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<ul><li>The Prime Minister Economic Advisory Council seems like a divided house on the debate over India’s economic slowdown.</li><li>While Shamika Ravi and Rathin Roy have been critical of the government’s pace of response, Chairman Bibek Debroy has been more sanguine.</li><li>India’s GDP grew at a mere 5% between April and June 2019-- the slowest quarterly rate in over six years.</li></ul> India’s Prime Minister Narendra Modi is aiming to make India a $5 trillion economy by 2024 .But with every day closer to the deadline, everyone in India-- at chai thelas, smoking breaks at offices, soccer mom meetings and also social media-- is discussing an economic slowdown or <a href="https://www.businessinsider.in/markets/economy/recession-in-india-searches-spike-as-gdp-growth-hits-a-six-year-low/articleshow/70922461.cms">fearing a recession</a>. However, the PM’s Economic Advisory Council (PMEAC), some Modi’s closest advisors, are a divided lot on the question-- how deep is the problem? The vicious cycle After months of denial, the Indian government woke up to announce a slew of <a href="https://www.businessinsider.in/foreign-investors-in-india-may-get-some-relief-from-tax-surcharge-after-prime-ministers-intervention/articleshow/70561763.cms">stimulus measures </a>as well as a mega merger of <a href="https://www.businessinsider.in/indian-government-merges-ten-public-sector-banks-to-form-four-large-entities/articleshow/70910392.cms">weak state-owned banks </a>to revive the economy in the last couple of weeks. Before these steps can take effect, the country’s quarterly growth in Gross Domestic Product (GDP) hit a <a href="https://economictimes.indiatimes.com/markets/stocks/news/indias-gdp-growth-hits-over-6-year-low-heres-how-analysts-reacted/articleshow/70912164.cms">six-year low </a>of 5%. A ripple that started with a fall in consumption led to a wave of slowdown in manufacturing -- which grew an appalling 0.6% between April and June 2019-- which was already hamstrung by lack of private investment. The double shock <a href="https://www.businessinsider.in/indias-government-wants-you-to-believe-that-demonetisation-didnt-slow-down-the-economy/articleshow/67785050.cms">of demonetisation</a> and the disruptive launch of <a href="https://economictimes.indiatimes.com/news/economy/policy/gst-compliance-regime-not-yet-simple-says-cag/articleshow/70454175.cms">a new tax regime</a>, Goods and Services Tax (GST), soon after are still echoing in the Indian industry. The job losses that followed have, in turn, have curbed consumption further and the economy is caught in a vicious cycle. Here’s what some of the members of the PMEAC have to say about the economy: ‘India can’t be fixed by accountants’ Shamika Ravi, who works at research firm Brookings India, is a part-time member of PMEAC. She was very provocative in calling the government to action. This tweet, a day before the Finance Ministry announced the stimulus measures, stands testimony for the kind of urgency she called for. <div type="twitter" handle="ShamikaRavi" handlename="Shamika Ravi" image="http://pbs.twimg.com/profile_images/466900364520747008/SgCWyFu9_normal.jpeg" favoritecount="2529" retweetcount="997" status="We are faced with a structural slowdown. Urgently need to follow a #NationalGrowthStrategy with time bound goals fo… https://t.co/654ZZvkhKW" createdat="1566489495000" id="1164567466795626496"></div>

 However, she has been quick to acknowledge some of the steps taken by the government like the one on August 27 to merge 10 state-owned banks into four. <div type="twitter" handle="ShamikaRavi" handlename="Shamika Ravi" image="http://pbs.twimg.com/profile_images/466900364520747008/SgCWyFu9_normal.jpeg" favoritecount="316" retweetcount="65" status="Good move.These 12 PSBs must now actively differentiate. Currently they are all clones of each other.… https://t.co/lrsShqkiay" createdat="1567166002000" id="1167404943952625665"></div>

