Report says 2QFY20 GDP growth may slip to 4.7% | WeForNews | Latest News, Blogs Report says 2QFY20 GDP growth may slip to 4.7% – WeForNews | Latest News, Blogs
Connect with us

Business

Report says 2QFY20 GDP growth may slip to 4.7%

Published

on

National debt under Modi govt surges

Mumbai, Nov 12 : Even as the government continues to stress that economic slowdown is cyclical in nature and a recovery will soon be visible, high frequency data suggests otherwise.

After the poor IIP numbers, Kotak said on Tuesday that India’s 2QFY20 GDP growth may fall to 4.7 per cent, from 5.2 per cent predicted earlier.

After a disappointing start to 1QFY20 amid a consumption and investment-led slowdown, high frequency indicators suggest that economic activity has worsened in 2QFY20, despite a pick-up in government spending, Kotak said.

“We now expect 2QFY20 GDP growth at 4.7% (5.2% earlier). Even though the government has announced corporate tax rate cuts and a new fund to support stalled projects, they are unlikely to contribute substantially to growth in the near term in the absence of demand,” Kotak report said.

Owing to the continued slowdown, Kotak expects the MPC to cut the repo rate by another 50 bps in the rest of FY2020 as some of the increase in food inflation is seasonal and abundant rainfall should lead to lower food prices ahead.

Earlier rating agency Moody’s had cut India’s outlook from ‘stable’ to ‘negative’ saying that its decision to change the outlook partly reflecting lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses than Moody’s had previously estimated.

The government, however, said it has undertaken a series of financial sector and other reforms to strengthen the economy as a whole.

“The fundamentals of the economy remain quite robust with inflation under check and bond yields low. India continues to offer strong prospects of growth in the near and medium term,” the Finance Ministry had said.

Business

Sensex opens marginally higher, auto stocks gain

Published

on

By

Sensex equity Nifty

Mumbai: Sensex and Nifty opened marginally higher on Monday. Gains were led by Yes Bank, Zee, Maruti Suzuki and Tata Motors.

Auto stocks were trading higher, led by gains in Maruti Suzuki. The auto major increased its production in November by 4.33 per cent, after having reduced output for nine straight months due to lower demand.

At 9.52 a.m., the Sensex was up 2.40 points or 0.01 per cent at 40,447.55. It opened at 40,527.24 from its previous close of 40,445.15.

The Nifty was also trading on a flat note. The broader index was up 8 points or 0.07 per cent at 11,929.50.

Continue Reading

Business

Starting point to address slowdown would be to acknowledge it: Raghuram Rajan

The former RBI governor urged India to join free trade agreements judiciously in order to boost competition and improve domestic efficiency.

Published

on

By

raghuram-rajan-policy

Former Reserve Bank of India (RBI) governor Raghuram Rajan said India is in the midst of a “growth recession” with signs of deep malaise in the Indian economy that is being run through extreme centralisation of power in Prime Minister’s Office and powerless ministers.

Penning down his recommendations to help the ailing Indian economy out of the ongoing slowdown in the India Today magazine, he called for reforms to liberalise capital, land and labour markets, and spur investment as well as growth.

He also urged India to join free trade agreements judiciously in order to boost competition and improve domestic efficiency.

“To understand what has gone wrong, we need to start first with the centralised nature of the current government. Not just decision-making but also ideas and plans emanate from a small set of personalities around the Prime Minister and in the Prime Minister’s Office (PMO).

“That works well for the party’s political and social agenda, which is well laid out, and where all these individuals have domain expertise. It works less well for economic reforms, where there is less of a coherent articulated agenda at the top, and less domain knowledge of how the economy works at the national rather than state level,” Rajan wrote.

Stating that previous governments may have been untidy coalitions but they consistently took path of further economic liberalisation, he said, “extreme centralisation, coupled with the absence of empowered ministers and the lack of a coherent guiding vision, ensures that reform efforts pick up steam only when the PMO focuses on them, and lose impetus when its attention switches to other pressing issues”.

