This year 2019 will remember us the year 1989 -90 in which our country faced severe Slow Down and collapse of the economy. Govt exchequer was empty in 1989-90 and in 1990-91, the government has pledged huge gold in London to pay import bills as inflation touched 10%.
Then in 1991 PV Narasimha Rao took the reins of the country and released the pledged gold. Then came a sea change in Indian Economy with a slew of reforms creating private wealth and a big boost for liberalisation. It created huge employment.
Again in 2012, the inflation touched 10% all rates have increased enormously. In 2013 huge accounts in Iron and Steel Industries, Jet Airways, and many construction companies became NPA. The Scheme CDR (corporate debt restructuring) was introduced by RBI in early 2013 to postpone the huge NPAs till 2014 elections.
In 2014 May Narendra Modi government came with a legacy of huge inflation, huge NPAs, delayed decision making, slow growth in tax collection. Let us see one by one:
Non-Performing Assets -NPA
The NPA level on 31-3-2018 was 11.2% of total advances of banking industries, it came down to 9.3% on 31-3-2019 and steady at 9.10% as of November 30, 2019. During this year not much, big accounts were added to NPA except IL&FS and Jet Airways. 91% of the NPAs are big-ticket accounts with above Rs.5.00 crore category. Indicating that Retail NPA is hardly 9% now.
Govt has taken a clever move to get a dividend or bonus of Rs.1.75 lakh crore from RBI to pass on the same to Corporate accounts by reducing the income tax rates for Corporate companies.
Due to the reduction of the capital base due to provisions made for NPAs, not many fresh loans were given by Govt banks and NBFCs. It affected the lending by at least 10% growth in advances. After allocation of fresh capital of around Rs.55,000 crore by Central Government in September 2019 fresh lending has begun by Government banks.
During 2018 March to September 2019 through private banks, deposits and advances increased above 20%, but concentration was mainly on high yielded personal loans were concentrated by private banks.
During 2018-19 average GST collection was Rs.98,114crore per month. January 2019 month GST collection was Rs.1.01 lakh crore and in March 2019 it was Rs.1.06lakh crore.
GST collection also slowed down to Rs. 91,916 crores in September 2019, Rs.95,380 crore in October 2019. Due to festival season in November 2019, it was Rs.103,492 crore. It is now estimated that average GST may come down to Rs.94,000 crore this year. The automobile industry has dashed the GST on the highway of growth.
The most worrying thing is that industrial production and exports are in stagnation stage during this year up to October 2019. Now positive news is coming from various companies especially from Abroad. Arcelor Steel has taken over the huge NPA of the 2013 year Essar Steel Ltd for Rs.42,000crore, Alok Industries purchased by RIL & JM financial for Rs.5,052 crore, Bhushan Power & Steel purchased by Tara Steel & Powerhouse for Rs.19,350 crore, Jyothi Structure Ltd was purchased by Mr Sharad Sanghi & friends for Rs.3,691 crore.
Due to the introduction of 15% income tax for fresh manufacturing companies introduced by Finance minister in September 2019, many eastern countries are showing interest in manufacturing their products in India’ rather than in China.
WILL INDIA SUSTAIN THE PRESSURE IN 2020?
But many economists feared that a situation like 1990-91 may arise. But India could sustain the pressure due to strong Macro-Economic factors. In Forex reserves India outnumbered Russia and pushed to 8th place and India occupied fifth place with the US, $ 448.24 million (Russia US$ 419.60 million) as at 30-11-2019. Gold reserves with RBI reached its peak at 558.10 tons due to confiscated gold in airports heavily. Inflation in November 2019 was only 5.58 % mainly due to food inflation (onions off course). Fiscal deficit was 5.3% in 2013-14 brought down to 3.3% now. That means the government is not taking much borrowing to support the budget gap.
The big project of Ganga Waterway in 1360 Km with 375 Million dollars loan from world bank is taking shape now. Similarly, third Railway line from Chennai to Delhi via Vijayawada, Warangal, Ramagundam, Balharsha, Itarsi is going in good speed. Similarly, Kolkata to Delhi third Railway line project also is in full swing.
Electric cars have entered with a big bang on Indian roads. Banks are financing liberally to charging station and electric cars also. This will reduce the crude oil bill in the next two years.
Though 2019 is a memorable year with so many twists and turns, it is ending with a positive note.