 ‘India is facing a silent financial crisis’ Another PMEAC member, Rathin Roy pressed the panic button earlier than Shamika Ravi but his narrative put the focus on monetary policy, and therefore the Reserve Bank of India (RBI), more than the government. “Monetary and credit policy transmission needs fixing, not further rate cuts. Using speculative foreign money for sovereign spending would raise risk without ameliorating the credit and liquidity situation,” he said in a<a href="https://www.business-standard.com/article/opinion/coherent-set-of-immediate-actions-119082500710_1.html"> column written in</a> Business Standard. Roy was advising against the government’s plan to borrow money in <a href="https://www.cnbctv18.com/finance/pmeac-member-rathin-roy-says-government-should-rethink-sovereign-bond-plan-4034401.htm">dollars abroad</a> to meet the investment needed to revive the economy. He also warned against any temporary measures to boost growth and recommended long-term changes that will reshape the Indian economy in a tweet on August 21. <div type="twitter" handle="EmergingRoy" handlename="rathin roy" image="http://pbs.twimg.com/profile_images/1092282710817673217/Oq50ePfp_normal.jpg" favoritecount="53" retweetcount="25" status="Muddled macro: asserting slowdown cyclical then arguing for sector, admin reforms, relative price distortion fixes… https://t.co/IsAHnqvOZg" createdat="1566356687000" id="1164010430257176576"></div>

 Yet, two days later, the Modi government’s stimulus measures were accompanied by a narrative from the Finance Minister that largely blamed global factors and a temporary cash crunch in the country’s shadow banks for the current crisis. The reality is Indians have cut back on everything from air tickets to cars to even essential items of daily use like <a href="https://www.businessinsider.in/indian-villagers-are-not-buying-clothes-and-cutting-back-on-hair-oil/articleshow/70856804.cms">biscuits and clothes</a>. But Roy and Ravi’s senior colleague Bibek Debroy chose to measure his words. ‘Spreading gloom and doom message is disservice’ Debory, the chairman of the PMEAC, however released a statement last week right after growth numbers were released, allaying the fears and ‘negativity’ spreading fast. He said that several reform measures introduced by the government are meant to address precisely this question, both cyclical and structural aspects. “When economists list out structural constraints, they often mention factor markets, which are in the State List or the Concurrent List. Alternatively, they concern the legislature or the judiciary. Therefore, because these reforms are complicated areas, reforms will happen incrementally, not overnight,” said a press release by the government. Debroy said that that those who seek to spread a message of gloom and doom are doing a great disservice. “The council does not endorse such views,” he said in the release. SEE ALSO <a href="https://www.businessinsider.in/indian-villagers-are-not-buying-clothes-and-cutting-back-on-hair-oil/articleshow/70856804.cms">After biscuits, Indian villagers are cutting down on clothes and hair oil too</a> <a href="https://www.businessinsider.in/markets/economy/recession-in-india-searches-spike-as-gdp-growth-hits-a-six-year-low/articleshow/70922461.cms">Indians were fearing recession even before data showed that GDP growth hit a six-year low</a>

Here’s what Narendra Modi’s closest advisors have been saying about economic slowdown

