growth, and food prices poised to recover, inflation is expected to converge toward four per cent, it said, adding that both the current account and the fiscal deficit are expected to narrow.

“On the external front, improvements in India’s export performance and low oil prices should bring about a reduction in the current account deficit to 1.9 per cent of GDP,” it said. “On the internal front, the consolidated fiscal deficit is projected to decline, albeit slowly (to 6.2 and 6.0 per cent of GDP in FY19/20 and FY20/21 respectively). As the centre’s deficit is budgeted to remain unchanged at 3.4 per cent of GDP in FY19/20, the burden of adjustment will rest on the states, the World Bank said.

Inflation

A sustained decline in food prices since July 2018, subsequently complemented by the softening of oil prices and concomitant appreciation of the rupee, has led to a steady decline in inflation, it noted. Observing that headline inflation stood at 2.6 per cent in February 2019, and the average for FY18/19 so far at 3.5 per cent, well below the RBI’s target-midpoint of four per cent, the report said that as a result, the RBI reduced the policy rate by 25 basis points (to 6.25 per cent) in February 2019. However, the report said that the current account deficit widened in FY18-19.

India’s external position worsened significantly in the first half of FY18-19, as large portfolio outflows were triggered by US monetary policy and fears of contagion from stress in some emerging market economies. The nominal exchange rate depreciated, and foreign reserves declined by over eight per cent over January to October 2018. However, since then, the decline in oil prices and the United States Fed signalling a slower pace of normalisation than initially anticipated led to a partial reversal. Portfolio outflows have reversed, and the rupee has appreciated by about four per cent since October 2018.

India’s GDP growth is expected to accelerate moderately to 7.5 per cent in Fiscal Year 19-20, driven by continued investment strengthening, particularly private-improved export performance and resilient consumption, the World Bank has said.

India’s GDP growth is expected to accelerate moderately to 7.5 per cent in Fiscal Year 19-20, driven by continued investment strengthening, particularly private-improved export performance and resilient consumption, the World Bank has said. The real GDP growth is estimated at 7.2 per cent in FY18/19, the World Bank said in its latest report on South Asia on Sunday ahead of the spring meeting of the World Bank and the International Monetary Fund. Data for the first three quarters suggest that growth has been broad-based. Industrial growth accelerated to 7.9 per cent, making up for a deceleration in services. Balanced growth Meanwhile, agriculture growth was robust at four per cent. On the demand side, domestic consumption remained the primary growth driver, but gross fixed capital formation and exports both made growing contributions. Over the last quarter, growth is expected to remain balanced across sectors, the report said. Inflation dynamics have been subdued over most of the FY18/19, the report said. The World Bank said India’s GDP growth is expected to accelerate moderately to 7.5 per cent in FY19/20, driven by continued investment strengthening-particularly private- improved export performance, and resilient consumption. With robust growth, and food prices poised to recover, inflation is expected to converge toward four per cent, it said, adding that both the current account and the fiscal deficit are expected to narrow. “On the external front, improvements in India’s export performance and low oil prices should bring about a reduction in the current account deficit to 1.9 per cent of GDP,” it said. “On the internal front, the consolidated fiscal deficit is projected to decline, albeit slowly (to 6.2 and 6.0 per cent of GDP in FY19/20 and FY20/21 respectively). As the centre’s deficit is budgeted to remain unchanged at 3.4 per cent of GDP in FY19/20, the burden of adjustment will rest on the states, the World Bank said. Inflation A sustained decline in food prices since July 2018, subsequently complemented by the softening of oil prices and concomitant appreciation of the rupee, has led to a steady decline in inflation, it noted. Observing that headline inflation stood at 2.6 per cent in February 2019, and the average for FY18/19 so far at 3.5 per cent, well below the RBI’s target-midpoint of four per cent, the report said that as a result, the RBI reduced the policy rate by 25 basis points (to 6.25 per cent) in February 2019. However, the report said that the current account deficit widened in FY18-19. India’s external position worsened significantly in the first half of FY18-19, as large portfolio outflows were triggered by US monetary policy and fears of contagion from stress in some emerging market economies. The nominal exchange rate depreciated, and foreign reserves declined by over eight per cent over January to October 2018. However, since then, the decline in oil prices and the United States Fed signalling a slower pace of normalisation than initially anticipated led to a partial reversal. Portfolio outflows have reversed, and the rupee has appreciated by about four per cent since October 2018.

