1.

Government set floor price of sugar won’t impact retail

prices: Indian Sugar Mills Association

Industry body Indian Sugar Mills Association (ISMA) thought welcomed

the Cabinet’s decisions of extending a package of Rs 8,500 crore to help
the sugar mills and cane farmers, it said that it may not impact retail
prices significantly.

"The decision to fix a minimum ex-mill sale price of sugar at Rs.29 per
kilo will improve ex-mill prices from current levels of around Rs. 28 per
kilo, but may not impact the retail prices in any significant way," stated a
release from ISMA.

The industry Association has said that the proposed minimum price of
Rs. 29 per kilo is not enough to cover the cost of sugarcane at FRP of
Rs.290 per quintal at the current all India average recovery of 10.8%.
“The ex-mill sugar price which supports the current FRP works out to
around Rs.35 per kilo and therefore the Rs.29 is inadequate,” it said.
ISMA said that it will be a challenge to expect the sugar industry to clear
the huge cane price arrears on this basis.

However, it welcomed other step of providing subsidised loans for

ethanol production capacity as an excellent move.
“ It will encourage setting up of more distilleries in the country over the
next 3 years and will help in diverting some of the surplus sugarcane into
ethanol and reduce surplus sugar in the long run. However the decision
to impose stock holding  limits on sugar mills tantamounts to controls on
sugar sales which is not the right way to move into the future,” it said.

Industry expects creation of buffer stocks of 30 lakh tons will reduce

some surplus sugar from the market, though only for a year, and will
improve market sentiments to support domestic prices.

“What is concerning is that there is no idea or proposal on rationalisation

of cane pricing policy, which is actually the main reason for all the
problems of the industry today,” stated that ISMA release.

Summary

Industry body Indian Sugar Mills Association (ISMA) thought

welcomed the Cabinet’s decisions of extending a package of Rs 8,500
crore to help the sugar mills and cane farmers, it said that it may not
impact retail prices significantly. "The decision to fix a minimum ex-mill
sale price of sugar at Rs.29 per kilo will improve ex-mill prices from
current levels of around Rs. 28 per kilo.”

Industry expects creation of buffer stocks of 30 lakh tons will reduce

some surplus sugar from the market, though only for a year, and will
improve market sentiments to support domestic prices.

“ It will encourage setting up of more distilleries in the country over the

next 3 years and will help in diverting some of the surplus sugarcane into
ethanol and reduce surplus sugar in the long run. However the decision
to impose stock holding limits on sugar mills tantamounts to controls on
sugar sales which is not the right way to move into the future,” it said.
“The ex-mill sugar price which supports the current FRP works out to
around Rs.35 per kilo and therefore the Rs.29 is inadequate,” it said.
“What is concerning is that there is no idea or proposal on rationalisation
of cane pricing policy, which is actually the main reason for all the
problems of the industry today,” stated that ISMA release. ISMA said
that it will be a challenge to expect the sugar industry to clear the huge
cane price arrears on this basis. 28 per kilo, but may not impact the retail
prices in any significant way 29 per kilo is not enough to cover the cost
of sugarcane at FRP of Rs.290 per quintal at the current all India
average recovery of 10.8%.

Effect on Economy

Sugar mills are lobbying for the government to hike the minimum selling
price (MSP) of sugar to ₹34.50 per kg to help them clear payment
arrears to cane farmers. The production rose 20% in the first five months
of the season which started in September, putting further pressure on
falling prices, said the Indian Sugar Mills Association on
Wednesday.This comes at a time when large numbers of sugarcane
farmers from western Uttar Pradesh, one of the country’s biggest sugar
producing areas, are camped on the borders of Delhi as part of the
protest against three farm reform laws.

By the end of February, 502 mills across the country had produced
almost 234 lakh tonnes of sugar, in comparison to 195 lakh tonnes
produced by 453 mills during the same period last year. Production has
shot up in Maharashtra and Karnataka, though it is slightly lower in Uttar
Pradesh than last year, according to ISMA data.“The prices are almost
₹80-100 per quintal less than what was prevailing a year back during the
corresponding period,” said ISMA. “This is not a good sign as low prices,
much below the cost of production for the last several months, have
adversely affected the liquidity of mills and their ability to pay the FRP [ie
Fair and Remunerative Price] to cane farmers. It is feared that if such a
situation persists then cane price arrears will jump very fast to
uncomfortable levels.”

Opinion:

Farmers resort to Sugar Cane cultivation in preference to rice mainly

because of lesser efforts for the same or more income. But, sugar is not
staple food unlike rice and move sugar production creates lesser
demand.

A balanced view of rice and sugar cultivation is necessary to be

exercised by the Agricultural authorities.
2. Gas price ceiling for deepwater output slashed by 33%
for six months

While the government has freed gas prices from its control, it caps the
maximum price any energy producer can change from customers mainly
because India’s gas market is yet to mature.

The government has slashed price ceiling for gas produced from
deepwater, ultra-deepwater and high pressure-high temperature areas of
Indian sedimentary basins by over 33% to $5.61 per unit for the first half
of current financial year.

Price ceiling for natural gas produced from other domestic fields have
also been reduced by 26% to $2.39 per unit for the first half of current
financial year ending September 30, 2020, according to two official
notifications. The unit for gas pricing is million metric British thermal unit
(mmBtu).

The new gas price ceilings will be applicable for six months from April 1,
2020 to September 30, 2020.

The previous price ceiling applicable from October 1, 2019 to March 31,
2020 for gas produced from deepwater, ultra-deepwater and high
pressure-high temperature areas was $8.43 per unit. For rest of the
fields it was $3.23 per unit.

While the government has freed gas prices from its control, it caps the
maximum price any energy producer can change from customers mainly
because India’s gas market is yet to mature.

The gas price ceiling is fixed for six months based on a formula linked
with the international energy markets. The formula is linked with the
weighted average price of four global benchmarks — the Henry Hub of
USA, the Canada-based Alberta gas, the UK-based NBP and the
Russian gas.

Price caps have been revised downwardly on March 31 mainly because

of a steep fall of energy prices in international oil markets, an oil ministry
official aware of the development said.

Summary

The Ministry of Petroleum and Natural Gas has slashed the price of
domestically produced natural gas to $1.79 per million British thermal
units (mBtu) for the October 2020 to March 2021. This is the third
consecutive cut in price of domestically produced natural gas in the
country. It is also the first time that the price has gone below $2 per
mBtu. The price ceiling for natural gas produced from difficult (High
Pressure-High Temperature, Deepwater and Ultra Deepwater
discoveries) fields was also cut to $4.06 per mBtu.

Effect on Economy

Volatile gas prices have taken center stage in the media as the national
average for a gallon of regular gasoline has experienced wild prices
swings over the past few years.

In the past, geopolitical tensions, hurricane seasons, flooding in the

Mississippi, and increased travel demand during the summer driving
season were forces pushing prices higher. At the individual level, higher
gas prices mean that each of us pays more at the pump, leaving less to
spend on other goods and services. But higher gas prices affect more
than just the cost to fill up at the gas station; higher gas prices have an
effect on the broader economy.

Inversely, when gas prices fall, it is cheaper to fill up the tank for both
households and businesses, and really eases costs on transportation-
focused industries like airlines and trucking—but it also puts a damper
on the domestic oil industry.

In general, higher oil prices are a drag on the economy. Here we will
focus on some of the direct and indirect negative effects of high gas
prices.

Opinion

The price of gasoline is made up of four factors: taxes, distribution and

marketing, the cost of refining, and crude oil prices. Of these four factors,
the price of crude oil accounts for nearly 70% of the price you pay at the
pump, so when they fluctuate (as they often do), we see the effects

3. Prices of oxygen concentrators, oximeters, nebulizers

jump by upto to 100% despite cap

Prices of oxygen concentrators, oximeters and nebulisers have surged

50-100% over the past ten days, with a huge demand-supply mismatch
amid the second wave of the coronavirus pandemic. Ecommerce giant
Amazon said it has started removing listings of accounts selling these
products above MRP, even as the organised medical devices industry,
legal entities and consumers called for enforcing pricing control over
these products. Prices of oxygen concentrators, which generate oxygen
from air, have almost doubled, while those of oximeters have shot up by
Rs 1,000-2,000 over the past seven days alone. Prices have shot up
across both offline stores and e-commerce platforms including Amazon
and Flipkart. The government had last year put a cap on the prices of
these products, but it is not being followed by some sellers, companies
and importers. An Amazon India spokesperson said the company is
taking immediate steps to halt the surge pricing.

“We are disappointed that some sellers are attempting to raise prices
beyond the MRP on certain products amid the pandemic. There is no
place for price gouging on Amazon and in line with our policy, we
continue to actively monitor our marketplace and take necessary action
including removal of listings and suspension of accounts against sellers
who are selling products above the MRP, which is in violation of Indian
laws,” the spokesperson said. An email seeking comment to Flipkart
remained unanswered at press time on Tuesday. Hundreds of tweets by
consumers have gone viral, that they had to shell out more than Rs 1
lakh to buy oxygen concentrators, which would usually be available for
Rs 45,000. Monthly rentals for the device, too, have shot up from Rs
5,000 to Rs 10,000-20,000.
“A lot of traders and importers, even on online marketplaces like Amazon
and Flipkart, have increased prices of Covid-essential medical products
by two-four times in just a week. The problem is more with imported
products by opportunistic traders who import these products at low
prices and then keep on increasing prices to take advantage of the
situation and blame it on their suppliers,” said Rajiv Nath, forum co-
ordinator of the Association of Indian Medical Device Industry. Oxygen
concentrator seller BPL Medical chief executive Sunil Kurana said the
company has reached out to its distributors and dealers and asked them
not to sell beyond a certain price and maintain the margin at a
reasonable level since several players are selling the products at
exorbitant prices.
Legal experts said existing guidelines must be enforced immediately.
“This is an enforcement issue right at the ground level. The cap on
pricing applies for all drugs including medicines and equipment and must
be adhered to by manufacturers or importers. However, what we are
witnessing is unscrupulous behaviour from stockists or sellers,” said
Varun Kalsi, partner at legal firm Priti Suri & Associates. The industry
has been pushing the government to put a price cap on these products,
at a maximum of three-four times the import landed price. The
concentrator market is import-dominated and a scarcity of material has
further aggravated the situation.