<ul><li>With their sales being hit, the Indian business community which has so far been an active supporter of the Indian government, has been raising its voices.</li><li><keyword id="6359432" type="UNKNOWN" weightage="20" keywordseo="britannia">Britannia</keyword>’s MD Varun Berry said there is some serious issue in the economy.</li><li>He’s not alone, leaders from the auto industry have raised their concerns as the segment is witnessing its worst sales slowdown.</li></ul>Questions are being raised by top Indian businessmen about the economic health of the country. The latest one to cry foul is fast moving consumer goods company Britannia. In the <a href="https://www.dnaindia.com/business/report-consumers-thinking-twice-before-buying-a-rs-5-pack-britannia-2781047">latest earnings call</a> of Britannia, the company’s MD Varun Berry raised some serious concerns about the <keyword id="6356076" type="DEFINITION" weightage="20" keywordseo="indian-economy">Indian economy</keyword>. "We've grown only 6% and the market is growing slower than that. And that's a little bit of a worry, because even for a ₹5 product if the consumer is thinking twice before buying it, then there is some serious issue in the economy,” he said. This comes in even though Britannia holds one-third of market share in the Indian biscuit industry. With their sales hit, the Indian business community which has so far been an active supporter of the Indian government, has been raising its voices. India’s GDP has slumped to 6.8% in FY19, whereas <a href="https://www.businesstoday.in/current/economy-politics/india-economy-9-per-cent-gdp-growth-pm-modi-5-trillion-dollar-economy-target-ey/story/370433.html">analysts </a>say that for India to reach its dream of being a $5 trillion economy, the country’s GDP needs to grow steadily at 9%. The industry that has been worst hit has the auto industry which has seen a massive slowdown in sales has seen. Auto industry leaders like Pawan Munjal of HeroCorp, RC Bhargava of Maruti, Anand Mahindra of Mahindra &amp; Mahindra, have all been rallying for reduction of GST to boost growth in sales. Rahul Bajaj, the chairman of Indian conglomerate Bajaj Group. During his company’s Annual General Meeting, he spoke of the government’s role in the weak sales of the auto industry. “There is no demand and no private investment, so where will growth come from? It doesn’t fall from the heavens. The auto industry is going through a very difficult period. Cars, commercial vehicles and two-wheelers are going through a rough patch,” Bajaj added. Earlier, Adi Godrej, chairman of the Godrej group, too <a href="https://www.firstpost.com/business/industry-leaders-reaction-on-budget-2019-adi-godrej-says-budget-is-not-growth-oriented-stock-market-comes-down-considerably-6940161.html">said</a> that the Budget presented by Finance Minister Nirmala Sitharaman is not “growth-oriented”. <a href="https://www.ndtv.com/india-news/adi-godrej-rising-intolerance-hate-crimes-can-seriously-damage-growth-2068996">Godrej also touched upon a sensitive subject </a>saying that rising intolerance in the country is also affecting growth. However, there are also some who believe this is just a phase. HDFC Chairman <a href="https://www.businesstoday.in/current/economy-politics/indias-economic-slowdown-driven-by-lower-consumption-temporary-in-nature-says-hdfcs-deepak-parekh/story/370229.html">Deepak Parekh</a> in the recent annual general meeting of the bank said, “While there has been an across-the-board slowdown in consumption, given the inherent demand and low penetration levels, I believe this is temporary in nature.”

Forget cars, Indian consumers are wary of buying a ₹5 biscuit packet

<keyword id="6355261" type="POSITION" weightage="100" keywordseo="Finance-minister">Finance Minister</keyword> <keyword id="42575" type="PERSON" weightage="100" keywordseo="Arun-Jaitley">Arun Jaitley</keyword> said he will have to take tough measures to put the economy back on track. “India must prepare itself for this,” he said in a Facebook post on Sunday. 
 
The minister said the slowdown in economic growth, coupled with high inflation, “has a serious social consequence since (it) comes with a decade of jobless growth.” 
 He said curbing inflation, sticking to fiscal discipline and providing a boost to low-cost manufacturing are his main priorities as he gets down to prepare the government’s first <keyword id="6358021" type="PERSON" weightage="100" keywordseo="budget">budget</keyword>. 
 
He said growth and price stability are intertwined, even though they “may require a different strategy.” 
 Although analysts expect RBI Governor Raghuram Rajan to keep key rates constant despite dismal <keyword id="35050" type="CITY" weightage="100" keywordseo="gdp">GDP</keyword> growth, Jaitley’s comments indicate some softening of rates, which will allow him to keep the fiscal deficit under control. 
 
The finance minister indicated he will not give room for tax concessions. He said, “Tax collections are at 10.1% of the GDP as compared to the initial budget estimates of 10.9%. India can ill afford this trend.” 
 
Jaitley’s prescription is going in for “fiscal rectitude as combination of monetary and fiscal policy”. “Slower GDP growth will imply lower tax buoyancy and higher fiscal deficit,” he said.