India’s GDP expected to accelerate moderately to 7.5% in 2019-20: World Bank

India has been one of the fastest growing large economies in the world, the International Monetary Fund (IMF) has said, asserting that the country has carried out several key reforms in the last five years, but more needs to be done.

Responding to a question on India's economic development in the last five years at a fortnightly news conference here, IMF communications director Gerry Rice Thursday said, "India has of course been one of the world's fastest-growing large economies of late, with growth averaging about seven per cent over the past five years."

"Important reforms have been implemented and we feel more reforms are needed to sustain this high growth, including to harness the demographic dividend opportunity, which India has," he said.

Details about the Indian economy would be revealed in the upcoming World Economic Outlook (WEO) survey report to be released by the IMF ahead of the annual spring meeting with the World Bank next month, he said.

This report would be the first under Indian American economist Gita Gopinath, who is now IMF's chief economist.

"The WEO will go into more details. But amongst the policy priorities, we would include accelerate the cleanup of banks and corporate balance sheets, continue fiscal consolidation, both at centre and state levels, and broadly maintain the reform momentum in terms of structural reforms in factor markets, labour, land reforms and further enhancing the business climate to achieve faster and more inclusive growth," Rice said.&nbsp;

India has been one of the fastest growing large economies in the world, the International Monetary Fund (IMF) has said, asserting that the country has carried out several key reforms in the last five years, but more needs to be done.

India has been one of the fastest growing large economies in the world, the International Monetary Fund (IMF) has said, asserting that the country has carried out several key reforms in the last five years, but more needs to be done. Responding to a question on India's economic development in the last five years at a fortnightly news conference here, IMF communications director Gerry Rice Thursday said, "India has of course been one of the world's fastest-growing large economies of late, with growth averaging about seven per cent over the past five years." "Important reforms have been implemented and we feel more reforms are needed to sustain this high growth, including to harness the demographic dividend opportunity, which India has," he said. Details about the Indian economy would be revealed in the upcoming World Economic Outlook (WEO) survey report to be released by the IMF ahead of the annual spring meeting with the World Bank next month, he said. This report would be the first under Indian American economist Gita Gopinath, who is now IMF's chief economist. "The WEO will go into more details. But amongst the policy priorities, we would include accelerate the cleanup of banks and corporate balance sheets, continue fiscal consolidation, both at centre and state levels, and broadly maintain the reform momentum in terms of structural reforms in factor markets, labour, land reforms and further enhancing the business climate to achieve faster and more inclusive growth," Rice said.

India one of world's fastest-growing large economies: IMF

The rupee appreciated by 30 paise to 69.98 against the US dollar in opening trade Thursday, driven by foreign inflows and positive opening in domestic equities.

The rupee opened strong at 70.08 at the interbank forex market and then gained further ground and touched 69.98, a gain of 30 paise over its last close.

Forex dealers said selling of the American currency by exporters supported the rupee, but rising crude prices weighed on the local unit and capped the upmove.

Besides, fresh foreign fund inflows also boosted sentiments in domestic the forex market, they added.

The rupee Wednesday had strengthened by 21 paise to close at 70.28 against the US dollar.

Meanwhile, foreign investors (FIIs) remained net buyers in the capital markets, putting in Rs 1,130.78 crore on a net basis Wednesday, as per provisional data.

Brent crude futures, the global oil benchmark, rose 0.48 per cent to trade at $66.31 per barrel.

Meanwhile, the benchmark BSE Sensex was trading higher by 49.01 points, or 0.13 per cent, to quote at 36,685.11 in early trade, while the NSE Nifty was quoted at 11,057.25, up by 4.25 points, or 0.04 per cent.

