Irrespective of their size or industry sector, all businesses are structured to result in concentration of income in the hands of their owners Even as industries and businesses — both domestic and foreign-owned large corporations — expect the government to formulate policies and take fiscal measures to stimulate aggregate demand to put the Indian economy on an ‘accelerated’ and ‘sustained’ growth trajectory. A key question that needs serious introspection is: What are they doing in pursuit of this overarching goal? An analysis of the financials of India’s largest companies — those comprising the BSE 500 index — with focus on revenue, profits and dividend payouts, over the past five financial years (FY) gives us some clues. The profits of corporations...
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Category: Growth & employment
Businesses can’t have the cake and eat it too
Record corporate profits, dividend payouts point out to their unwillingness to help boost economy’s strengths Even as the industries and businesses (large corporations, domestic and foreign-owned included) expect the government to formulate policies and take fiscal measures to stimulate aggregate demand to put the Indian economy on an ‘accelerated and sustained’ growth trajectory, it’s worth asking what exactly they themselves are doing in pursuit of this overarching goal? An analysis of the financials of India’s largest companies—those comprising the BSE 500 index (the index covers every sector; besides it includes public sector undertakings (PSUs), as well as overseas subsidiaries of Indian-owned private-sector businesses, hence captures a broad trend)—shows focus on revenue, profits and dividend payouts, which represent a slice of...
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RBI hikes repo rate but more is needed
While there is no guarantee that the RR hike will tame inflation, we can’t rule out the risks to growth Normally, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) conducts a review once in every two months based on which the RBI makes policy announcements at the beginning of each of the following months viz. February, April, June, August, October, December. Deviating from this practice, in early May 2022, Governor Shaktikanta Das announced changes in the important monetary policy instruments. Das increased the policy repo rate (interest rate at which the RBI lends to banks) or RR from 4 per cent to 4.4 per cent. He also increased the cash reserve ratio (percentage of a bank’s total...
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RBI changes gear, finally
Normally, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) conducts a review once in every two months based on which the RBI makes policy announcements at the beginning of each of the following months viz. February, April, June, August, October, December. Deviating from this practice, in early May, 2022, Governor Shaktikanta Das announced changes in the important monetary policy instruments. Das increased the policy repo rate (interest rate at which the RBI lends to banks) or RR from 4 percent to 4.4 percent. He also increased the cash reserve ratio (percentage of a bank’s total deposits that it needs to maintain with the RBI as liquid cash; the bank does not earn interest on this liquid...
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2022-23 budget – avoid a debt trap
The Union Budget for 2022-23 provides for capital expenditure of Rs 750,000 crore which is a jump of over 35 percent from the budget estimate (BE) of Rs 554,000 crore for 2021-22 (revised estimate (RE) for the current year is Rs 604,000 crore which is more or less close to the BE when we exclude Rs 50,000 crore given to Air India Asset Holding Company Limited AIAHCL where the debt of now divested Air India resides). Considering that the BE for current year was 26 percent higher than the RE of Rs 439,000 crore during 2020-21, this sounds impressive. However, when seen in juxtaposition with over Rs 100,00,000 crore investment needed to build infrastructure over five years – for catapulting...
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Income inequalities – tackle the root cause
According to the Oxfam report, “Inequality Kills’’ released ahead of the World Economic Forum’s (WEF) Davos Agenda early this month, during 2021, the collective wealth of India’s 100 richest people hit a record high of Rs 5700,000 crore (US$ 775 billion) while the number of Indian billionaires grew from 102 to 142. During the pandemic, the wealth of these billionaires increased from Rs 2300,000 crore (US$ 313 billion) in March 2020 to Rs 5300,000 crore (US$ 719 billion) in November 30, 2021. At the same time, during 2021, the income of 84 percent of households declined even as the share of bottom 50 percent of the population in national wealth was a mere 6 percent. More than 46 million Indians...
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Shun ‘accommodative’ policy stance
In its bi-monthly Monetary Policy Committee’s (MPC) review announced by Governor Shaktikanta Das on December 8, 2021, the Reserve Bank of India (RBI) has kept the policy repo rate or RR ( interest rate at which it lends money to banks) unchanged at 4 percent. It has also kept reverse repo rate or RRR (interest rate on the surplus cash kept by the banks with it) unchanged at 3.35 percent. Besides, it has retained an ‘accommodative’ policy stance as long as necessary. This is the ninth consecutive time that both the policy rates have remained unchanged since August 2020. Justifying the decision, Das observed “given the slack in the economy and the ongoing catching-up of activity, especially of private consumption,...
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Fiscal splurge continues unabated
Even as the Finance Minister Nirmala Sitharaman prepares for the next budget, it is time to take stock of the fiscal scenario. During 2019-20, the revised estimate (RE) of fiscal deficit (FD) was 3.8 percent of GDP against the budget estimate (BE) of 3.3 percent. In her speech on the Union Budget for 2020-21, she had justified this in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms with unanticipated fiscal implications.” For 2020-21, she had set FD at 3.5 percent as against 3.0 percent as stipulated under the FRBM Act. Here also, she had justified...
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Asset monetization – will it take off
In her maiden budget presented to Parliament on July 5, 2019, Finance Minister Nirmala Sitharaman laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25, its most crucial component being investment in infrastructure to the tune of a mammoth Rs 100,00,000 crore (US$1.4 trillion) over a period of five years (read: 2020-21 to 2024-25). As for funding, 39% of this amount was to come from the Union Government and States each and the balance 22% from the private sector. The Centre’s contribution at 39% works out to around Rs 40,00,000 crore over 5 years or Rs 800,000 crore per annum. Against this, the revised estimate (RE) for capital expenditure during 2020-21 was Rs 439,000 crore. Even assuming...
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FDI in retail: Remove the smokescreen
A pragmatic approach would be one wherein the Modi Govt legitimises direct selling by foreign companies in Indian retail in all forms For the last couple of years, the Confederation of All India Traders (CAIT) was complaining about a blatant violation of the Foreign Direct Investment (FDI) policy and the Foreign Exchange Management Act (FEMA) by global e-commerce players like Amazon and Walmart-owned-Flipkart, etc. Addressing their concerns, the Ministry of Commerce and Industries in December 2020 asked the Reserve Bank of India and the Enforcement Directorate to take action against these global giants. Earlier this year, Commerce Minister Piyush Goyal promised to ensure that the e-commerce sector works “in the true spirit of the law”. As a follow-up, the Ministry of Consumer...
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