“India Must Prepare For Reversal Of
Economic Slowdown,” Says Arun Jaitley

<ul><li>India is expected to overtake Germany to become fourth-largest economy in 2026. </li><li> It further said India is also set to reach a gross domestic product (GDP) of USD 5 trillion by 2026, 2 years later than the government's target. </li><li>Japan to become third largest in 2034.</li></ul>India is expected to overtake Germany to become fourth-largest economy in 2026 and Japan to become third largest in 2034, according a recent report by the UK-based Centre for Economics and Business Research (CEBR).
 It further said India is also set to reach a gross domestic product (GDP) of USD 5 trillion by 2026, 2 years later than the government's target.
 "India has decisively overtaken both France and the UK to become the world's fifth-largest economy in 2019. It is expected to overtake Germany to become fourth largest in 2026 and Japan to become the third largest in 2034," the report, titled 'World Economic League Table 2020', said.
 Japan, Germany and India will battle for third position over the next 15 years, according to the CEBR.
 Referring to Prime Minister Narendra Modi-led government's target of taking the economy to 5 USD trillion by 2024, it said, "India is also set to reach a GDP of USD 5 trillion by 2026 - 2 years later than the current government target."
 But, dark clouds gathering all over the economy are leading many to question the maintainability of the target.
 Recently, former Reserve Bank governor C Rangarajan, said that at the current growth rate, reaching the USD 5-trillion GDP target by 2024-25 is "simply out of question".
 Noting that Indian data revisions mean that 2019 was the year when the country's economy finally overtook the UK and France, the report said, "But, slow growth during the year has increased pressure for more radical economic reforms."
 Despite the rapid ascent of countries such as India and Indonesia, it is striking how little an impact this will have on the US and China's dominant roles in the global economy, said Pablo Shah, senior economist at Cebr.
 India, which till recently was hailed as the world's fastest-growing major economy, has seen growth rate decline to a six-year low of 4.5 per cent in the September quarter of 2019-20.
 This has largely been attributed to the slowdown in investment that has now broadened into consumption, driven by financial stress among rural households and weak job creation.
 The World Economic League Table is an annual calculation by Cebr jointly published by Cebr and Global Construction Perspectives. The base data for 2019 is taken from the IMF World Economic Outlook. BKS HRS

India might overtake Germany to become world's fourth largest economy, predicts CEBR

New Delhi, May 19 () Moody's Investors Service on Tuesday said the measures announced by the government for financial institutions as part of Rs 20 lakh crore-economic package will help ease their asset risk, but will not fully offset the negative impact from the COVID-19 outbreak. The government last week announced a support package of Rs 3.70 lakh crore for micro, small and medium enterprises (MSME) sector, Rs 75,000 crore for non-banking financial companies (NBFCs) and Rs 90,000 crore for power distribution companies. This is part of the overall economic package announced by the government over last week to mitigate the economic impact of coronavirus crisis. "While these measures will help ease asset risks for the financial sector, they will not fully offset the negative impact from the coronavirus outbreak," Moody's said in a commentary titled 'Financial Institutions - India: Support measures to provide relief to the financial system, but will not solve all issues'. On MSME package, the rating agency said the sector was already under stress before coronavirus outbreak and further slowdown in economic growth will lead to more liquidity woes. With regard to measures for NBFCs, it said the support is "far lower than the immediate liquidity requirements of those companies" and the sector will continue to pose risks to the banks. Amongst the measures, the most significant is the government guaranteed, automatic and uncollateralised loans to MSMEs. Such loans will help improve MSMEs' near-term liquidity and ease asset risks for the banks and NBFCs who are the key lenders to the sector, it said. However, the MSME sector was already under financial strain before the outbreak of the coronavirus because of the gradual slowdown in India's economic growth over the past 18 months. As a consequence, it has limited capacity to weather another economic shock, Moody's said. "The deeper and broader economic slowdown in India's growth, the more the MSMEs will face liquidity stress, leading to asset-quality problems for the financial system," it added. Moody's said the relief measures for the NBFC sector will fall short of solving the liquidity needs of the sector. The government will set up a special purpose vehicle that will subscribe to new and existing bonds issued by NBFCs up to a maximum of Rs 30,000 crore. "This is the first instance of direct support to the NBFC sector from the government, but the size of support is far lower than the immediate liquidity requirements of those companies. "The planned debt purchase represents about 2 per cent of the total outstanding debt of the top 20 NBFCs that represent close to 75 per cent of the assets of the NBFC sector," it added. Also, the Reserve Bank of India's (RBI) liquidity measures have so far benefited the larger and better-rated NBFCs, while the credit flow to smaller NBFCs has been less effective. "We do not expect these new measures to significantly help the smaller NBFCs and their funding conditions are likely to remain difficult. We expect that NBFCs will continue to pose risks to the banking sector as banks are a large lender to the sector," it added. Liquidity support to power distribution companies (discoms) will improve near-term cash flows of power generating companies. According to the agency, loans from the Power Finance Corporation Ltd and Rural Electrification Corporation Ltd to discoms will allow them to repay amounts owed to power generating companies and help their cash flow, easing asset risks for the lenders to the sector. "Nevertheless, the sharp slowdown in India's economic growth and the continued low capacity utilisation in the power sector will exacerbate the already stressed conditions of power generation companies. "For PFC and REC, although the loans carry low risk because of state government guarantees, the new loans will increase leverage unless the two companies raise new equity capital. Leverage is measured as total assets/shareholders' equity," Moody's added. JD ANSANS