Summary

The government had last year put a cap on the prices of these products,
but it is not being followed by some sellers, companies and importers.
An Amazon India spokesperson said the company is taking immediate
steps to halt the surge pricing."We are disappointed that some sellers
are attempting to raise prices beyond the MRP on certain products amid
the pandemic. There is no place for price gouging on Amazon and in line
with our policy, we continue to actively monitor our marketplace and take
necessary action including removal of listings and suspension of
accounts against sellers who are selling products above the MRP, which
is in violation of Indian laws," the spokesperson said. Monthly rentals for
the device, too, have shot up from Rs 5,000 to Rs 10,000-20,000."A lot
of traders and importers, even on online marketplaces like Amazon and
Flipkart, have increased prices of Covid-essential medical products by
two-four times in just a week. The problem is more with imported
products by opportunistic traders who import these products at low
prices and then keep on increasing prices to take advantage of the
situation and blame it on their suppliers," said Rajiv Nath, forum co-
ordinator of the Association of Indian Medical Device Industry. The
industry has been pushing the government to put a price cap on these
products, at a maximum of three-four times the import landed price.

Effects on Indian Economy

The main effect on the economy from the rise in prices of oxygen
concentrators will be rise in black money and reduction in GDP. As for
example if a product is for Rs. 100 and it is being sold for Rs. 150 but in
the bill the amount mentioned is 100 but buyer has to pay 150. So the
amount earned by the seller other trhan the bill will be not going to
include in GDP because Rs 50 will not be shown in Books of account
and it will be Black money which can be used for terrorists funding or
money laundering, etc.

My views on the news

According to me before Covid era there was very less demand of oxygen
concentrators as compared to covid arrival time.

When in starting covid first stage was there in Indian then at that time
people were told that if a person suffers from covid then there will be
deficiency of oxygen in the body and when people heard about this then
so many people rushed into medical stores to get oxygen concentrators
for future in case they get covid and after some time when there was
problem regarding bed was going to full in the hospital then people
made a panic situation at that time which lead to people rushing to the
medical stores to get oxygen concentrators.

In my point of view the main reason for rise in the prices of oxygen
concentrators was the lack of oxuygen and the panic situation created in
public.

4. 77% of Indians want petrol and diesel under GST

Almost four out of every five Indians want petrol and diesel to come
under Goods and Services Tax (GST), as they grapple with the rising
cost, a LocalCircles survey said.
About 77% of the respondents said that they would want petrol and
diesel under GST.
“Majority of the Indian households want petrol and diesel to be moved
under GST as it will immediately have a huge positive impact on the cost
of living. Even at 28% GST rates the prices of petrol post such a move
will slide to Rs 75 a litre and diesel to Rs70 a litre. This could give a
huge impetus to the economy and businesses via increased consumer
spending,” the LocalCircles survey said.

Experts say that in the short term both the centre and states could see a
loss of revenue.

Rising prices of petrol in India hovering between Rs 100-110 a litre in

most cities and that of diesel between Rs 90-100 a litre for almost 12
months now has had an adverse impact on how citizens commute, how
much essentials and other goods cost, and how people draw up their
personal finances, at a time when Indian households are recovering from
the shock of a brutal second Covid wave. In a Local  Circles survey
conducted in first half of 2021, 51% households said that they have cut
spending to cope with high petrol/diesel prices; 21% had even cut
essentials spending and were feeling the pinch strongly while 14%
expressed they were even dipping into savings to pay for it, the survey
said.

The survey received more than 7500 responses from citizens located in
379 districts of India. 61% of the participants were men while 39% were
women. 44% of respondents were from tier 1 districts , 29% from tier 2
and 27% respondents were from tier 3, 4 and rural districts.

Given that the GST council is scheduled to meet today, LocalCircles has
conducted another survey to understand citizens’ pulse on whether
petrol and diesel should be brought under the purview of GST.

Summary

Almost four out of every five Indians want petrol and diesel to come
under Goods and Services Tax , as they grapple with the rising cost, a
LocalCircles survey said. About 77% of the respondents said that they
would want petrol and diesel under GST."Majority of the Indian
households want petrol and diesel to be moved under GST as it will
immediately have a huge positive impact on the cost of living. Even at
28% GST rates the prices of petrol post such a move will slide to Rs 75
a litre and diesel to Rs70 a litre. In a Local Circles survey conducted in
first half of 2021, 51% households said that they have cut spending to
cope with high petrol/diesel prices; 21% had even cut essentials
spending and were feeling the pinch strongly while 14% expressed they
were even dipping into savings to pay for it, the survey said. Given that
the GST council is scheduled to meet today, LocalCircles has conducted
another survey to understand citizens' pulse on whether petrol and
diesel should be brought under the purview of GST.

Effects on Indian Economy

If the GST council indeed decides to cover fuel prices under its regime,
then there will most likely be a maximum tax of 28 per cent on the base
price of petrol, diesel across all states.
This means the different rates of excise and VAT that the Centre and
states used to levy on the fuel prices will be replaced with a uniform GST
rate across the country.
At present in Delhi, the base price of petrol is Rs 40.78 and including the
freight charges, the amount for dealers comes out to be Rs 41.10. This is
our base price for petrol in Delhi, as per Indian Oil website.
To this we add excise duty of Rs 32.90, dealer commission Rs 3.84 and
VAT on dealer commission Rs 23.35. Calculating the total we get the
retail selling price of petrol in Delhi which is Rs 101.19.
Now, if prices start being regulated under the GST regime, this excise
duty (which is the Centre's share) and VAT (state's share) will be done
away with and 28 per cent GST will be levied on the base price which
comes out to be Rs 11.50. To this we will add the dealer's commission of
Rs 3.84 and our retail price of petrol comes down to Rs 56.44.
Similarly, for diesel the price charged to dealers is Rs 41.27 in Delhi, as
per the Indian Oil website. If we calculate as per the new regime then the
price will come down to Rs 55.41 from Rs 88.62 at present.
In the same manner, a litre of petrol in Karnataka currently attracts tax of
Rs 59 — Rs 32.9 central additional excise duty (AED) and 35 per cent
state sales tax on the sum of the base price (Rs 41.8) and AED. Under
GST, the retail rate will decrease from the present Rs 104.7 per litre to Rs
59.2 (including dealer commission of Rs 3). The price of diesel will fall
from Rs 94 per litre to Rs 50.
A similar scenario can be observed across states.

My Opinion on this news:

It may be noted that India levies the highest taxes on petrol and diesel.
This is due to high central and state taxes. At the moment, a litre of
petrol is retailing above Rs 101 per litre in New Delhi and over Rs 97 in
Mumbai. Diesel, on the other hand, costs Rs 88 per litre in the national
capital and Rs 96.19 per litre in Mumbai.

Therefore, the inclusion of petroleum products under GST would provide

much-needed relief to citizens. But given that the issue is politically
sensitive and impacts states, it may take a while before the proposal to
include petroleum products under GST becomes a reality.

States determine the tax on petroleum products after taking into account
crude oil price, transportation change, dealer commission and excise
duty imposed by the central government.

Experts indicated that several rounds of discussions would be needed

for all stakeholders to finally reach an agreement. Some believe that
states could even demand a new tax bracket higher than 28 per cent.
However, such a move would deter the idea of uniformity in taxes under
the GST regime.

5. Ford wakes up badly burnt from its India dream

When Ford Motor Co built its first factory in India in the mid-1990s, U.S.
carmakers believed they were buying into a boom - the next China.

The economy had been liberalised in 1991, the government was

welcoming investors, and the middle class was expected to fuel a
consumption frenzy. Rising disposable income would help foreign
carmakers to a market share of as much as 10%, forecasters said.

Last week, Ford took a $2 billion hit to stop making cars in India,
following compatriots General Motors Co and Harley-Davidson Inc in
closing factories in the country.
Among foreigners that remain, Japan's Nissan Motor Co Ltd and even
Germany's Volkswagen AG - the world's biggest automaker by sales -
each hold less than 1% of a car market once forecast to be the third-
largest by 2020, after China and the United States, with annual sales of
5 million.

Instead, sales have stagnated at about 3 million cars. The growth rate
has slowed to 3.6% in the last decade versus 12% a decade earlier.

Ford's retreat marks the end of an Indian dream for U.S. carmakers. It
also follows its exit from Brazil announced in January, reflecting an
industry pivot from emerging markets to what is now widely seen as
make-or-break investment in electric vehicles.

Analysts and executives said foreigners badly misjudged India's

potential and underestimated the complexities of operating in a vast
country that rewards domestic procurement.

Many failed to adapt to a preference for small, cheap, fuel-efficient cars

that could bump over uneven roads without needing expensive repairs.
In India, 95% of cars are priced below $20,000.

Lower tax on small cars also made it harder for makers of larger cars for
Western markets to compete with small-car specialists such as Japan's
Suzuki Motor Corp - controlling shareholder of Maruti Suzuki India Ltd,
India's biggest carmaker by sales.
Of foreign carmakers that invested alone in India over the past 25 years,
analysts said only South Korea's Hyundai Motor Co stands out as a
success, mainly due to its wide portfolio of small cars and a grasp of
what Indian buyers want.

"Companies invested on the fallacy that India would have great potential
and the purchasing power of buyers would go up, but the government
failed to create that kind of environment and infrastructure," said Ravi
Bhatia, president for India at JATO Dynamics, a provider of market data
for the auto industry.