The rupee appreciated by 30 paise to 69.98 against the US dollar in opening trade Thursday, driven by foreign inflows and positive opening in domestic equities. The rupee opened strong at 70.

The rupee appreciated by 30 paise to 69.98 against the US dollar in opening trade Thursday, driven by foreign inflows and positive opening in domestic equities. The rupee opened strong at 70.08 at the interbank forex market and then gained further ground and touched 69.98, a gain of 30 paise over its last close. Forex dealers said selling of the American currency by exporters supported the rupee, but rising crude prices weighed on the local unit and capped the upmove. Besides, fresh foreign fund inflows also boosted sentiments in domestic the forex market, they added. The rupee Wednesday had strengthened by 21 paise to close at 70.28 against the US dollar. Meanwhile, foreign investors (FIIs) remained net buyers in the capital markets, putting in Rs 1,130.78 crore on a net basis Wednesday, as per provisional data. Brent crude futures, the global oil benchmark, rose 0.48 per cent to trade at $66.31 per barrel. Meanwhile, the benchmark BSE Sensex was trading higher by 49.01 points, or 0.13 per cent, to quote at 36,685.11 in early trade, while the NSE Nifty was quoted at 11,057.25, up by 4.25 points, or 0.04 per cent.

Rupee surges 30 paise against US dollar in early trade

Globally, real estate development is an important parameter to measure economic growth. If one just looks at the demand for homes in India, the growth potential is huge. &nbsp;

Initiatives by the government, including ‘Housing for All by 2022’ offer&nbsp;major growth potential not just for the sector, but also for economic development and GDP growth.

Indian real estate is the engine which will power the Indian economy into the ‘big league’. From the ancillary industries that it supports to job creation – easily the next in line after agriculture and manufacturing – Indian real estate has the potential to reach the magic figure of ‘trillion dollars’.

Let us look at the route map to achieve this. A KPMG Report released at NAREDCO and APREA’s Real Estate &amp; Infrastructure Investors’ Summit in Mumbai last year stated that the Indian real estate will be a $1 trillion industry by 2030.

This will propel it to being the third largest economy globally – and this growth will be driven by not just the huge demand for homes, but also new and emerging asset classes within real estate, such as affordable housing, co-working spaces, warehousing and logistics, among others.

The ‘grease’, which will ensure this happens easily, is the post-RERA transparent regulatory environment powered by the economic and taxation reforms.

Estimates suggest that from $120 billion in 2017, the sector should grow to $650 billion by 2025. During this period, its contribution to GDP is estimated to go up from the present 7 per cent to 13 per cent. &nbsp;

Even as the new paradigm in post-RERA scenario ensures this does happen, we also need to factor in ground realities that will play a major role.

Infrastructure growth is opening up peripheral areas, as also creating satellite cities, the new growth centres of real estate. &nbsp;

Figures speak for themselves - from an average highways road construction pace of 3 km per day in May 2014, the figure now stands at 27 km per day. &nbsp;

The National Highways, earlier a stretch of 96,000 km, are now in the process of being doubled. &nbsp;

Creating jobs is another aspect where real estate powers the economy, and will help achieve the ‘trillion dollar’ target. The third largest employer, it employs over 50 million at present. &nbsp;

While the initial days of the new regulatory environment saw Indian real estate going through a phase of transition, now the story is largely about enhanced growth potential. &nbsp;

Over the past year, we have seen real estate post higher numbers, while also evolving and adopting global best practices. &nbsp;

From being an unorganised sector traditionally, Indian real estate has become more organised, transparent and now offers a safe and secure environment – ideal for investment that drives growth.

It has witnessed implementation of landmark reforms, which impacted it directly as also indirectly, be it GST, RERA, Insolvency and Bankruptcy Code and Benami Property Transaction Act, among others. &nbsp;

While the initial pain did exist, these reforms have taken the housing sector towards a healthier ecosystem and make the trillion dollar economy target sound feasible.

