By J Mulraj
DEC 9-15, 2023

If we remove the reasons for citizens to be whining

There are reasons, aplenty, to be bullish about the India story.

India is, today, the fastest growing large economy in the world. In its October 23 World Economic Outlook report, the IMF forecast India’s GDP growth at 6.3% for 2022-23. The RBI has projected GDP growth at 6.5%, and inflation at 5.4%. Global GDP growth has been forecast at 3%. Growth of the top 5 economies larger than India’s, viz. USA 2.5%, China 5%, Japan 2%, Germany – 0.5%, is lower than ours.

Thanks to UPI (Unified Payments Interface), a real time payments interface system, India leads the world in electronic payments, recording 83 billion transactions, more than the next four countries, combined!

This explosive growth in digital payments is the result of a combination of factors, including a Government devised and owned real time payment interface system, UPI, which makes possible transactions at no cost to both sides of the transaction, both of which may be using different payment apps, and different banks. Low cost smart phones and amazingly low telecom charges have popularized app based digital transactions even in remote parts of India, hitherto unserviced because of their location. UPI has as many as 330 m. users and 70 m. service providers!

As the video points out, other countries have high charges for digital transactions, and perhaps UPI can become used globally.

India’s achievements in space were demonstrated by the Chandrayaan 3 mission of ISRO, which successfully landed on the South side of the moon, the first country to do so. ISRO is highly competitive, and technologically capable, in space launches.

At a time when several countries are aging, India’s demographic profile is favorable, providing a young population capable of earning, and of spending, income. The median age in India is 28.7 years. Compare that to Japan (48.6), Germany (47.8), Italy (46.5), USA (38.5) and China (38.4) and one can see the demographic dividend this is yielding for India.

The income earned by young Indians is used for consumption, propelling GDP growth, and saving, providing the capital for investment. Investment in equity mutual funds, usually through SIP (Systematic Investment Plan) has resulted in the AUM ( Assets Under Management) of the mutual fund industry crossing Rs 5 trillion in June 2023. This helps explain the continuing rise of the BSE Sensex, which crossed 70,000 last week, a new high, seemingly impervious to geopolitical events. Domestic retail investors are driving the bandwagon; foreign portfolio investors are the cherry on the cake. FPI is attracted by the growth story, and the inclusion of India’s debt in global indices will help propel larger inflows into Indian debt markets, too.

So, economically, India is shining.

Yet there are other factors that cause it’s people to be whining. These need to be corrected, and swiftly, lest the sheen starts wearing off.

Much has been written, but little done about, the backlog of judicial cases, an appallingly dismal 50 million! The only reasons this delay is not jointly addressed by the Government and the Judiciary can be bad governance, ego and apathy. Not the attributes needed for a country aspiring to become a developed nation with a $5 trillion economy. The Government is least concerned about protecting individual investors – shame on it! Several Ponzi schemes, such as NSEL, Sarada, Rose Valley have been shoved under the carpet despite assurances by PM Narendra Modi himself! A crying shame! Perhaps Mr Modi is satisfied by the facade of action by its agencies. The ED has, for example, seized assets of defaulters in the Ponzi schemes but does little to liquidate the assets and recompense victims. When assets are placed in auctions, there are no buyers, due to either intimidation or an unreasonable base price. But Mr Modi seems reassured that assets have been seized, though it does far good for victims! Similarly, SEBI, which failed to act against FTIL, now 36 Moons, a listed company, under its jurisdiction, is now de-registering brokers. That’s a parody of bolting the barn door after the horse has bolted.  It’s been 10 years since the NSEL exchange, a wholly owned subsidiary of FTIL closed. So de-registration of a broker is a mere gesture, and a fake one at that.

India’s other millstone is unabated corruption, especially political corruption. What explains the stash of ₹ 340 crores in cash found with a Congress MP in Jharkhand? Like in the past cases, will this, too, be shoved under the carpet after some political quid-pro-quo deal? If so, the India story will completely lose its sheen. Singapore PM Lee Kuan Yew’s first step was to root out corruption. It’s per capita income is $68000. India hasn’t tackled corruption. It prefers to indulge in political back scratching. It’s per cap income is $2600. Can’t our politicians see that?

The best remedy would be to forfeit any unexplained cash, say over Rs 50 crores. That’s the only deterrence.

Last week the BSE Sensex crossed 70000, a new high. It closed at 71125 , for a weekly gain of 1300 points.

Last week central banks including the US Fed, ECB and Bank of England kept interest rates unchanged. The Fed talked about the possibility of three rate cuts in 2024.

Jamie Dimon, head of JP Morgan Chase, expects a rate cut earlier than most but also feels that these are the most dangerous times. His assessment is that, thus far, corporate sales and profits are riding on the back of strong consumer spending, itself a result of the humongous $ 4 trillion of new currency printed in the past few years. This cache is running out, which, Dimon feels, can reduce consumer spend, hence corporate margins. Fears of a hard landing will prod, he feels, a faster interest rate cut.

Then there is the risk of large closures of small and medium businesses after a 5% hike in interest rates, which make their businesses unviable. Such closures will put pressure on banks, especially community banks, like the 3 that failed recently.

Add to that the continuing, distressful, conflicts. It appears that the Russia-Ukraine conflict is in its end game, as US is unable, without bipartisan agreement, to continue funding the black hole. However, the situation in the Middle East worsens, and Houthi rebels in Yemen have started firing missiles at ships passing through the narrow straits, a dangerous escalation. Plus, the Chinese dragon is spewing flames over Taiwan. It could resort to setting up a blockade.

Silver and gold seem the best linings for these dark clouds.


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