'Boost home sales to revive banks' ⁠— that and other top highlights from India Economic Survey 2020

  • Indian economy may grow 5% in year ending March 2020 and 6%-6.5% in the year starting April 1, 2020.
  • Government may have to ease fiscal deficit target for the current financial to boost economic growth.
  • Follow Business Insider for top highlights from the latest Economic Survey from Chief Economic Advisor KV Subramanian.
Indian economy may grow 5% in year ending March 2020 and 6%-6.5% in the year starting April 1, 2020, according the latest Economic Survey from the Narendra Modi government's Chief Economic Advisor KV Subramanian.

This is an important document that shows the state of the Indian economy and what Finance Minister Nirmala Sitharaman may present in her annual budget for the next financial year on February 1.
These are some of the top highlights from Subramanian's India economic survey tabled in Parliament today by the Finance Minister.

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1. "Government may have to ease fiscal deficit target for the current financial to boost economic growth." — Moody's, while cutting India's rating outlook, had warned that the fiscal deficit (the amount of money that the government spends over and above its income) is likely to be 3.7% of gross domestic product (GDP). If the final deficit is worse than the estimates, it may hurt India's credit rating further.
A fall in rating is likely to increase borrowing cost for the government, make rupee weaker, increase the cost of imports, and further increase inflation for the common people.

2. "Indian economy may grow 5% in year ending March 2020 and 6%-6.5% in the year starting April 1, 2020. Gorwth will pick up pace in the second half of the financial year" — the estimates are higher than most private expectations.

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3. Government should embark on a 'assemble in India' programme to boost manufacturing in India.

4. A chapter in the Economic Survey analysed the performance of 11 public sector companies before and after they privatised between 1999-2000 and 2003-04. "Analysis shows that these privatized CPSEs, on an average, perform better post privatization than their peers in terms of their net worth, net profit, return on assets (ROA), return on equity (RoE), gross revenue, net profit margin, sales growth and gross profit per employee."
A chapter in the Economic Survey analysed the performance of 11 public sector companies before and after they privatised between 1999-2000 and 2003-04. Source: India Economic Survey 2020

This, essentially, is prodding the government to sell stake in state-owned companies, something that will be an important cue to watch out for in the budget speech tomorrow.
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5. The share of corporate loans in non-food credit peaked in 2013. The subsequent decline led to the economic slowdown 2017 onwards. Fall in credit starts showing in GDP growth four years later.
6. "Policy makers intending to revive the shadow banking channel of growth can use this analysis to efficiently allocate liquidity enhancements across firms (with different Health Scores) in the NBFC (non-banking finance c ompanies) sector, thereby arresting financial fragility in a capital-efficient manner." — Subramanian also said that the government should set 'prudential thresholds' for the extent of wholesale funding that can be permitted for the shadow banks.

7. "Budget 2019-20 announced an infusion of ₹70,000 crore into Public Sector Banks (PSBs) to boost credit and investment in the economy. As of November 2019, ₹60,314 crore has been infused from this provision, thereby, equipping banks for growth and investment."
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8. "Existing unsold housing inventory can be cleared and the balance sheets of both bank/ non-bank lenders cleaned if the real estate developers are willing to take a ‘hair-cut’ by allowing the house-prices to drop."

9. Aside from bad loans, frauds are another source of concern in public sector banks. "Over 90 per cent of the cases of bank frauds based on the amount involved occurred in PSBs with private sector banks accounting for less than 8 per cent."

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This story will be updated with more highlights from the report.
SEE ALSO:
Watch: India’s ‘make or break’ budget 2020⁠— once-in-a-career crisis offers Finance Minister Nirmala Sitharaman a fertile ground for creativity


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