Package for financial sector to ease asset risks, but won't fully offset COVID-19 blow: Moody's

<ul><li>According to the Monster Salary Index, employee satisfaction with regards to pay dropped by almost 22%. </li><li>Despite that, three in four employees in India are satisfied with their jobs. This includes employee relations with peers and senior management, shows the <keyword id="8330817" type="UNKNOWN" weightage="20" keywordseo="monster-survey">Monster survey</keyword> </li><li>The consumer confidence on <keyword id="47201" type="COMPANY" weightage="20" keywordseo="income">income</keyword>, employment and spending declined to six-year low in September, as per Reserve Bank of India (RBI).</li></ul>India’s <keyword id="36141" type="ORGANIZATION" weightage="20" keywordseo="economic-slowdown">economic slowdown</keyword> is eating into the income of salaried employees. According to the Monster Salary Index, employee satisfaction with regards to pay has dropped by almost 22%. The slowdown caused job cuts, delayed salaries, decreased <keyword id="632631" type="PERSON" weightage="20" keywordseo="hiring-sentiment">hiring sentiment</keyword> and resulted in fewer increments. The consumer confidence on income, employment and spending declined to six-year low in September, as per <a href="https://m.rbi.org.in/Scripts/PublicationsView.aspx?id=19332">Reserve Bank of India </a>(RBI). The net headcount of public sector companies dropped by 2.6% year-on-year in 2019. Employees are not too confident of their income increasing either year. However, almost half of the respondents expect it to increase in the coming year. “Analysing employees’ job satisfaction-levels is essential to understand and measure the perceived quality of working conditions. This is pivotal as the working population spends close to 1/3rd of the day at work,” Krish Seshadri, CEO, Monster.com, APAC &amp; Middle East said. Despite the anger over salaries, three in four employees are satisfied with their jobs. This includes employee relations with peers and senior management, as per the survey. Across industries, employees in the construction and technical consultancy, healthcare, caring services and social Work, information and communication technology services, legal and market consultancy and business activities sectors are highly satisfied with their jobs. ICT services witnessed the highest growth in terms of satisfaction amongst all recorded sectors. The survey analysed data between January 2016 to December 2018. The wage analysis is based on data collected from Paycheck.in, the Salary Calculator and Monster Salary Index from the period. See also: <a href="https://www.businessinsider.in/careers/news/hiring-managers-reveal-a-big-reason-for-high-unemployment-in-india/articleshow/71970122.cms">Hiring managers reveal a big reason for high unemployment in India</a> <a href="https://www.businessinsider.in/careers/news/employers-want-gurus-and-ninjas-while-employees-remain-thinkers-and-starters/articleshow/72037100.cms">Employers want ‘Gurus’ and ‘Ninjas’ while employees remain thinkers and starters</a>