EARLY MISSTEP

Some of Ford's missteps can be traced to when it drove into India in the
mid-1990s alongside Hyundai. Whereas Hyundai entered with the small,
affordable "Santro", Ford offered the "Escort" saloon, first launched in
Europe in the 1960s.

The Escort's price shocked Indians used to Maruti Suzuki's more

affordable prices, said former Ford India executive Vinay Piparsania.
Ford's narrow product range also made it hard to capitalise on the
appeal won by its best-selling EcoSport and Endeavour sport utility
vehicles (SUVs), said analyst Ammar Master at LMC.

The carmaker said it had considered bringing more models to India but
determined it could not do so profitably. "The struggle for many global
brands has always been meeting India's price point because they
brought global products that were developed for mature markets at a
high-cost structure," said Master.

A peculiarity of the Indian market came in mid-2000 with a lower tax rate
for cars measuring less than 4 metres (13.12 ft) in length. That left Ford
and rivals building India-specific sub-4 metre saloons for which sales
ultimately disappointed.

"U.S. manufacturers with large truck DNAs struggled to create a good

and profitable small vehicle. Nobody got the product quite right and
losses piled up," said JATO's Bhatia.

RISE AND FALL

Ford had excess capacity at its first India plant when it invested $1 billion
on a second in 2015. It had planned to make India an export base and
raise its share of a market projected to hit 7 million cars a year by 2020
and 9 million by 2025.

But the sales never followed and overall market growth stalled. Ford now
utilises only about 20% of its combined annual capacity of 440,000 cars.
To use its excess capacity, Ford planned to build compact cars in India
for emerging markets but shelved plans in 2016 amid a global consumer
preference shift to SUVs.

It changed its cost structure in 2018 and the following year started work
on a joint venture with local peer Mahindra & Mahindra Ltd designed to
reduce costs. Three years later, in December, the partners abandoned
the idea. After sinking $2.5 billion in India since entry and burning
another $2 billion over the past decade alone, Ford decided not to invest
more.

"To continue investing ... we needed to show a path for a reasonable

return on investment," Ford India head Anurag Mehrotra told reporters
last week.

"Unfortunately, we are not able to do that."

Summary

When Ford Motor Co built its first factory in India in the mid-1990s,
U.S.carmakers believed they were buying into a boom - the next China.
Last week, Ford took a $2 billion hit to stop making cars in India,
following compatriots General Motors Co and Harley-Davidson Inc in
closing factories in the country. Among foreigners that remain, Japan's
Nissan Motor Co Ltd and even Germany's Volkswagen AG - the world's
biggest automaker by sales - each hold less than 1% of a car market
once forecast to be the third-largest by 2020, after China and the United
States, with annual sales of 5 million. Analysts and executives said
foreigners badly misjudged India's potential and underestimated the
complexities of operating in a vast country that rewards domestic
procurement. Of foreign carmakers that invested alone in India over the
past 25 years, analysts said only South Korea's Hyundai Motor Co
stands out as a success, mainly due to its wide portfolio of small cars
and a grasp of what Indian buyers want."Companies invested on the
fallacy that India would have great potential and the purchasing power of
buyers would go up, but the government failed to create that kind of
environment and infrastructure," said Ravi Bhatia, president for India at
JATO Dynamics, a provider of market data for the auto industry. EARLY
MISSTEP Some of Ford's missteps can be traced to when it drove into
India in the mid-1990s alongside Hyundai.

Impact on Indian economy

If I talk about its impact on Indian economy , two things will get affected
in a very bad manner i.e.

Employement : ford provide employment to number of individual near

about 40000 direct employees was working in the ford . Now ford have
to lay off their employee as they shut down their operation.so employees
have to search another job to survive. Unemployment will rise as number
of employee have to leave company.

Revenue which was collected by the government from tax : Every

company have to pay tax to the govt according to their earning as ford
will be not in running of their business in india it will be loss of govt in
term of collecting tax

My views on news

The Indian market is especially tough for these MNCs due to the
dominance of the Japanese and Korean car makers. Maruti Suzuki has
a roughly 48 per cent share in the Indian market, while Hyundai India
has around 17 per cent. At the same time, demand has been muted.
Auto sales have registered a combined annual growth rate of just 1.5 per
cent in India over the past five years, upsetting the plans of MNCs who
have heavily invested in the Indian markets. The government has
announced a scrappage policy where it is mandatory to get one’s car
inspected when its registration certificate expires. As per law, a
registration certificate for a passenger vehicle is valid for 15 years from
the date of issue. But there is no clarity whether this will have any
significant impact on the sales of automobiles. In August this year,
wholesale auto sales fell 12 per cent year-on-year, which the industry
attributed to an ongoing shortage of semiconductors that has impacted
output, and the high commodity prices that have increased vehicle costs.
Add to this the rising cost of fuel in the past few months, and vehicle
demand is expected to remain under pressure, forcing companies to
rework their strategies in a ‘cost-conscious’ market like India.

6. Explained | What is a bad bank and why you should care

about it

MUMBAI: Union Finance Minister Nirmala Sitharaman on Thursday

announced that the Cabinet has approved Rs 30,600 crore in security
receipts to be issued by the National Asset Reconstruction Company
(NARC) towards resolution of bad loans.

The move is another step in the direction of making the NARC

operational. The government said banks have identified bad loans worth
Rs 2 lakh crore, which will be shifted to the NARC for resolution, and
nearly Rs 90,000 crore of bad debt would be resolved in the first phase.
The NARC is now awaiting a licence of operation from the Reserve Bank
of India after having filed an application with the central bank. The
government indicated that the licence is under process and could be
issued soon.
What is NARC?
NARC is basically a bad bank created by the government in the mould of
an asset reconstruction company-cum-asset management company.
The NARC will pick up bad loans above a certain threshold from banks
and would aim to sell them to prospective buyers of distressed debt. The
NARC will also be responsible for valuing the bad loans to determine at
what price they would be sold

Is it a good idea?
The idea of a bad bank in whatever mould has been a hotly debated one
in India. Its supporters have argued its benefits in freeing capital on the
balance sheet of PSBs, which can then kickstart the credit cycle in the
economy. Its detractors have argued that it only takes care of the here
and now, but does not fundamentally change the underlying problem of
lax credit standards and appraisal by banks.

Many have argued that governance reforms at state-owned lenders,

which account for two-thirds of the loans in the banking system, would
provide a long-term solution to the bad loan crisis that plagues India
every few years.

How will banks benefit from NARC?

For banks, mainly state-owned banks, the NARC is a heaven-sent. It will
allow banks to transfer the bad loans from their balance sheets to
NARC. The reduction of bad loans on balance sheets will allow banks to
free up capital that was locked up to cover for the bad loans. Eventually,
a successful resolution of the bad loan will also allow banks to reverse a
substantial chunk of the provisions made by them depending on the
amount recovered, which will boost their earnings.

How will NARC benefit the economy?

The majority of the bad loan pile in India is stuck with the state-owned
lenders. The pandemic has made the crisis worse, although relatively
less than what was expect ed expected, but RBI is projecting Indian
banking sector GNPAs to rise in 2021-22.

Public sector banks account for the majority of loans generated in the
Indian economy and because their capital has been stuck in providing
for the large amount of bad loans, their ability to lend has been
constrained.

Credit growth in India has been largely dormant in the past three years
due to low appetite in the corporate sector and households deleveraging
their balance sheet following the IL&FS crisis and the pandemic.

“Since the banks will remove these NPAs from their balance sheets, they
can focus on lending activities that can help trigger a fresh round of
credit off take that the economy badly needs,” said VK Vijayakumar,
chief investment strategist at Geojit Financial Services.

How will it benefit households?

With capital freed up and stress on the balance sheet eased, banks may
be more willing to ease credit standards and borrowing costs for
borrowers. While the interest rate that a borrower pays today is linked to
her collateral, credit score and income stream, in times of economic
distress, banks automatically tighten credit standards or charge higher
interest rates to discourage bad actors from borrowing. This form of
adverse selection imposes . a cost on the good borrower, who would
have otherwise paid lower interest rate on loan due to his high
creditworthiness.

( Originally published on Sep 16, 2021 )

Summary

The move is another step in the direction of making the NARC

operational. The government said banks have identified bad loans worth
Rs 2 lakh crore, which will be shifted to the NARC for resolution, and
nearly Rs 90,000 crore of bad debt would be resolved in the first phase.
The NARC is now awaiting a licence of operation from the Reserve Bank
of India after having filed an application with the central bank. The NARC
will also be responsible for valuing the bad loans to determine at what
price they would be sold Is it a good idea? It will allow banks to transfer
the bad loans from their balance sheets to NARC. The reduction of bad
loans on balance sheets will allow banks to free up capital that was
locked up to cover for the bad loans.

Effect on Economy

Challenges or problems

Coming to the bad bank, most of these bad assets are already fully
provided for, written down on the books of banks. The banks no longer
nurture hopes of a meaningful recovery.

From these assets, the most critical part will be how banks arrive at a
valuation for the transfer of these assets to the bad bank. The ability of
the bad bank to resolve these assets in a time-bound manner will be
critical for future provision write back by banks.

Another issue, which may arise, is selling stressed assets to potential

buyers and resolving the underlying crisis in the system.

Benefits

It will help lenders get rid of bad assets by transferring them to the bad
bank and clean up their books. The bad bank will release capital for the
banks and enable them to re-start lending. It will be more result-oriented
and hence be better able to recover the dues from the borrowers.

As it is supported by the government, it will not delay resolution due to

governance deficiencies, slow-moving judicial architecture, poorly
designed regulation, etc—the major issues faced by ARCs. Overall, it
will give a huge boost to the macro economy.

