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GS-3||Economy||Banking & Financial Sector||Basics

Five bad things happened with our economy in 2019

GDP slowdown

Despite all government efforts to arrest slowdown, this is the slowest growth rate Indian economy has registered in six and a half years.

India’s July-September 2019 (Q2)gross domestic product (GDP) growth rate fell to 4.5%

In the 2 nd quarter of the previous year, the GDP growth stood at 7.1%

quarter of the previous year, the GDP growth stood at The GDP growth seen in the last quarter was slowest in more than six years.

The previous low was recorded at 4.3% in the final quarter (January-March) of 2012-13.

NBFC Crises

The liquidity crisis in the non-banking financial companies’ (NBFCs) sector may not pose a systemic risk for now but investors can impact on the overall growth of the economy in the long run.

for now but investors can impact on the overall growth of the economy in the long run. NBFCs play an important role in promoting inclusive growth in the country, by catering to the diverse financial needs of bank excluded customers.

by catering to the diverse financial needs of bank excluded customers. If there is a problem with a few NBFCs, there can be a chain reaction of selling the exposure, which could create more trouble for the NBFC sector.

Budget 2019

Finance Minister announced that the tax rate on the super-rich would go up, with a peak effective tax rate of 42.7 percent being higher than the US’ 40 percent .

with a peak effective tax rate of being . Nirmala Sitharaman announced that individuals earning more than Rs 5 crore a year would pay a surcharge of 37.5 percent on their tax, over above their 30 percent marginal tax.

RBI rate cut

In the previous five monetary policy reviews, the RBI has reduced the policy rate (repo rate) consecutively.

As of February 2019, there has been a net decrease of 135 basis points.

But by keeping the interest rate, the RBI now seems to have managed to stop this pattern as there was no substantial impact in the growth of the economy.

India not joining RCEP

India will certainly lose its business in the region by not joining the RCEP.

India must try to make its products & market more competitive.

India need to focus on the composition of imports, the possibility of exports, and concurrent employment opportunities created under FTAs, rather than unnecessarily worrying about import deluges and irrelevant trade deficits

Five good things happened with our economy n 2019

Insolvency and Bankruptcy Code

Insolvency and Bankruptcy Code, 2016 is considered as one of the biggest insolvency reforms in the economic history of India.

This was enacted for reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons.

partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons. The Essar verdict not only gives the single largest realisation from any asset to financial creditors, qualitatively also this is the biggest for the financial sector in getting their due rights and primacy in the scheme of things.

Committee on Data protection

The statistics ministry has constituted a 28 member Standing Committee on Statistics (SCES) chaired by former Chief Statistician Pronab Sen to improve quality of data amid criticism of the government over political interference.

chaired by former to improve quality of data amid criticism of the government over political interference. The first meeting of the SCES is scheduled on January 6, 2020

GST Collections

GST collections were Rs 97,637 crore in November last year and Rs 95,380 crore in October this year. The increase in collections was a sign of economic revival, recovery in demand and measures to ease compliance. After two months of negative growth, GST revenues witnessed an impressive recovery

were The increase in collections was a sign of economic revival, recovery in demand and measures to ease compliance. After two months of negative growth, GST revenues witnessed an impressive recovery India’s goods and services tax collections rose 6% to Rs 1.03 lakh crore in November, reversing two months of decline, with experts attributing the increase to festive shopping and better compliance.

Not bailing out the Jet airways

Saving a big airline from shutdown months before a Lok Sabha election is good politics, but does not seem to be good business. Instead of getting out of the business of flying, the government seems to be committing more and more of public funds to the airline sector.

but does not seem to be good business. Instead of Reports of a government sponsored move to bail out Jet by making banks pump in equity are quite troubling. Such a move may staunch the temporary bleeding but Jet’s market share and brand value will suffer without quality and purposeful management — something that banks cannot provide.

Such a move may staunch the temporary bleeding but Jet’s market share and brand value will suffer without quality and purposeful management — something that banks cannot provide. Banks lost money both in debt and equity. They should be very wary of doing anything that may lead to the same result.

Privatization of Air India-Disinvestment

Centre now plans to divest 100% stake in the loss-making national carrier

in the loss-making national carrier The first attempt to privatize the airline failed as investors were not happy with the government retaining a 24% stake.

The environment is now conducive to restart the privatization process of Air India and the failure of Jet Airways (India ) Ltd to secure an investor will not affect the disinvestment plan.

to restart the privatization process of Air India and the of ) Ltd to secure an investor will not affect the disinvestment plan. With a revival of Jet Airways appearing bleak, Air India offers a great opportunity for any company that wants to enter the full service carrier business in India.

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