The biggest impact of these steps is financial discipline in the sector, which has also created a better perception for India as a global hub for investments. &nbsp;

Private equity investments in Indian real estate have improved 15 per cent year-on-year in January-March 2018, reaching $3 billion. &nbsp;

Overall, strong economic ground rules, proactive reforms and the use of technology will continue to boost the sector. &nbsp;

A number of new asset classes—such as co-working spaces, affordable housing, rental housing, and warehousing realty—have mushroomed in the country, and are fast gaining traction.

Backed by regulatory changes, the growth story of Indian real estate has been co-scripted by rapid urbanisation, increasing levels of income and growth in foreign and domestic investment, entry of international real estate players, investors and Indian corporate houses and the recent appreciation in EODB rankings.

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-indian-real-estate-can-evolve-into-trillion-dollar-economy-2721515">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.) 
&nbsp;

Globally, real estate development is an important parameter to measure economic growth. If one just looks at the demand for homes in India, the growth potential is huge.

Globally, real estate development is an important parameter to measure economic growth. If one just looks at the demand for homes in India, the growth potential is huge. Initiatives by the government, including ‘Housing for All by 2022’ offer major growth potential not just for the sector, but also for economic development and GDP growth. Indian real estate is the engine which will power the Indian economy into the ‘big league’. From the ancillary industries that it supports to job creation – easily the next in line after agriculture and manufacturing – Indian real estate has the potential to reach the magic figure of ‘trillion dollars’. Let us look at the route map to achieve this. A KPMG Report released at NAREDCO and APREA’s Real Estate & Infrastructure Investors’ Summit in Mumbai last year stated that the Indian real estate will be a $1 trillion industry by 2030. This will propel it to being the third largest economy globally – and this growth will be driven by not just the huge demand for homes, but also new and emerging asset classes within real estate, such as affordable housing, co-working spaces, warehousing and logistics, among others. The ‘grease’, which will ensure this happens easily, is the post-RERA transparent regulatory environment powered by the economic and taxation reforms. Estimates suggest that from $120 billion in 2017, the sector should grow to $650 billion by 2025. During this period, its contribution to GDP is estimated to go up from the present 7 per cent to 13 per cent. Even as the new paradigm in post-RERA scenario ensures this does happen, we also need to factor in ground realities that will play a major role. Infrastructure growth is opening up peripheral areas, as also creating satellite cities, the new growth centres of real estate. Figures speak for themselves - from an average highways road construction pace of 3 km per day in May 2014, the figure now stands at 27 km per day. The National Highways, earlier a stretch of 96,000 km, are now in the process of being doubled. Creating jobs is another aspect where real estate powers the economy, and will help achieve the ‘trillion dollar’ target. The third largest employer, it employs over 50 million at present. While the initial days of the new regulatory environment saw Indian real estate going through a phase of transition, now the story is largely about enhanced growth potential. Over the past year, we have seen real estate post higher numbers, while also evolving and adopting global best practices. From being an unorganised sector traditionally, Indian real estate has become more organised, transparent and now offers a safe and secure environment – ideal for investment that drives growth. It has witnessed implementation of landmark reforms, which impacted it directly as also indirectly, be it GST, RERA, Insolvency and Bankruptcy Code and Benami Property Transaction Act, among others. While the initial pain did exist, these reforms have taken the housing sector towards a healthier ecosystem and make the trillion dollar economy target sound feasible. The biggest impact of these steps is financial discipline in the sector, which has also created a better perception for India as a global hub for investments. Private equity investments in Indian real estate have improved 15 per cent year-on-year in January-March 2018, reaching $3 billion. Overall, strong economic ground rules, proactive reforms and the use of technology will continue to boost the sector. A number of new asset classes—such as co-working spaces, affordable housing, rental housing, and warehousing realty—have mushroomed in the country, and are fast gaining traction. Backed by regulatory changes, the growth story of Indian real estate has been co-scripted by rapid urbanisation, increasing levels of income and growth in foreign and domestic investment, entry of international real estate players, investors and Indian corporate houses and the recent appreciation in EODB rankings. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Indian real estate will power Indian economy into the ‘big league’

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