Ekcrore

10/01/2020

World Bank projects India’s GDP growth to decelerate to 5% in FY 2019/20

The World Bank in its latest edition of the Global Economic Prospects has stated that growth in India is projected to decelerate to 5% in financial year (FY) 2019/20, which ends March 31, amid enduring financial sector issues. But, it also said that growth is likely to recover to 5.8% in the following financial year. It added that key risks to the outlook include a sharper-than-expected slowdown in major economies, a re-escalation of regional geopolitical tensions, and a setback in reforms to address impaired balance sheets in the financial and corporate sectors.

In India, the World Bank said tighter credit conditions in the non-banking sector are contributing to a substantial weakening of the domestic demand in the country. It also said activity was constrained by insufficient credit availability, as well as by subdued private consumption. It added that India’s economic activity slowed substantially in 2019, with the deceleration most pronounced in the manufacturing and agriculture sectors, whereas government-related services sub-sectors received significant support from public spending. GDP growth decelerated to five percent and 4.5% in the April-June and July-September quarters of 2019, respectively, the lowest readings since 2013.

On the global front, the report said the global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year's significant weakness, but downward risks persist. The US' growth is forecast to slow to 1.8% this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty. The Euro area's growth is projected to slip to a downwardly revised 1% in 2020 amid weak industrial activity. It added that with the growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction.

02/01/2020

Finance Minister unveils Rs 102 lakh crore infra projects to achieve $5 trillion economy target

In order to achieve the target of making India a $5 trillion economy by 2025, Finance Minister Nirmala Sitharaman has unveiled Rs 102 lakh crore of national infrastructure projects, including Mumbai-Ahmedabad High Speed rail, that will be implemented in the next five years. She also said another Rs 3 lakh crore of projects will be added to this pipeline that includes Jewar Airport and Jal Jeevan Mission. She noted that of the Rs 102 lakh crore projects, Rs 42.7 lakh crore (43 percent) projects are under implementation, Rs 32.7 lakh crore (about 33 percent) worth of projects are at conceptualisation stage and Rs 19.1 lakh crore (about 19 per cent) worth of projects are under development.

The minister has stated that the projects are spread across 22 ministries and 18 states and union territories. Besides, she said the government also intends to launch NIP, National Infrastructure Pipeline, a coordination mechanism consisting of the Centre, states and also the private sector for information dissemination together with monitoring the implementation of this entire framework. She added that these projects are on top of Rs 51 lakh crore spent by the Centre and the states during the last six years.

With regard to investment, Sitharaman said that the new pipeline consists of 39 percent projects each by the Centre and states and the balance by 22 percent by private sector which could increase to 30 percent by 2025. On the financing, she said the government will look at deepening of debt market and alternative investment funds which will provide bulk of the debt financing necessary for this.

01/01/2020

06/12/2019

*RBI keeps repo rate unchanged at 5.15%; cuts GDP growth forecast*

*The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), in its fifth bi-monthly monetary policy review of 2019-20, has kept policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15%. This came after five consecutive cuts. Consequently, the reverse repo rate under the LAF remains unchanged at 4.90%, and the marginal standing facility (MSF) rate and the Bank Rate at 5.40%. It has kept key rate unchanged in line with its objective of achieving its medium-term inflation target of 4%, with an upper and lower limit of 6% and 2%, respectively, while supporting growth. The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth. The MPC has recognized that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture.*

*On the inflation front, the CPI inflation projection is revised upwards to 5.1-4.7% for H2:2019-20 and 4.0-3.8% for H1:2020-21, with risks broadly balanced. The MPC noted that the upsurge in prices of vegetables is likely to continue in immediate months. Also, incipient price pressures seen in other food items such as milk, pulses, and sugar are likely to be sustained, with implications for the trajectory of food inflation. It added that both the 3-month and 1-year ahead inflation expectations of households polled by the RBI have risen and these latent sentiment upsides are being reflected in other surveys as well. Moreover, domestic financial markets have exhibited volatility and domestic demand has slowed down, which is being reflected in the softening of inflation excluding food and fuel.*

*With weak domestic and external demand conditions, the central bank has revised its real Gross Domestic Product (GDP) growth forecast downwards to 5.0% for 2019-20 (FY20) from 6.1% projected in its October policy. It also said growth is likely to be 4.9-5.5% in H2 and 5.9-6.3% for H1:2020-21. The RBI stated that while improved monetary transmission and a quick resolution of global trade tensions are possible upsides to growth projections, a delay in revival of domestic demand, a further slowdown in global economic activity and geo-political tensions are downside risks. The MPC noted that economic activity has weakened further and the output gap remains negative. However, several measures already initiated by the Government and the monetary easing undertaken by the RBI since February 2019 are gradually expected to further feed into the real economy.*

25/10/2019

Happy Dhanteras

03/09/2019

Govt’s stimulus measures to support business sentiment but headwinds to drag growth: Moody's

Amid raft of measures announced by the government to boost the sagging economic growth, Moody's Investors Service has said these measures will provide some support to investors and business sentiments, and the acceleration of the capitalization of public sector banks to help improve the provision of credit and transmission of monetary policy easing. It said that the measures announced were an effort to stimulate slowing economic growth.

Though, it also said domestic and external headwinds to persist over the course of the year, resulting in 6.4% real Gross Domestic Product (GDP) growth in the fiscal year ending in March 2020. It added that growth rate will pick up next fiscal year to 6.8%. Recently, Moody's had revised downwards India's GDP growth forecast to 6.2% for 2019 calendar year from its previous estimation of 6.8%.

In order to revive growth momentum, the government had announced a raft of measures, including rollback of enhanced super-rich tax on foreign and domestic equity investors imposed in the Budget, exemption of startups from 'angel tax', a package to address distress in the auto sector and upfront infusion of Rs 70,000 crore to public sector banks. Also, it said Goods and Services Tax (GST) filing will be simplified further to meet the GSTN to remove further glitches in the system.

03/09/2019

*Finance Ministry’s Announcement On PSU Bank Merger*

*_Ten public sector banks to be merged into four entities._*

*Merger 1: Punjab National Bank, Oriental Bank of India and United Bank of India.*
*Merger 2: Canara Bank and Syndicate Bank.*
*Merger 3: Union Bank, Andhra Bank and Corporation Bank.*
*Merger 4: Indian Bank and Allahabad Bank.*