Indians are unhappy with their pay but satisfied with their jobs

Despite a slowdown in the economic, <keyword id="1390483" type="PERSON" weightage="20" keywordseo="housing-sales">housing sales</keyword> witnessed a marginal rise 2019 across eight major cities to nearly 2.46 lakh units, according to property consultant <keyword id="6363605" type="UNKNOWN" weightage="20" keywordseo="knight-frank">Knight Frank</keyword>. Releasing its latest report, India <keyword id="6354553" type="COMPANY" weightage="20" keywordseo="real-estate">Real Estate</keyword>: H2 2019, Knight Frank said that "despite headwinds of <keyword id="36141" type="ORGANIZATION" weightage="20" keywordseo="economic-slowdown">economic slowdown</keyword>, Indian real estate sector has recorded an overall growth in 2019." The <keyword id="35281" type="PERSON" weightage="20" keywordseo="residential-property">residential property</keyword> market in top eight cities recorded a growth of 1 per cent year-on-year (YoY) in sales volume in 2019. Total sales volume was recorded at 2,45,861 units in 2019 over 2,42,328 in 2018 as affordability improved, and developers aligned themselves with the needs of homebuyers by reducing ticket-sizes and unit-sizes in a bid to encourage sales, the consultant said. 
 "Housing market grew last year beating all odds," Knight Frank India Executive Director ( Valuation and Advisory, Retail and Hospitality) Ghulam Zia told reporters. 
 Housing sales increased in Delhi-NCR, Bengaluru, Chennai, Hyderabad and Ahmedabad, but dropped in Mumbai, Pune and Kolkata. 
 According to the report, Bengaluru saw maximum rise in housing sales of 10 per cent at 48,076 units.
 Housing sales in Chennai increased by 6 per cent to 16,959 units, while the national capital region saw 5 per cent rise at 42,828 units. 
 "Steady sales volumes is a positive sign for the reeling NCR residential market," said Muddasir Zaidi, Executive Director (North) Knight Frank India. 
 Average housing prices rose by 4-5 per cent last year, but it is still lower than 2015 level, Zaidi added.
 Hyderabad witnessed 4 per cent rise in sales to 16,267 units and Ahmedabad reported 3 per cent increase at 16,713 units. 
 However, Kolkata saw a decline of 12 per cent in housing sales at 11,266 units.
 Housing sales in Mumbai and Pune fell by 5 per cent and 2 per cent, respectively. Sales of apartments stood at 60,943 units in the financial capital and 32,809 units in Pune.
 New residential unit launches rose by 23 per cent YoY in 2019 to be recorded at 2,23,325 units.
 In the office segment, leasing of space rose by 27 per cent to touch record 60.6 million square feet (msf), backed by a surge in leasing activity by the information technology sector. New supply of office space surged by 56 per cent in 2019 and was recorded at 61.3 msf. 
 Shishir Baijal, Chairman and Managing Director, Knight Frank India said, "2019 can be seen as a relatively positive year for the real estate sector. The historic rise in the office transactions is a significant growth indicator for the office market as it represents the continued commitment of domestic and global corporations in the country's growth potential despite the ongoing economic slowdown."
 The residential sector also overcame the negative market outlook by registering a growth in sales volumes as well as new launches, he added.
 "Economic headwinds such as slower GDP growth, reduced industrial output, poor consumer sentiments, amongst others, presented significant challenges to the residential market throughout the year. 
 "However, the slew of recent fiscal and monetary incentives by the government and Reserve Bank of India, seem to have had an arrestive impact on the real estate sector," Baijal said. MJH ANS
ANS

Housing sales saw marginal rise last year in India despite economic slowdown: Knight Frank

<ul><li>
Moody's upgraded India in November 2017, a year after demonetisation, but economic growth has hit a six-year low since then.</li><li>Those who invested based on Moody's upgrade of India would have risked huge losses.</li><li>The current cut in outlook for Indian economy has come after a series of measures by the government to stimulate investment and demand.</li><li>Was 2017 too soon to upgrade India’s credit rating or is 2019 too late to tell people that prospects are bleak?</li></ul>Exactly one year after demonetisation, global credit rating agency Moody’s upgraded India with a ringing endorsement of Prime Minister Narendra Modi’s reforms. But today, three years hence, Moody’s cut the outlook on India’s economic prospects to ‘negative’. Interestingly, the latest cut has come after weeks of continued efforts⁠— from cut in corporate taxes to merging large banks, creating a rescue fund for cash-strapped builders, and other stimulus measures⁠— by the Modi government to revive the economy from the doldrums. However, according to many economists, the current economic slowdown in India has its roots in the ill-advised demonetisation in November 2016, when Prime Minister Modi, in one stroke, banned 86% of all cash circulating in the country. Soon after the note ban came a well-intended but poorly executed rollout of the Goods and Services Tax (GST). Together, they threw the business, payments, and credit cycles for small businesses in the country into complete disarray. But that is when Moody’s upgraded India. The Finance Ministry then celebrated as an endorsement of the ‘Modinomics’. 
	