“The Modi government came to power emphasising ‘minimum government, maximum governance’. This slogan is often misunderstood. What was meant was that government would do things more efficiently, not that people and the private sector would be freed to do more. While the government continues the creditable drive to automation — direct benefit transfer to recipients is an important achievement — the role of the government in many spheres has expanded, not shrunk,” he said.

Rajan said the starting point to address the economic slowdown will be for the Modi government to acknowledge the problem.

“The starting point has to be to recognise the magnitude of the problem, to not brand every internal or external critic as politically-motivated, and to stop believing that the problem is temporary and that suppressing bad news and inconvenient surveys will make it go away,” he said. “India is in the midst of a growth recession, with significant distress in rural areas.”India’s economic growth slowed to a 6-year low of 4.5 per cent in the July-September quarter. With inflation rising, fears of stagflation — a fall in aggregate demand accompanied by rising inflation — have resurfaced.

He said construction, real estate and infrastructure sectors are in “deep trouble” and so are lenders to it like the non-bank finance companies. The crisis among shadow lenders and a build-up of bad loans at banks have curbed lending in the economy.

Seeking asset quality review of the non-bank finance companies, he said corporate and household debt is rising, and there is deep distress in parts of the financial sector.

Unemployment, especially amongst youth, seems to be growing, as is the accompanying risk of youth unrest. “Domestic businesses have not been investing either, and the stagnation in investment is the strongest sign that something is deeply wrong,” he said.

Rajan called for reforms in land acquisition, labour laws, stable tax and regulatory regime, fast track bankruptcy resolution of developers in default, proper pricing of electricity, preserving competition in telecom sector and giving farmers access to inputs and finance.

Calling for not selling already dominant family enterprises to avoid concentration of power, he also wanted decentralisation of power by empowering ministers and engaging states, beginning with amending the terms of reference of the 15th Finance Commission by not curtailing states’ share of tax revenue.

Rajan said the government should desist from cutting personal income tax rates for the middle-class for now and should use its scarce fiscal resources to support the rural poor through schemes such as the MGNREGA.

The repeated government allusions to a USD 5-trillion-economy by 2024, which would necessitate steady real growth of at least 8-9 per cent per year starting now, seem increasingly unrealistic, he added.

“Furthermore, even if some of the problems are legacies, the government, after five-and-a-half years in power, needs to resolve them. A massive new reform thrust is needed, accompanied by a change in how the administration governs,” he said.

Rajan said the Modi government has shown “surprising timidity” when it comes to unfinished reforms on the business environment, land acquisition, labour and the role of the public sector.

Continue Reading

Auto

Auto component industry’s turnover falls over 10% in H1

Published

on

By

Auto sector slowdown

New Delhi, Dec 6 : The slump in vehicle sales adversely impacted the financial performance of India’s auto component manufacturing industry during the period between April and September 2019, industry data showed on Friday.

According to data furnished by the Automotive Component Manufacturers Association of India, the industry turnover during the period under review declined by 10.1 per cent to Rs 1.79 lakh crore ($26.2 billion) over the first half of the previous year.

The industry body cited factors such as subdued vehicle demand, recent investments made for transition from BSIV to BSVI emission norms, liquidity crunch, lack of clarity on policy for electrification of vehicles among others, that adversely impacted the expansion plans of the sector.

However, auto components’ exports grew by 2.7 per cent to Rs 51,397 crore ($7.5 billion) in H1 2019-20 from Rs 50,034 crore ($7.3 billion) in H1 2018-19.

“Europe accounted for 32 per cent of exports followed by North America and Asia, with 30 per cent and 26 per cent respectively,” the association said.

“The key export items included drive transmission and steering, engine components, body or chasis, suspension and braking etc.”

Continue Reading
Advertisement

Most Popular