Dear Readers

Introduction : Abnormally high temperatures have been impacting the nation’s agricultural output. People are finding it hard to handle the extreme heat. In order to elect 543 members of the Lok Sabha, a general election is being held from April 19 to June 1, 2024 in the country. The incumbent prime minister, Narendra Modi, is expected to lead the new government and is running for a third term, as claimed by him and his parties. The value of the stock market recently surpassed USD 5 trillion approximately.

Cover Story : Goldman Sachs sees net financial savings of Indian households as a percentage of GDP to have increased to 6% in 2023-24, significantly higher than the 18-year low of 5.1% in 2022-23. It also estimates that household liabilities increased to 6.6% of GDP as against 5.9% of GDP in FY23. To assist finance the capex cycle without significantly widening the current account deficit or raising external vulnerabilities, there is a need to increase domestic financial savings of the country.

Indian Economy : India Ratings & Research, a Fitch group company, expects the country’s GDP growth for March Q4 at 6.7% and around 6.9-7% during FY23-24.

RBI projected GDP growth at 7% for FY23-24. The service sector, along with construction, will continue the momentum. Mining, industrial output might take a backseat. IMF estimates India’s contribution to global growth will be around 18% during FY24. Net FDI declines by 62% to USD 10.58 billion in FY24 from USD 27.98 billion in the previous year. Gross inward FDI remained stable at USD 71 billion during FY24 compared with USD 71.4 billion in FY23 as per RBI.

More than 60% of FDI equity flows were directed towards manufacturing, electricity, energy, financial services, retail and household trade. India is expected to experience high FDI inflow. NRI deposit flow jumps by 63.55%, highest in eight years to USD 14.7 billion in FY24 from USD 8.98 billion.

FCNR deposits were at USD 25.73 billion in March ’24. Non-Resident External (NRE) deposits were USD 982.60 billion in March ’24, a rise from USD 97.68 billion in February ’24. It appears, the rise is due to higher interest rate.

FM Sitharaman asked the private sector to play a significant role in developing India. Private sectors expect the government to become their “Godfather” in protecting them when they are affected by external factors. Their risk appetite is being killed as they are not getting enough support whereas their enterprises are being snatched and they are accused of being involved in fraudulent activities. To keep the Balance Sheet of the lenders clean, even taking 82-83% haircut on an average has become normal, and this is resulting in concentration of wealth in few hands, killing competition and risk-taking appetite of entrepreneurs.

RBI kept interest rate quite low during FY 2021-22. The repo rate was increased from 4 to 6.5% in FY23 which has been kept the same since then. Current rate of interest is very high discouraging new investment hurting health of industry. Many enterprises are at the door of IBC due to high rate of interest which the borrowers have failed to repay. With higher interest rates it may be difficult to control inflation.

Greenfield projects like Hospitals and Hotels take around 10 to 15 years to get all the approval. These projects keep paying a rate of interest of around 13% to 15% even when the venture is not income-generating.

Forbes’ ‘2024 Billionaires’ list reveals a rise in Indian billionaires, totalling 200 individuals, compared to 169 last year. The combined wealth of Indian billionaires has spiked to USD 954 billion, a significant 41% increase from the previous year’s USD 675 billion.

Ibc : FM Sitharaman also stressed manufacturing activity to reduce the import. PM and FM should also consider healing the temporarily ailing manufacturing units like human beings’ being treated in healthcare centres or hospitals when sick. Ailing organizations were also there in the past which were given solutions and were not being sold forcibly at rock bottom prices. With co-operation of authorities, animal spirit and risk appetite of entrepreneurs will be revived enabling India to grow at 9-10% per annum to achieve an economy size of USD 35 trillion by 2047.

Dr. H.P. Kanoria

Editor