My Opinion on news

A ‘bad bank’ is a bank that buys the bad loans of other lenders and
financial institutions to help clear their balance sheets. The bad bank
then resolves these bad assets over a period of time. When the banks
are freed of the NPA burden, they can take a more positive look at the
new loans. Ideally, such a bank should be owned by the banks which
have the most of NPAs
7. Covid takes away at least 2 years of India's growth, GDP
Still below pre- pandemic levels

India’s Gross Domestic Product (GDP) in the quarter ending June 2021
grew by a whopping 20.1 per cent on-year, riding on a low base. Amid
the business shutdown and strict restrictions on movement, India’s
economy had nosedived by 24.4 per cent in the first quarter of last fiscal.
Though the growth percentage looks large, India would need some more
time to recover from the devastation caused by the pandemic. That too,
when the country was already reeling under stress since 2018.

Despite a record jump, India’s Q1 FY22 real GDP was well below the
pre-pandemic level of Q1 FY20. India’s GDP in Q1 FY22 (Rs 32.38 lakh
crore) is nearly nine per cent below the Q1 FY20 level (Rs 35.67 lakh
crore). This shows how the pandemic took away at least two years of
India’s economic growth.

Manufacturing and construction sectors had taken a massive blow and

succumbed to the strict nationwide lockdown, forcing agriculture to
single-handedly carry the baton of the Indian economy during the
pandemic. While manufacturing had fallen by 36 per cent, the
construction sector had shrunk by nearly half (49.5 per cent).

In the current fiscal’s first quarter, the damage has been repaired to an
extent, but the pre-pandemic level is still a distant dream for both areas
that are also among the largest employers. In Q1 FY22, manufacturing is
4.2 per cent while construction is 14.9 per cent below the Q1 FY20
levels.

“The sharp YoY expansion in Q1 FY2022 is analytically misleading, with

a sequential slowdown of 16.9 per cent over Q4 FY2021 and a shortfall
of 9.2 per cent relative to the pre-Covid level of Q1 FY2020,” Aditi Nayar,
chief economist at ICRA told India Today’s Data Intelligence Unit (DIU).

There will be a modest contraction over pre-Covid levels in the second

quarter, as agriculture and industries will be higher, but services will still
be lower, she added.

Some experts point out a silver lining too.

“Though it was feared that the second wave would make a deeper dent
on India’s economy, it did not play out that way. The learnings from the
first wave helped Indians cope with the second,” Madhavi Arora, lead
economist at Emkay Global, told DIU.

Going forward, exports and government investments could provide

immediate support to the economy, which is expected to reach pre-
pandemic levels between September 2021 and March 2022, she added.

Summary

4 per cent in the first quarter of last fiscal. Despite a record jump, India's
Q1 FY22 real GDP was well below the pre-pandemic level of Q1 FY20.
India's GDP in Q1 FY22 is nearly nine per cent below the Q1 FY20
level. Manufacturing and construction sectors had taken a massive blow
and succumbed to the strict nationwide lockdown, forcing agriculture to
single-handedly carry the baton of the Indian economy during the
pandemic. 9 per cent below the Q1 FY20 levels."The sharp YoY
expansion in Q1 FY2022 is analytically misleading, with a sequential
slowdown of 16. 2 per cent relative to the pre-Covid level of Q1
FY2020," Aditi Nayar, chief economist at ICRA told India Today's Data
Intelligence Unit.

Impact on Indian economy

The spiralling and pervasive COVID-19 pandemic has distorted the
world’s thriving economy in unpredictable and ambiguous terms. But it
significantly indicated that the current downturn seems primarily different
from recessions of the past which had jolted the country’s economic
order. Whereas the nations, conglomerates, corporations and
multinationals continue to understand the magnitude of the pandemic, it
is undoubtedly the need of the hour to prepare for a future that is
sustainable, structurally more viable for living and working.

While the unprecedented situation has caused a great damage to the

economy, especially during periods of lockdown, the nation will have to
work its way through it, by introduction of fiscal measures. As the
national government envisions, protection of both lives and livelihood is
required. The economic activity must begin gradually after screening of
the labour force. Strict preventive measures should be implemented by
the industry in order to safeguard the health of the workers. While policy
and reforms should be doled out by the government adequately to
salvage the economy, the industry, civil societies and communities have
an equal role in maintaining the equilibrium. The norms of social
distancing, avoiding or cancelling gatherings, and use of masks and
sanitisers should be the way of life till we are able to eradicate the virus.
During this time, the economy is juxtaposed with social behaviour of
humankind, so the responsibility of bringing back economic action is not
of government alone.

The risk of a global recession due to COVID-19 in 2020 and 2021 would
be extremely high, as it has been observed globally that the shutdown of
all economic activities—production, consumption and trade—to control
the spread of COVID-19 is imminent. The nature of shutdown is unique
in case of COVID-19 due to a supply shock, a demand shock and a
market shock.

My Opinion

. The recovery in economy depends on the timings and magnitude of

government support as well as the level of corporate debt and how the
companies and markets cope with lower demand. Government
assistance to those most in need (largely constituted of unorganised
sector, migrants and marginalised communities) is a critical measure to
save many lives.

However, every crisis brings about a unique opportunity to rethink on the

path undertaken for the development of a human being, community and
society. The COVID-19 pandemic has a clear message for the Indian
economy to adopt sustainable developmental models, which are based
on self-reliance, inclusive frameworks and are environment friendly.

8. How digital cash can lift gross national happiness

The tiny Himalayan kingdom of Bhutan, landlocked between the teeming

multitudes of China and India, shot to global fame in the 1970s with
gross national happiness: a broad measure of overall welfare it
prefers over the more traditional metric of gross domestic product, which
only includes production of goods and services, even those that
ultimately leave us miserable.

More recently, the hydroelectric-powered nation decided to become not

just carbon neutral — but carbon negative, its pristine forests acting as
a sink-hole to absorb the greenhouse gases released by its coal-
burning neighbors.
And now Bhutan wants a digital currency. 

Will a new payment instrument make the 800,000-strong, mostly

Buddhist society happier than it already is? My answer: It might. 

Cash is a relatively new construct in Bhutan. Up until the 1950s, the

people were still bartering in rice, butter, cheese, meat, wool, and hand-
woven cloth. Even civil servants accepted their pay in commodities.
Seven decades later, the Royal Monetary Authority has announced a
pilot with San Francisco-based Ripple for a national currency running on
distributed electronic account-keeping.

The open-source XRP ledger claims to be carbon neutral and 120,000

times more efficient than proof-of-work blockchains. Unlike El Salvador,
which has chosen to use the volatile and energy-guzzling Bitcoin as
money alongside U.S. dollars, Bhutan wants to retain the ngultrum, the
national currency. The bet is that a paperless version of the central
bank’s liabilities would be a more attractive alternative to bank deposits
for a sparse population scattered across a rugged, mountainous terrain.

Big gains are expected from the monetary authority making its IOUs

available to the public directly, as electronic cash that can be spent or
saved without requiring a commercial bank in the middle. The goal of
85% financial inclusion by 2023 is a substantial jump over the 67% of
adult Bhutanese who have bank accounts. Only a fifth of the population
has any credit facility. 

Bhutan is moving to test wholesale, retail and cross-border applications

of its central bank’s tokens, even as advanced nations are still
debating their utility. The Federal Reserve is yet to make up its mind;
research that will reveal its assessments of the pros and the cons of a
digital dollar is eagerly awaited around the world. Among larger
economies, China’s e-CNY plans are the most advanced.

Summary

The tiny Himalayan kingdom of Bhutan, landlocked between the teeming

multitudes of China and India, shot to global fame in the 1970s with
gross national happiness: a broad measure of overall welfare it prefers
over the more traditional metric of gross domestic product, which only
includes production of goods and services, even those that ultimately
leave us miserable. The bet is that a paperless version of the central
bank's liabilities would be a more attractive alternative to bank deposits
for a sparse population scattered across a rugged, mountainous terrain.
Big gains are expected from the monetary authority making its IOUs
available to the public directly, as electronic cash that can be spent or
saved without requiring a commercial bank in the middle. The goal of
85% financial inclusion by 2023 is a substantial jump over the 67% of
adult Bhutanese who have bank accounts. Only a fifth of the population
has any credit facility. The Federal Reserve is yet to make up its mind;
research that will reveal its assessments of the pros and the cons of a
digital dollar is eagerly awaited around the world.

Effect on economy

First, digital cash will make transactions less expensive, because the
cost of transferring digital cash through the Internet is cheaper than
through the conventional banking system. To transfer money, the
conventional banking system maintains many branches, clerks,
automatic teller machines, and electronic transaction systems of its own.
These overhead costs increase the fees of money transfers or credit
card payments through banks. But because digital cash uses the
existing Internet network and user's computers, the cost of digital cash
transfer will be much lower, probably nearly zero .This nearly zero cost
enables micropayments (e.g., payments of 10 or 50 cents), which may
foster a new distribution system of software such as music, movies, and
computer software. "Super distribution" is one of its practical applications
.

Second, because the Internet has no national borders, digital cash also
does not have national borders. Thus, the cost of transfer within a state
is equal to the cost of transfer across states. The cost of international
money transfer, which is much higher than the transfer within national
borders, will be reduced dramatically.

Third, digital cash payments can be used by everybody. Although credit

card payments are limited to authorized stores, digital cash payments
are possible for person-to-person payments. Thus, even very small
businesses or individuals can use these payments.
The consequence of these three effects is an enlargement of new
business opportunities and an expansion of economic activities on the
Internet which will directly leads to gross national happiness.

Opinion

A cashless society fosters lower crime rates as there is no tangible

money for criminals to steal.Money laundering and tax evasion are
reduced because there is always a paper trail.A cashless society
facilitates easier currency exchange while travelling abroad. There is no
need to figure out currency exchange rates as technology assists you in
more ways than one.By collecting extensive data through digital
transactions, consumers can use behavioural insights to manage their
spending habits and preferences.The risk of handling, storing, and
depositing cash is eliminated.Cashless transactions hinder the
generation of black money and therefore curbs corruption.