	
	
	
	<div type="twitter" handle="adhia03" handlename="Dr Hasmukh Adhia" image="http://pbs.twimg.com/profile_images/2925511197/d32f3db60b1b3dc824c5a8befab0f651_normal.jpeg" favoritecount="308" retweetcount="122" status="2/3 The path that Government has chosen for long term reforms and fiscal consolidation is well recognised by investors already." createdat="1510887219000" id="931354618977665024"></div>











 However, as Sensex hit new highs in recent days, expecting a windfall for companies from the recent tax cuts and other measures intended to revive the economy, Moody’s has cut the outlook. Not surprisingly, the Finance Ministry hit back immediately. Just like growth projections, credit ratings are important. It plays a part in an investor’s decision on whether to invest more in a country. It moves borrowing rates on foreign loans. But as <a href="https://www.business-standard.com/article/economy-policy/imf-s-growth-projections-are-80-wrong-eac-pm-member-rathin-roy-117101100846_1.html">pointed out often</a>, the GDP projections⁠— even by reputed institutions like the International Monetary Fund (IMF) ⁠— have been amiss more often than not. In the case of Moody’s, those who invested based on the upgrade in November 2017, a year after demonetisation, must have risked huge losses as the economic growth since then slowed down sharply to a six-year low at the end of June 2019. And the slowdown has been broad-based across sectors like textiles, automobiles, aviation, consumption and many more. 
 
 
 
 
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 While not one data point or factor determine ratings or outlook, the question remains in front of Moody's: was 2017 too soon to upgrade India’s credit rating or is 2019 too late to tell people that prospects are bleak? SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/moodys-changes-outlook-on-india-to-negative/articleshow/71966087.cms">Moody's says India's tax cuts, realty rescue, and bailouts are not enough to beat the slowdown</a> <a href="https://www.businessinsider.in/recession-in-india-searches-spike-as-gdp-growth-hits-a-six-year-low/articleshow/70922461.cms">Indians were fearing recession even before data showed that GDP growth hit a six-year low</a>

Upgrade post demonetisation, downgrade post tax cuts⁠— Moody's mood swings expose the economist’s inertia

<ul><li>Before accounting for inflation, the slowdown in the pace of India’s economic growth would seem nearly seven times worse than it does right now</li><li>The corporate profit-to-GDP ratio for Nifty 500 companies dropped to a 15-year low of 2.8% in FY18, the Ambit report said. </li><li>Recent rate cuts and tax cuts may boost growth but the government will have to push through meaningful strategic disinvestment to fund the stimulus.</li></ul>India’s economic slowdown is real. A new research from Ambit shows that the country’s nominal GDP (Gross Domestic Product) growth ⁠— the pace of growth before deducting inflation ⁠— has seen the sharpest fall in twenty years. “Nominal GDP growth has fallen by 870 basis points, compared to Real GDP growth that is down 125 basis points,” Ambit’s November 2019 report said. This essentially means that before accounting for inflation, the slowdown in the pace of India’s economic growth would seem nearly seven times worse than it does right now. <keyword id="7706673" type="UNKNOWN" weightage="20" keywordseo="finance-minister-nirmala-sitharaman">Finance Minister Nirmala Sitharaman</keyword> has already ruled out a ‘quick recovery’ from the current slump. Hope floats that the emergency measures taken by the government as well as the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> will turn the tide. 
 
 
 
 
 
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 The missteps and the correction At the end of 2018, India had one of the highest lending rates in the world. If the real interest rate⁠— the rate of interest on loans minus the inflation rate ⁠— is too high, it may act as a disincentive for investors who look to raise money from the market or banks to set up or grow their business. The corporate profit-to-GDP ratio for Nifty 500 companies dropped to a 15-year low of 2.8% in FY18. the Ambit report said. 
 
 
 
 
 
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 The RBI’s push to bring lending rates down may set off investors who were sitting on the fence due to high cost of funds. Under Governor Shaktikanta Das, the RBI has cut the benchmark interest rates by 135 basis points this year alone. But much of it is yet to trickle down to the borrowing counters. The recently announced tax cuts have the potential trigger investments and kickstart a virtuous cycle of growth, employment and consumption. But the fund these stimulus measures, the government needs money and that will come only from strategic divestment. The budget has a goal of ₹ 1 trillion but so far, in recent years, stake sale by the government has been merely financial⁠— money has moved from one pocket of the government to another. SEE ALSO: <a href="http://businessinsider.in/policy/economy/news/raghuram-rajan-gave-ideas-on-how-to-revive-economic-growth-in-india/articleshow/71573594.cms" data-type="tilCustomLink" target="_blank">Raghuram Rajan’s recipe to revive India's economic growth</a> <a href="https://www.businessinsider.in/narendra-modi-pmeac-comments-on-indias-economic-slowdown/articleshow/70954078.cms" data-type="tilCustomLink" target="_blank">Here’s what Narendra Modi’s closest advisors have been saying about economic slowdown</a>

