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ET Special Podcast (ET Online)

Where is India's economy headed?

02:23 Min | November 08, 2019, 5:03 PM IST
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Ratings firm Moody's downgraded India's credit ranking outlook from stable to negative. But the Government believes otherwise. So where is India's economy really headed? What do the numbers mean? This and more in today's special podcast
Transcript
Script: Poorabi Gaekwad
Hosts: Poorabi Gaekwad, Rahul Aripaka
Producer: Poorabi Gaekwad

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India’s credit ranking outlook has been changed from stable to negative.

Moody’s, the ratings firm, downgraded India’s status after concerns about India’s economy.

However, the Indian government doesn’t share the same concerns.

After the ratings for India dropped to negative, Sitharaman’s office responded saying India is still one of the fastest growing economies in the world.

The Finance Ministry believes that the reforms they have introduced will attract investment.

But NBFC’s are facing a lot of stress right now.

And it could lead to a more severe cash crunch.

It doesn’t help that loan growth has slumped at 8.8%

Which is the lowest its been in about two years.

Ratings Agency Fitch has raised the fiscal deficit target to 3.6% because of the corporate tax cut, and also because there hasn’t been enough GST collection.

For September and October, the collection came in below the one lakh crore rupees mark. And its putting pressure on non-tax revenue growth.

And if the government wants to maintain its deficit target of 3.3%, its gonna have to curb its spending.

Which seems a tad difficult because the FinMin is refusing any fresh market borrowing, and the fact that capital spending is very important to revive the economy, chances of us breaching the 3.3% target seems high.

Another piece of bad news? Tax growth has slumped.

The Gross Tax collection has been the lowest in almost a decade, falling to 1.5% in the first half of this fiscal.

And because the economy is barely reviving, and all major institutes have downgraded the country’s growth rate, tax revenue growth seems like an uphill task.

The good news? Air India and Bharat Petroleum might be coming to our rescue.

The Goverment’s planning to sell some state-owned firms to foreign companies.

And if they’re successful, it could raise about 60,000 crore rupees.

Which also means more activity on the disinvestment front.

And deficits are not that bad.

And the corporate tax cut reform is already showing its effects in India Inc’s second quarter earnings.

The companies can actually use this surplus. This can help them boost private investment.

Which means they can boost consumption.

Which increases spending

Which will be good for the Economy in the long run.

For more on this, log on to the economictimes.com
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