9. Make in India a great concept but what is under the

hood: Honeywell’s Ashish Modi

Across industries, there is a lack of frugal engineering as dumping of

cheap imported products is rampant in the name of 'Make in India', a
problem that needs to be addressed, says Ashish Modi, President,
Honeywell Building Technologies, Asia.

According to the representative of the technology company known for

industry-specific solutions, very few companies are today focused on
solving the real problems for SMEs.
"There is a weak manufacturing capacity, especially in electronics.
Further, MNCs are increasingly playing safe in the enterprise segment,"
he said in a virtual interaction on Tuesday.

While hailing the country as a global centre for production, Modi stressed
the need for attracting and grooming local talent.

In a make in India push, the company today launched three products,

including an AC controller, an AI-Based video surveillance system, and
DIY connected smoke detector. The company claims its AC controller
can save up to 30% in energy costs.

The brand is also expanding its reach through leading e-commerce

platforms for these plug-and-play connected products and solutions.

Summary
Across industries, there is a lack of frugal engineering as dumping of
cheap imported products is rampant in the name of 'Make in India', a
problem that needs to be addressed, says Ashish Modi, President,
Honeywell Building Technologies, Asia. According to the representative
of the technology company known for industry-specific solutions, very
few companies are today focused on solving the real problems for
SMEs."There is a weak manufacturing capacity, especially in
electronics. While hailing the country as a global centre for production,
Modi stressed the need for attracting and grooming local talent. In a
make in India push, the company today launched three products,
including an AC controller, an AI-Based video surveillance system, and
DIY connected smoke detector. The company claims its AC controller
can save up to 30% in energy costs.

Effects on Economy

Since its launch, Make in India has played a major role when it comes to
improving ease of doing business in India. The various initiatives being
undertaken have made a hugely positive impact on investor confidence.
Some of the major achievements are as follows:
Total FDI between April 2014 and March 2017 amounted to around 33%
of cumulative FDI into India since April 2000. In 2015-16, FDI inflow
crossed US$ 50 billion for the first time in any fiscal, and further in 2016-
17, FDI reached a record figure of US$ 60 billion. Cumulative FDI inflows
from April 2000 to March 2018 had reached US$ 546.45 billion (including
equity inflows, invested earnings and other capital). In 2017, India
retained its position as the world's most attractive destination for
greenfield FDI.

Measures to improve business confidence have led to progressive

improvements in India's rank in the World Bank's ease of doing business
rankings from 142 in 2014 to 100 in 2017.

Five industrial corridors and 21 new nodal industrial cities are being
developed to boost industrial growth.

The Insolvency and Bankruptcy Code 2016 has consolidated all rules
and laws pertaining to insolvency into one legislation, thereby bringing
India's bankruptcy code in step with global best practices.

The Government of India introduced a holistic National Intellectual

Property Rights (IPR) policy in May 2016 in order to spur creativity and
innovation in the Indian economy. During April - October 2017, 45,449
patents and 15,627 copyrights were filed in India, out of which 9,847
patents and 3,541 copyrights were granted.

My Opinion on news

Make in India has come with lots of benefits and advantages for the
Indian Economy. Due to this fact companies from across the globe
making a huge investment in Make in India project, and have thrived
successfully, making India a hub for the manufacturing companies,
overshadowing countries like the USA in the collection of FDI up to $63
billion during the previous year

The finest of the industrialists, support the make in India operation and
are happy to invest in the vision of an economically strong India, while
on the other hand, there is another set of industrialists and economists
who strongly hold the belief, that the Make in India might be a huge
threat to the evolution of India, ecologically and economically.

Vision of make in India;-

 Encourage young talent

 Increase brand value

 Expad GDP

Reason for why make in india in not effectively are following:-

1. Casually announce policy

2. There is no focus of any authority

3. So many sector include in make in india

4. Depend on foreign investment

5. There no focus on local investments

Up-gradation of Technology

Encourage young talent Increase brand value

Expad GDP

Reason for why make in india in not effectively are following:-

1. Casually announce policy

2. There is no focus of any authority

3. So many sector include in make in india

4. Depend on foreign investment

5. There no focus on local investments

10. Government ask powerplant to blend 10% imported

coal to step up supply
The government has asked thermal power units to restart the
discontinued practice of blending 10% imported coal on concerns over
depleting stock, while the coal and power ministries will explore ways to
further enhance supplies, sources told ET after high-profile deliberations
on Tuesday.
Secretaries of coal and power ministries at a review told the Prime
Minister's Office (PMO) that coal dispatches to power plants have
exceeded daily consumption. Both the ministries will also work on
improving coal logistics, as Coal India has stocks of about 40 million
tonnes at its mines.

Sources said coal dispatches to thermal power plants rose to 1.95

million tonnes on October 11 against a consumption of 1.9 million
tonnes. Dispatches are expected to increase to 2 million tonnes a d ay
and the situation is expected to improve soon.

Outages Continued
"The Prime Minister's Office reviewed the coal stock position at thermal
power plants and the measures being taken by the coal and power
ministries to contain the crisis as electricity consumption is expected to
remain high for a few more days," an official said.

This came after several states complained of low coal stocks, with some
even resorting to load-shedding over the last few days.

Outages continued in Punjab, Uttar Pradesh and R ajasthan, though the

situation was better than on Monday.

The power ministry earlier on Tuesday directed thermal power plants to

blend 10% imported coal, citing fast-depleting coal inventories at power
stations.

All thermal power plants can accommodate nearly 20% imported coal,
but the practice was stopped around 4-5 years ago due to increased
availability of domestic coal and less generation capacity utilisation.
A senior government official told ET that the cost of imported coal can be
passed on to consumers, but electricity generating companies said
importing coal at prevailing high prices and at short notice was not
possible.

Also, the power stations need approval from discoms to import coal for
blending.

Coal imported from Indonesia is at a historic high of $160 per tonne,

from about $50 a tonne in March. This is nearly five times the price of
domestic coal.
Sources in the Gujarat government told ET that the state was working to
get three imported coal-based plants to start generating power soon.

The state has three imported coal plants run by Tata Power (4,000 mw),
Adani Power (4,620 mw) and Essar Power (1,200 mw) which are
currently non-operational due to high fuel prices.

"We are buying a substantial amount of power from the exchange at

around Rs 13 per unit. We expect to reach a consensus in 2-3 days. If
this happens, prices on exchange will reduce too," a source said.

The power ministry also issued guidelines to states asking them to not
divert electricity allocated by the Centre from its share of coal-based
power stations of central Public Sector Undertakings. The ministry asked
states not to sell this electricity on power exchanges.

Normally, 15% of the capacity of central power generating stations is

reserved as "unallocated" quota for the Centre, which is subsequently
allocated to states as per a fixed formula.

The coal and power ministries have both said that coal stocks are likely
to rise as supply stabilises and electricity demand wanes with favourable
weather.

Average power prices on spot markets for delivery on Wednesday

dropped by ₹2 per unit but remains high at ₹13.13 per unit.

As of October 11, over 140 Gw of the 165 Gw monitored capacity had

coal stock of fewer than seven days. The average coal stock position
remained low, at four days.

The Central Electricity Authority (CEA), which is the technical wing of the
power ministry, on Tuesday issued a communication asking power
companies operating domestic coal-based power plants to start blending
10% imported coal.

“During the period August to September, the share of coal-based

generation has increased from about 62% in 2019 to 66% in 2021. As a
consequence, total consumption during Aug-Sep has increased by about
18% in comparison to the corresponding period in 2019. However, the
supply of coal from CIL (Coal India) is not commensurate with the
requirement. Hence, the coal stock available with the power plants is
depleting fast,” according to the communication.

Domestic thermal coal-based power plants will use imported coal up to

10% for blending with domestic coal, whenever feasible, to meet the
increased power demand in the country, it added.

All generation companies “shall expedite the process of importing coal

for blending to meet the requirement,” it added.

The power ministry also asked the states to utilise the Centre’s
unallocated power for supplying electricity to consumers within the state
and any surplus power to be reallocated to other needy states.
Sources said Coal India had 100 million tonnes of stock at the start of
the financial year, but states did not take delivery despite repeated
reminders.

The company does not hold stocks over this limit. Subsequently, as
international coal prices rose, states started taking more while extended
monsoon rainfall dampened production.

Additionally, nearly 10 states owe over Rs 19,000 crore to CIL, which

has impacted supplies. Maharashtra, West Bengal and Madhya Pradesh
owe CIL about Rs 2,600 crore, Rs 2,000 crore and Rs 1,000 crore,
respectively, sources said.

Summary

The government has asked thermal power units to restart the

discontinued practice of blending 10% imported coal on concerns over
depleting stock, while the coal and power ministries will explore ways to
further enhance supplies, sources told ET after high-profile deliberations
on Tuesday. Secretaries of coal and power ministries at a review told the
Prime Minister's Office that coal dispatches to power plants have
exceeded daily consumption. Outages Continued "The Prime Minister's
Office reviewed the coal stock position at thermal power plants and the
measures being taken by the coal and power ministries to contain the
crisis as electricity consumption is expected to remain high for a few
more days," an official said. The power ministry earlier on Tuesday
directed thermal power plants to blend 10% imported coal, citing fast-
depleting coal inventories at power stations. A senior government official
told ET that the cost of imported coal can be passed on to consumers,
but electricity generating companies said importing coal at prevailing
high prices and at short notice was not possible. Sources in the Gujarat
government told ET that the state was working to get three imported
coal-based plants to start generating power soon. The state has three
imported coal plants run by Tata Power , Adani Power and Essar
Power which are currently non-operational due to high fuel prices."We
are buying a substantial amount of power from the exchange at around
Rs 13 per unit. The power ministry also issued guidelines to states
asking them to not divert electricity allocated by the Centre from its share
of coal-based power stations of central Public Sector Undertakings. The
Central Electricity Authority , which is the technical wing of the power
ministry, on Tuesday issued a communication asking power companies
operating domestic coal-based power plants to start blending 10%
imported coal."During the period August to September, the share of
coal-based generation has increased from about 62% in 2019 to 66% in
2021. Hence, the coal stock available with the power plants is depleting
fast," according to the communication.