India's nominal GDP growth has seen the sharpest fall in 20 years

<ul><li>Among the group of top 10 economies, the most positive prospects in terms of international trade are related to India, said an S&amp;P report. </li><li>It also said that the country does not seem to be impacted by the global economic slowdown to a large extent.</li></ul>New Delhi [India], November 18 (ANI): Among the group of top 10 economies, the most positive prospects in terms of international trade are related to India and the country does not seem to be impacted by the global economic slowdown to a large extent, S&amp;P Global Market Intelligence said in its latest Global Trade Monitor report. The top 10 economies by GDP in 202, according to the report, include the US, EU27, mainland China, Japan, the UK, India, Brazil, South Korea, Canada, and Russia. These countries are responsible for approximately four-fifths of the world GDP and three-quarters of global exports, with most trade carried out within the group. The section in the report on expectations for international trade in the next months said the global economic slowdown now is more and more visible. Monthly historical data clearly shows that in the top 10 economies exports are primarily impacted slowing down in the majority of economies within the group. "The picture is slightly more optimistic for imports, yet the situation is expected to deteriorate in the forthcoming months for both exports and imports, which is reflected in the most recent PMI NExO readouts," the report said. The consequences of the global economic slowdown are not that apparent in the monthly data for 2022 as in the first three quarters of the year, the dynamics of exports and imports were relatively strong in the top 10 economies. "This should translate in still positive growth in 2022 from the yearly perspective, yet in 2023 global trade contraction may be expected. GTAS Forecasting expects trade recovery to start in 2024, returning to the long-term stable growth path," it added. On economic growth, the report said the months ahead will likely bring recessions in Europe, the US, Canada, and parts of Latin America. With moderate growth in Asia Pacific, the Middle East, and Africa, the world economy can avoid a downturn, but growth will be minimal. Global real GDP growth is projected to slow from 5.9 per cent in 2021 to 2.8 per cent current year and 1.4 per cent in 2023. Notably, S&amp;P Global Market Intelligence revised down the 2023 growth rate 0.6 percentage point from the last month's forecast. (ANI)

India has the best international trade prospects among top 10 economies: S&P

A slowdown in 2023 in advanced economies, especially the US and the eurozone, is expected to make <keyword id="3658" type="General" weightage="80" keywordseo="india" source="Orion">India</keyword>'s <keyword id="23820" type="General" weightage="20" keywordseo="footwear" source="Orion">footwear</keyword> and leather products export trade vulnerable, said <keyword id="183985" type="General" weightage="50" keywordseo="crisil-ratings" source="Orion">Crisil Ratings</keyword>. "Domestic labour-intensive sectors such as textiles, footwear, and leather depend significantly on these two regions, making them particularly vulnerable to a slowdown in these economies," it said in a report titled 'The Slowdown Shadow'. It said since these regions being two of India's largest export destinations, a slowdown in their economies would lower demand for Indian <keyword id="35090" type="General" weightage="20" keywordseo="exports" source="Orion">exports</keyword>. Many economists and global institutions earlier projected to a global slowdown in 2023, as the impact of continued monetary policy tightening across major economies manifests. Raising interest rates typically cools demand in the economy and thus helps in managing inflation, but it also has the potential to trigger a slowdown in overall economic activities. "Advanced economies are expected to bear the brunt as they aggressively pursued monetary tightening in 2022," <keyword id="6359483" type="General" weightage="100" keywordseo="crisil" source="Orion">Crisil</keyword> said. The forecast of a global slowdown, Crisil said, is worrisome because India's growth cycles have become highly synchronised with those of advanced economies over the years. "The most important and direct impact of this will be reduced demand for Indian goods abroad. The US and European Union (EU) are two of the largest destinations, accounting for 18 per cent and 15.4 per cent, respectively, of India's merchandise exports in fiscal 2022," it added. It also raised concerns about India's textile exports. "It is noteworthy that labour-intensive categories such as leather articles, footwear, and textiles have the highest export dependence on these advanced economies," the report added.

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