Page 28 - Forbes - India (January 2020)

Pre-Budget S P ecial

GST Collections (` cr) Project Annoucements (` tln)

Aug 2019 98,203 March 2019 June 2019 Sept 2019 Dec 2019
Sept 2019 91,916 New ones 2.76 1.03 1.5 4.28
Oct 2019 95,380
Those completed 2.61 0.81 0.79 1.37
Nov 2019 103,491
Revived projects 0.13 0.29 0.51 0.8
Dec 2019 103,184
Source PIB Source cMIe

contributed to 59 percent of growth, While final numbers for 2018- reviving growth
according to the ministry of statistics 19 are not yet out, anecdotal The last five years have been tough
and programme implementation. evidence suggests that government for rural India. Two important
A key component of this growth expenditure in the run-up to the drivers—farming and construction
was the reliance on debt to power May 2019 elections also slowed. employment—had their terms of trade
spending on everyday gadgets, In 2017-18, it accounted for 11.1 reversed. As global food prices rose
including mobile phones and washing percent of GDP, and along with slowly, growth in minimum support
machines, and high-ticket items like consumption, was the main driver prices offered by the government to
cars and foreign holidays. In the of growth. As sales slid, companies farmers also reduced. At the same
four years since November 2015, the moved to realign production levels time, the government refused to pass
amount of personal loans increased to lower demand and orders to their on the benefits of falling oil prices. As
to `675,823 crore, with an annual suppliers fell. At 4.5 percent in the a result, farm input prices remained
rate of growth of 26.2 percent. second quarter of fiscal 2020, India high. In addition, 2014 and 2015
The increase in leverage also registered its lowest growth in 26 were drought years. Wages for the
coincided with a collapse in inflation, quarters. In the next few quarters, rural employment guarantee scheme
28 which led to nominal growth numbers help could come from an unexpected indexed to inflation barely rose.
slowing down. Companies lost pricing source—the rural economy. Since the start of 2019, food
power, debt took longer to pay off inflation has inched upwards with
and salary increases stalled. Still, a a sharp pick-up since August led by
large number of shadow banks and the rise in onion prices. It rose from
fintech companies continued to push 3.2 percent to 5.5 percent in the three
loan products in large part due to months to November. At 600.32 lakh
their cost of capital falling. (Several hectares, up by 6.8 percent from last
government banks with high levels of season, according to the department
bad loans and low capital adequacy of agriculture, the increase in prices
numbers were prohibited from making has promoted strong sowing numbers
new loans.) These were in the garb for the rabi (winter) crop. A good
of zero percent finance schemes as harvest and rising prices would mean
well as short-term payday loans. more income for farmers. Still, as
The collapse of IL&FS in September former chief statistician Pronab Sen
2018 and the freeze in the credit cautions, “The increased sowing
market put an end to the consumer could lead to a crash in crop prices.
lending boom. Several non-banking “we have had a We will have to wait till March
financial companies (NBFC) saw their to see whether this happens.”
business shrink and consumers as well Standard economic The second driver for growth is the
as small businesses found it impossible Slowdown and now increased flow of credit to consumers.
to raise money. Sales of cars and we will have a Government banks disbursed loans
two-wheelers went down, dealers of worth `252,000 crore in October and
consumer goods were unable to raise Standard economic NBFCs have started accessing the
working capital loans and real estate uPturn.” credit market and growing their loan
companies defaulted on their debt. book. Credit to small enterprises has
Growth in bank credit also slowed
Vikas khot with an increase of 8.6 percent in Saurabh Mukherjea, founder, started flowing again, albeit at interest
rates north of 10 percent. “There was
Marcellus Investment Managers
November 2019, the lowest in 11 years.
a lack of supply led by tight credit

forbes india • january 31, 2020