Effects on Indian economy

India on Tuesday allowed power producers to expedite imports of coal to

use for up to 10% of blends with the domestic grade to meet increased
power demand in a move that could push up already high global prices.
Asia's third-largest economy is facing large-scale outages as several
power plants have low coal inventories amid a sharp spike in global
energy prices.So far power plants that use local coal import little.The note
said supply from state-run Coal India is not commensurate with the surge
in electricity consumption, leading to a change in government policy on
coal imports.

India's power demand has been rising with the revival of the economy
after the lifting of Covid-induced restrictions.

My Opinion on news

The primary cause of the current crisis is that gencos lack funds to stock
sufficient coal as several unscrupulous discoms have been wilfully
delaying making overdue payments.
This is extremely shocking as huge loans were sanctioned to discoms to
clear pending dues - Government should immediately order SERCs to
investigate why this was not done and punish the officials responsible
not clearing dues to enforce accountability and ensure that such crisis do
not occur again
11. Auto debit rule: ICICI, Axis and HDFC assure continuity
of services

Three of India‘s largest non-public lenders – HDFC Bank, and Axis

Bank – mentioned they are going to meet the Reserve Bank of India’s
mandate for recurring payments forward of the October 1 deadline. The
dedication was given by the respective financial institution
spokespersons and communications despatched by the lenders to
prospects.

The growth comes at a time when India’s payments ecosystem, on-line

retailers and shoppers are anticipating large-scale disruption in recurring
funds by debit and bank cards owing to new central financial institution
guidelines.

According to sources, these banks are working with fee aggregators

Razorpay and BillDesk to combine with a standard e-mandate platform
that can guarantee compliance. Reserve Bank of India’s (RBI) new
guidelines mandate that banks can solely course of auto-debit
transactions in the event that they ship a pre-debit notification to
prospects at the least 24 hours earlier than the fee. “‘We will probably be
going stay within the subsequent 2-3 days, complying with RBI tips,”
mentioned Sanjeev Moghe, EVP & head – playing cards & funds, Axis
Bank. A spokesperson at ICICI Bank mentioned the financial institution
will go stay with a compliant system from October 1. HDFC Bank did not
reply, however as per a buyer communication reviewed by ET, the
lender can be working towards compliance.

“A common industry-wide platform has been developed, and HDFC

Bank has completed its internal development and integration,” the
communication by HDFC Bank acknowledged. “We are now working
jointly with merchants to make it live for customers at the earliest.”

Several banks had earlier expressed their lack of ability to adjust to this
rule earlier this 12 months. The central financial institution has already
postponed the implementation of this rule in March 2021 in a sternly
worded round which mentioned non-compliant banks processing such
transactions after September 2021 would face strict regulatory motion.

The new rule additionally states that auto-transactions above ₹5,000

would require a separate stream that would want prospects to
authenticate such funds manually with a One Time Password (OTP). In
reality, some of India’s largest web retailers – Google, Facebook,
YouTube – have over the previous few days communicated to the
purchasers that the brand new guidelines can result in massive scale
disruptions in e-mandate based mostly recurring funds. Others
seemingly affected would come with monetary services suppliers, OTT
platforms, telecom operators and information media.

It couldn’t be instantly decided whether or not different mass market

lenders together with State Bank of India would guarantee compliance.
SBI and RBI too did not reply.

However, regardless of these claims by banks, business sources

expressed apprehensions in regards to the timelines. According to an
govt, many of the big banks may seemingly miss the deadline owing to
procedural delays and procurement associated points.

Summary

Three of India's largest non-public lenders HDFC Bank, and Axis Bank
mentioned they are going to meet the Reserve Bank of India's mandate
for recurring payments forward of the October 1 deadline. The dedication
was given by the respective financial institution spokespersons and
communications despatched by the lenders to prospects. The growth
comes at a time when India's payments ecosystem, on-line retailers and
shoppers are anticipating large-scale disruption in recurring funds by
debit and bank cards owing to new central financial institution guidelines.
According to sources, these banks are working with fee aggregators
Razorpay and BillDesk to combine with a standard e-mandate platform
that can guarantee compliance. Reserve Bank of India's new guidelines
mandate that banks can solely course of auto-debit transactions in the
event that they ship a pre-debit notification to prospects at the least 24
hours earlier than the fee."'We will probably be going stay within the
subsequent 2-3 days, complying with RBI tips," mentioned Sanjeev
Moghe, EVP & head playing cards & funds, Axis Bank. HDFC Bank did
not reply, however as per a buyer communication reviewed by ET, the
lender can be working towards compliance."A common industry-wide
platform has been developed, and HDFC Bank has completed its
internal development and integration," the communication by HDFC
Bank acknowledged."We are now working jointly with merchants to
make it live for customers at the earliest". However, regardless of these
claims by banks, business sources expressed apprehensions in regards
to the timelines.

Effects on Economy

With this development, experts say the objective is to give more control
in the hands of customers over the auto-mandate facility. As the
customer can now determine and set the amount, velocity etc. of
recurring mandates. One can also annul a particular service whenever
required through web-based solutions offered by the banks.

With the aim to make online transactions more secure and safeguard the
interest of customers, the Reserve Bank of India, Bajaj says, has
adopted the following two-factor authentication. “The Bank is concerned
that auto-debit transactions on third-party apps and websites are
susceptible to fraud. Many times, cash outflows are executed even when
the customer has opted out. To a greater degree, the RBI is enforcing
two-factor authentication (AFA) to boost customer safety,” he adds.

Opinion
Since all kinds of recurring payments of more than ₹ 5,000 and above
are being preceded by a notification to the customer, 24 hours in
advance, these will go through only once the customer authenticates
them through OTP mode.

To explain the process a bit, while till now customers could execute
recurring transactions using their debit or credit cards, from October 1
onwards, all such recurring payments through cards will be routed
through the issuer bank.

In other words, customers will need to re-register themselves with each

of their payment instruments, whether it is a debit or a credit card. Once
this is done, the first recurring transaction will have to be conducted
through an additional factor authentication (AFA) system, i.e. through
approval in advance of such auto-debit requests, which are of value
above ₹ 5,000.

12. FM Nirmala Sitharaman launches National

Monetisation Pipeline, Rs 6 lakh crore expected till FY25

This pipeline will only include brownfield assets owned by the

government, Sitharaman said, and will not include land assets of the
government.
"The contractual partnerships which the Govt will enter, in executing the
monetisation pipeline, will be with full KPIs and performance indicators.
This will ultimately help in unlocking resources for the economy," the FM
said.
NITI Aayog Chief Executive Amitabh Kant said that the plan, which was
devised after extensive consultations with related parties would "unlock
value of government investment and public money in infrastrucutre".

Under the newly announced National Monetisation pipeline,

- Pipeline of government assets covers about 14% of Centre's outlay
- NMP covers over 20 asset classes and 12 line ministries

1. Ownership of the brownfield assets to remain with government

- There will be a mandatory handback of assets after the stipulated time.
- All assets will be de-risked.
"This will unlock resources for the economy, which is what we want," the
FM said.
2. Centre to incentivise States to monetise their assets
- Incentives to be given as 50-year interest-free loans.
- Upto Rs 5,000 crore already budgeted in the current year.
- If the states divest a PSU, they will receive 100% as financial
assistance.
- If they monetize the asset, they will receive 33% of that amount.
- If states list a public company in the stock markets, the government will
be give them 50% of that amount.

3. Roads, railways and power to be priority sectors

- Rs 1.6 lakh crore worth national highways of NHAI.
- Rs 67,000 crore worth transmission lines from Power Grid.
- Rs 32,000 crore worth Hydro, Solar, and Wind projects from NHPC,
NTPC, and Neyveli Lignite.
- 400 stations, about 150 trains, tracks and woodshed worth Rs 1.5 lakh
crore.

Summary

This pipeline will only include brownfield assets owned by the

government, Sitharaman said, and will not include land assets of the
government."The contractual partnerships which the Govt will enter, in
executing the monetisation pipeline, will be with full KPIs and
performance indicators. NITI Aayog Chief Executive Amitabh Kant said
that the plan, which was devised after extensive consultations with
related parties would "unlock value of government investment and public
money in infrastrucutre". Under the newly announced National
Monetisation pipeline, - Pipeline of government assets covers about 14%
of Centre's outlay - NMP covers over 20 asset classes and 12 line
ministries 1. Ownership of the brownfield assets to remain with
government - There will be a mandatory handback of assets after the
stipulated time.- All assets will be de-risked."This will unlock resources
for the economy, which is what we want," the FM said.2. Centre to
incentivise States to monetise their assets - Incentives to be given as 50-
year interest-free loans.- Upto Rs 5,000 crore already budgeted in the
current year.- If the states divest a PSU, they will receive 100% as
financial assistance.- If they monetize the asset, they will receive 33% of
that amount.- If states list a public company in the stock markets, the
government will be give them 50% of that amount.

Effects on Economy

The NMP comes up as a proof that the assets might have been built by
the government, but efficient utilisation of these assets can be done with
the help of private sector. This creates a huge opportunity for various
sectors, including real estate, for putting across the potential in boosting
the economic growth. This is likely to take the FDI & the domestic capital
flow on a higher side. The true essence of the National Monetisation
Pipeline will be realised in smooth execution & effective implementation.
The government looks determined with monthly & quarterly review
mechanisms to actualise the said targets. A mix of fair risk & reward
allocation along with efficiency in the process is sure to make it a
success. If taken in the right direction & complete focus, this might be a
great push for the nation’s growth. The blend of public and private sector
can prove to be the game changer!

Opinion

In my opinion it is important to execute NMP to boost infrastructure

growth, which in turn requires long-term capital that banks are normally
not keen to finance. It must be noted that the long-term concession of
core operational assets, which garners upfront funds that can be
invested in other infrastructure assets, has been occasional or sector-
specific. Given the benefits of this approach validated by successful
execution of the exercise by agencies such as National Highways
Authority of India, the need to systematically adopt these initiatives
across varied asset classes and streamline the modality of its functioning
has been felt. Additionally, the fixed asset turnover ratio for Central
Public Sector Enterprises (CPSEs) has been on a decline. Given the
CPSEs have gross fixed assets valued at Rs 14.4 lakh crore
cumulatively, there is a lot of unmet potential that can be met by its
effective utilisation under the NMP.

Although monetisation through disinvestment and privatisation has been

achieved in various sectors by the current dispensation, mere
monetisation is not always considered enough—the fear of squandering
of funds or its unwise allocation may prevail. A clear strategy of asset
recycling that will accompany the NMP will help allay these fears.

NMP is, thus, an initiative by the government to strategise the asset

monetisation of brownfield public sector assets by tapping institutional
and long-term capital, which can thereafter be leveraged for further
public investments. NMP has adopted a bottom-up approach where the
existing core infrastructure asset base managed under central sector
agencies is identified and mapped. Category of assets covered under
the plan include de-risked brownfield core assets. De-risked assets
without any pending issues of land acquisition, financial constraints or
other clearance requirements, will be considered. Assets that are central
to the business objectives of an entity and are used for delivering
infrastructure services to the public or users are considered as core
assets for the purposes of monetisation. These include asset classes
such as transport (roads, rail, ports, airports), power generation,
transmission networks, pipelines, warehouses etc.

13. Higher tax buoyancy augurs well for India's

expansionary fiscal policy
Seldom we see government revenues running ahead of the budgeted
targets in India. But this year, it seems that rarity would strike. Despite
the dreadful second Covid wave crippling economic activities during
April-May of the current fiscal, a remarkable jump in central government
revenues this year has left everyone astounded. During the first four
months of this fiscal, the central government gross tax revenues have
surged to Rs 7 trillion, nearly twice the gross tax revenues garnered
during the same period last year. It’s plausible to argue that the sharp
jump in revenues might be exaggerated due to the extremely low base of
last year when Covid-19 first struck us, bringing the economy to a
screeching halt. But even if we compare it with the pre-Covid period,
government revenues are still up 29.1% against the first four months of
2019-20, which is no mean feat given the fact that economic activities
were marred by partial lockdowns this year as well.

A further analysis of data divulges that the sharp rise in government

revenues is quite broad-based and is not led by any one-off factors. For
example, the personal income tax collections rose to Rs 1.61 trillion
during April-July 2021-22, the highest-ever during the first four months of
any fiscal year. Similarly, the corporate tax collections surged to Rs 1.46
trillion, again the highest-ever in the first four months of any fiscal year.
The indirect tax collections have also surged to Rs 3.8 trillionn during the
same period, up 19.5% against the same period last year.

Five factors are driving the revenues ahead of expectations. One,

companies in the tech sector (software development, artificial
intelligence, robotics and data science etc.) have offered enormous
salary increments in a range of 20% to 60% this year in order to keep
the mounting attrition rate under check. Tech firms are vying with each
other to entice IT professionals who, out of the blue, are in huge demand
due to the pandemic induced digital boost. This has given a fillip to
personal income tax collections. Two, surge in Security Transaction Tax
(STT) collection is also aiding personal income tax collections led by
surge in stock markets. Three, corporates have seen an upward revision
in their earnings led by pent up demand and cost saving measures
embraced during the pandemic, resulting in higher tax payment to the
government. Four, the excise duty hikes implemented when crude oil
prices had fallen to around $30/bbl last year are also contributing to
higher excise duty collections as petroleum products consumption
returns to normalcy. Five, tax authorities tightening the screws on the
compliance front is also one of the reasons for buoyancy in government
revenues.

In total, the central government could garner Rs 3.2 trillion surplus

revenue over and above the budgeted targets for 2021-22 on account of
higher than budgeted collection from excise duty collections by Rs
90,100 crore, GST by Rs 78,000 crore, dividend from RBI and PSUs by
Rs 70,100 crore, direct taxes by Rs 52,200 crore and custom duty
collections by Rs 25,000 crore.

What would the government do with this windfall gain in revenue? From
the Rs 3.2 trillion likely surplus revenues, around Rs 79,600 crore would
go to states as part of devolution, which would help mend state
government finances. Then the central government would have a net Rs
2.4 trillion surplus revenue over and above the budgeted revenue target
for the year. To my mind, the government would have four options to
spend this money. One, it can bump up spending on public infrastructure
(capex), which would create employment and recuperate economic
activities leading to lingering economic revival. Two, the government can
cut taxes, especially excise duties on oil or lower GST rates for some
categories in order to spur consumer demand. Three, the government
might choose not to spend it at all and utilize it to reduce the fiscal deficit
to 6% of GDP vs. the budgeted 6.8% of GDP in 2021-22, which would
reduce market borrowings and would keep the bond yields low. Also,
though the government sounds confident to achieve the magnanimous
Rs. 1.75-trillion disinvestment target, a part of the surplus revenues
could be used as a revenue shock absorber in case the LIC or BPCL
divestment does not go through.

Buoyancy in government revenues is a welcome surprise and it would

provide a fillip to government confidence to decide future course of
action in order to put the economy back on track. In fact, it has started
bearing fruits. The central government has sped up clearing all pending
devolution to states, which in turn, would improve the payment cycle in
the economy. Comfort on the revenue front has also helped the
government to take the decision to scrap the retrospective taxation on
the sale of assets in India by foreign entities executed before May 2012,
which would enhance the long-term growth perspective of the economy.
Also, the government jacked up Capex, which stood at Rs. 1.1tn during
the first quarter of 2021-22, a whopping 77% higher than the first quarter
of 2019-20 (pre-Covid period).

To sum it up, the sun is indeed shining for the government finances.
Higher than budgeted revenues are surely going to mend government’s
impaired finances in 2021-22. Even though the naysayers are busy nit-
picking, for the government, however, it’s time to cash in on the surplus
revenues and put it to use to expedite economic revival.

Summary

Despite the dreadful second Covid wave crippling economic activities

during April-May of the current fiscal, a remarkable jump in central
government revenues this year has left everyone astounded.During the
first four months of this fiscal, the central government gross tax revenues
have surged to Rs 7 trillion, nearly twice the gross tax revenues
garnered during the same period last year.But even if we compare it with
the pre-Covid period, government revenues are still up 29.1% against
the first four months of 2019-20, which is no mean feat given the fact
that economic activities were marred by partial lockdowns this year as
well.In total, the central government could garner Rs 3.2 trillion surplus
revenue over and above the budgeted targets for 2021-22 on account of
higher than budgeted collection from excise duty collections by Rs
90,100 crore, GST by Rs 78,000 crore, dividend from RBI and PSUs by
Rs 70,100 crore, direct taxes by Rs 52,200 crore and custom duty
collections by Rs 25,000 crore.From the Rs 3.2 trillion likely surplus
revenues, around Rs 79,600 crore would go to states as part of
devolution, which would help mend state government finances.Then the
central government would have a net Rs 2.4 trillion surplus revenue over
and above the budgeted revenue target for the year.

Buoyancy in government revenues is a welcome surprise and it would

provide a fillip to government confidence to decide future course of
action in order to put the economy back on track.

My Opinion on news

High rate of taxes affects the both sections poor or rich . In my opinion
higher tax rate could be beneficial for the expansion of india but at the
same time it could effected the people of country in certain ways like
inflation, sentiments of people etc.

Higher tax means increase the income of govt. if the govt use the
revenues collected through taxes in such a way it should be then this will
be very beneficial If govt. spend in various development of country like
recently govt lauch atama nirbhar bharat scheme to make india self-
reliant by providing financial aid to the industry which affected because
of covid.

High tax is the burden on middle class people as we know middle class
cover huge portion of tax payer and govt. did not do anything to support
them

Recovery from covid. Higher tax also help country to help country
affected by covid . Govt face huge loss because of covid no economic
activity was taken place at the time of covid.
14. IMF sees global GDP in 2021 slightly below prior
forecast of 6%

The International Monetary Fund (IMF) expects global economic growth in

2021 to fall slightly below its July forecast of 6%, IMF chief Kristalina
Georgieva said on Tuesday, citing risks associated with debt, inflation and
divergent economic trends in the wake of the Covid-19 pandemic.
Georgieva said the global economy was bouncing back but the pandemic
continued to limit the recovery, with the main obstacle posed by the
"Great Vaccination Divide" that has left too many countries with too little
access to Covid vaccines.

In a virtual speech at Bocconi University in Italy, Georgieva said next

week's updated World Economic Outlook would forecast that advanced
economies will return to pre-pandemic levels of economic output by 2022
but most emerging and developing countries will need "many more years"
to recover.
"We face a global recovery that remains 'hobbled' by the pandemic and its
impact. We are unable to walk forward properly - it is like walking with
stones in our shoes," she said.

The United States and China remained vital engines of growth, and Italy
and Europe were showing increased momentum, but growth was
worsening elsewhere, Georgieva said.
Inflation pressures, a key risk factor, were expected to subside in most
countries in 2022 but would continue to affect some emerging and
developing economies, she said, warning that a sustained increase in
inflation expectations could cause a rapid rise in interest rates and tighter
financial conditions.
While central banks could generally avoid tightening for now, they should
be prepared to act quickly if the recovery strengthened faster than
expected or risks of rising inflation materialized, she said.
She said it was also important to monitor financial risks, including
stretched asset valuations.
Global debt levels, now at about 100% of world gross domestic product,
meant many developing countries had very limited ability to issue new
debt at favorable conditions, Georgieva said.
Georgieva said it was important that debt restructuring efforts already
initiated by Zambia, Chad and Ethiopia be concluded successfully to
encourage others to seek help.
Better transparency about debts, sound debt management practices and
expanded regulatory frameworks would help ensure increased private
sector participation, she said in response to a question from a participant.
Asked about rising debt levels in Europe, Georgieva said growing
economic momentum had put Europe on a sound footing to avoid another
sovereign debt crisis like the one faced by Greece in the aftermath of the
global financial crisis of 2007–08.
But she said countries would have to plan carefully how to shift course to
medium-term fiscal consolidation to erase the increased pandemic-related
debt burden.
"The bills are going to come due," she said, adding that good planning
was needed to ease debt burdens over time while avoiding "brutal" cuts in
education or healthcare funding.
Accelerate vaccine deliveries
Georgieva urged richer nations to increase delivery of Covid-19 vaccines
to developing countries, remove trade restrictions and close a $20 billion
gap in grant funding needed for Covid-19 testing, tracing and
therapeutics.
Failure to close the massive gap in vaccination rates between advanced
economies and poorer nations could hold back a global recovery, driving
cumulative global GDP losses to $5.3 trillion over the next five years, she
said.
Georgieva said countries should also accelerate efforts to address climate
change, ensure technological change and bolster inclusion - all of which
could also boost economic growth.
A shift to renewable energy, new electricity networks, energy efficiency
and low carbon mobility could raise global GDP by about 2% this decade,
creating 30 million new jobs, she said.

Summary

The International Monetary Fund (IMF) expects global economic growth

in 2021 to fall slightly below its July forecast of 6%, IMF chief Kristalina
Georgieva said on Tuesday, citing risks associated with debt, inflation
and divergent economic trends in the wake of the Covid-19 pandemic.

Global debt levels, now at about 100% of world gross domestic product,
meant many developing countries had very limited ability to issue new
debt at favorable conditions, Georgieva said.

Asked about rising debt levels in Europe, Georgieva said growing

economic momentum had put Europe on a sound footing to avoid
another sovereign debt crisis like the one faced by Greece in the
aftermath of the global financial crisis of 2007–08.

Effects on Economy

A fall in GDP affects the poor more. Inequality may become more
noticeable.

Though studies have proved that growth does not necessarily reduce
inequality, inclusive growth tends to benefit everyone. A growth in which
the poor participate in the growth process will definitely have a positive
impact on the inequality front. Research finds strong evidence that
sustained growth is the most important way to reduce poverty. On
average, a 1% increase in per capita income reduced poverty by 1.7%.

Growth creates more opportunities in the labour markets and increases

financial inclusion. So, nothing would work better than economic growth,
in enabling a rise in the standard of living of people, including those at
the very bottom.
A fall in per capita income reduces the tax revenues for the Government.
This reduces the amount spent on public services including investment
in infrastructure.

The government then looks for alternative sources to cover the shortfall.
Like increasing the taxes on petrol and diesel or borrowing more money.

To raise debt, the government would usually borrow from the private
sector. Therefore, with higher government debt, there is likely to be a fall
in private sector investments as the private sector uses its funds to buy
government bonds.

At a higher debt level, there is a risk that rating agencies would

downgrade India’s credit rating. Markets would then demand higher
interest rates to compensate for the increased risk of default. This higher
interest rate will increase the amount of Government’s debt interest
payments, reducing the available amount to be spent on public
infrastructure.

Thus, we can say that a higher debt could lead to lower economic
growth. Countries like the US can be an exception to this.

My Opinion on news

To take care of the falling GDP, RBI would try to reduce the interest
rates. When interest rates in the economy go down, from a foreign
investor’s perspective, saving or investing in our country would not yield
better returns. This would decrease the demand for rupee resulting in a
weak exchange rate.

Every country that has achieved sustainable growth has managed a

significant increase in the levels of both domestic and foreign
investment.

A weaker rupee would mean that everything from studying abroad to

holidaying abroad will become more expensive.
Deposits with banks form around half of household financial savings in
India. With the excess liquidity generated in the financial system on
account reduced interest rates, rates on deposits would go down,
affecting savings.

But all these are monetary effects of falling GDP. Impact of a strong or
weak growth is not restricted to only these factors.

Strong growth creates employment opportunities, which improves

incentives for parents to invest in their children’s education, raising long-
term growth rates and income levels as they play a key role in the
creation and application of new knowledge.

Strong growth reduces infant mortality. India demonstrates the strength

of this relationship: a 10% increase in GDP is associated with a
reduction in infant mortality between 5%-7%.

Fewer diseases, higher life-expectancy, reduced gender and ethnic

oppression. Growth has a positive effect on all of these. For example,
the prevalence of HIV/AIDS is 3.2% for the least developed countries
and 0.3 per cent for high-income countries.

Growth, therefore, advances human development, which in turn,

promotes growth.

The lower growth rate in GDP would be acceptable only if the

government focuses more on the overall well-being of people than on
growth.

15. Moody’s upgrades India’s ratings outlook to Stable

International credit rating agency Moody’s upgraded India’s sovereign
rating to ‘Stable’ from ‘Negative’ in a revision after nearly two years.
Diminishing financial sector risks, increasing economic recovery, and
growing vaccinations were cited as reasons for the upgrade.

Although risks stemming from a high debt burden and weak debt
affordability remain, Moody’s expects the economic environment to allow
for a slow decline in the government fiscal deficit over the next few
years, thus preventing deterioration of the sovereign credit profile. After
a contraction of 7.3% in 2020 (ending March 2021), Moody’s expects the
real GDP growth to average at around 6% over the medium term,
indicating a rebound in activity to levels at potential as conditions
normalize. Moody’s also said that the ratings would be further improved
if India’s economic growth potential, supported by effective
implementation of government economic and financial sector reforms,
increased beyond its expectations. The agency observed that the
financial system’s creditworthiness has strengthened, and this trend is
expected to continue as policy settings normalize. However, it also
advised that weaker economic conditions than that currently expected,
or a revival of financial sector risks could risk India’s sovereign rating in
the future.

India’s foreign-currency and local-currency long-term issuer ratings and

the local-currency senior unsecured rating is Baa3. The credit rating
agency has also said that maintaining the rating balances India’s vital
credit strengths, which include a large and diversified economy that has
high growth potential, a relatively strong external position, and a stable
domestic financing base for government debt, against its principal credit
challenges such as low per capita income, elevated general government
debt, low debt affordability, and limited government effectiveness.
Moody’s confirmed India’s other short-term local currency rating at P-3.
In November 2017, Moody’s had upgraded India’s sovereign rating to
Baa2, as it expected that the government’s structural reforms would
alleviate India’s economic growth. However, in November 2019, it
changed the outlook to negative from stable with a Baa2 rating. In June
2020, the agency downgraded India back to Baa3, the lowest investment
grade with a negative outlook.

SUMMARY:-

International credit rating agency Moody's upgraded India's sovereign

rating to 'Stable' from 'Negative' in a revision after nearly two years.
Although risks stemming from a high debt burden and weak debt
affordability remain, Moody's expects the economic environment to allow
for a slow decline in the government fiscal deficit over the next few
years, thus preventing deterioration of the sovereign credit profile. 3% in
2020 , Moody's expects the real GDP growth to average at around 6%
over the medium term, indicating a rebound in activity to levels at
potential as conditions normalize. However, it also advised that weaker
economic conditions than that currently expected, or a revival of financial
sector risks could risk India's sovereign rating in the future. In November
2017, Moody's had upgraded India's sovereign rating to Baa2, as it
expected that the government's structural reforms would alleviate India's
economic growth. However, in November 2019, it changed the outlook to
negative from stable with a Baa2 rating.

Opinion
The Q1 GDP estimates for FY22 (Rs 51.23 trillion at current prices) have
yielded two opposing views, depending on whether one tends to view a
glass as half full or half empty.

One view is that the 20.1 percent growth (as compared to contraction of
24.4 percent in Q1 of FY21) shows strong economic recovery, and the
other points out that the GDP value is still below what it was before the
pandemic (Q1 of FY20). Both views are correct because the latest
quarter coincided with the second wave of the COVID-19 pandemic but
the state-wise lockdowns were less severe than the lockdowns imposed
in 2020. The result was a slowdown in economic activity compared with
Q4 of FY21, but better than during the first wave.

The simple fact is that economic activity has now become strongly
correlated with the intensity of the pandemic and consequent
government restrictions. The economy is performing as well as the
COVID-19 situation permits. However, when we dig beyond the headline
GDP number, we can find some pointers for government policy and the
road ahead.

Impact on Economy

Higher average incomes. Economic growth enables consumers to

consume more goods and services and enjoy better standards of living.
Economic growth during the Twentieth Century was a major factor in
reducing absolute levels of poverty and enabling a rise in life
expectancy.

Lower unemployment. With higher output and positive economic growth,

firms tend to employ more workers creating more employment.

Lower government borrowing. Economic growth creates higher tax

revenues, and there is less need to spend money on benefits such as
unemployment benefit. Therefore economic growth helps to reduce
government borrowing. Economic growth also plays a role in reducing
debt to GDP ratios.

Improved public services. Higher economic growth leads to higher tax

revenues and this enables the government can spend more on public
services, such as health care and education e.t.c. This can enable
higher living standards, such as increased life expectancy, higher rates
of literacy and a greater understanding of civic and political issues

Money can be spent on protecting the environment. With higher

economic growth a society can devote more resources to promoting
recycling and the use of renewable resources. The Kuznets curve
suggests that initially economic growth worsens the environment, but
after a certain point of growth, the damage to the environment will fall.
This theory is controversial. But, it is possible for higher growth to be
consistent with improved environmental outcomes.

Investment. Economic growth encourages firms to invest, in order to

meet future demand. Higher investment increases the scope for future
economic growth – creating a virtuous cycle of economic
growth/investment.

Increased research and development. High economic growth leads to

increased profitability for firms, enabling more spending on research and
development. This can lead to technological breakthroughs, such as
improved medicine and greener technology. Also, sustained economic
growth increases confidence and encourages firms to take risks and
innovate.