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Slow Pace of Private Investment, High Finance Costs Impact India’s Economy

"Sales might turn positive in August as the liquidity situation is expected to improve"

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A sovereign bond is a debt security issued by a national government and is either denominated in foreign or domestic currency. Pixabay

Consumption driven growth might become an unintended beneficiary of the government’s plans to raise a part of its gross borrowings from external markets. Presenting the Union Budget 2019-20 last Friday, India’s Finance Minister Nirmala Sitharaman proposed to raise a part of the government’s gross borrowings from abroad.

The budget proposal is expected to free-up additional liquidity in the domestic market and lower interest rates. Consequently, it will provide consumers and industry with cheaper access to finance.

According to Edelweiss Securities Lead Economist Madhavi Arora, lower interest rates wil aid consumer driven sectors which have been bogged down due to subdued demand.

Currently, the economy suffers from rural distress, slow pace of private investment and high finance costs. These together have subdued consumer sentiment and further impacted everything from car sales to air passenger traffic. This in turn has impacted production levels and further stalled hiring and wage levels.

india, sovereign bonds
“India’s sovereign external debt to GDP is among the lowest globally at less than 5 per cent,” Sitharaman said in her maiden Budget speech in Parliament. Flickr

The slowdown has impacted the automobile sector the hardest. The off-take data for May showed that domestic passenger car sales were down 26.03 per cent to 147,546 units. “Issuance of sovereign bonds should ideally free up resources available for production needs at a reduced cost,” explained Grant Thornton India Partner Sridhar V.

“Government’s move to issue sovereign bonds by itself is an indication of its confidence in the macro fundamentals and could boost economic activity.” However, Kavan Mukhtyar, Partner and Leader – Automotive, PwC India cited the need for further liquidity infusion.

“Cheaper interest rates (as an impact of government’s external borrowings) will aid in lowering the ownership cost. However, the need of the hour is to increase the availability of liquidity through NBFCs (non-banking finance companies) and banks,” Mukhtyar said.

“Sales might turn positive in August as the liquidity situation is expected to improve.” Off-loading sovereign bonds is a mechanism available to governments for raising cheaper funds from international markets.

india, sovereign bonds
“Sales might turn positive in August as the liquidity situation is expected to improve.” Pixabay

A sovereign bond is a debt security issued by a national government and is either denominated in foreign or domestic currency. “India’s sovereign external debt to GDP is among the lowest globally at less than 5 per cent,” Sitharaman said in her maiden Budget speech in Parliament.

“The government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have a beneficial impact on the demand situation for government securities in the domestic market,” she added.

This will be a first such bond issuance. In 2013, the government had considered the idea, but never implemented it. At that time, the country was faced with major fiscal and current account deficits.

Instead, the Reserve Bank of India at that time announced a scheme to incentivise foreign currency non-resident (FCNR) deposits, which brought in nearly $34 billion. As a result, most of India’s debt is rupee-denominated.

india, sovereign bonds
Instead, the Reserve Bank of India at that time announced a scheme to incentivise foreign currency non-resident (FCNR) deposits, which brought in nearly $34 billion. As a result, most of India’s debt is rupee-denominated. VOA

The government’s latest move is being seen as prudent in the face of limited options to raise funds as a slowing economy curtails tax revenue, while the borrowing target of a record Rs 7.1 trillion ($104 billion) this fiscal year remains a tough task.

ALSO READ: Is Budget 2019-20 a Hope for India’s Development?

“It will aid the sector to a limited extent. While the interest is low, transmission of cheap capital in the system is important, which takes time,” said Rahul Mishra, Principal, A.T. Kearney.

“Also, given the NBFC crisis, the overall availability of capital is very limited and whatever capital is available, it has strong checks and collateral requirement. A combination of low interest, eased out lending norms and better transmission of money will have a positive impact on consumption sectors over a 3-6 month period,” he added.  (IANS)

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New Samsung Foldable Smartphone “Galaxy Z Flip” Goes Out of Stock in Minutes During First Sale in India

In India, the device comes with Snapdrgon 855+ processor and 8/256 GB memory combination

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Samsung
The Galaxy Z Flip comes with a first-of-its-kind foldable glass that features a 6.7-inch display that folds into a stylish and compact form factor. IANS

 The Rs. 1.10 lakh Samsung Galaxy Z Flip foldable smartphone went out of stock within minutes during its first sale in India on Friday.

Samsung India’s online store put up a ‘sold out’ message for Galaxy Z Flip, less than an hour after the smartphone went on sale online at 11 a.m.. Leading retail outlets, accepting pre-bookings for Galaxy Z Flip, have also run out of stock.

Samsung’s online store and leading retail outlets are accepting pre-bookings against full payment for Galaxy Z Flip, which is priced at Rs. 1,09,999. Consumers, who managed to pre-book the Galaxy Z Flip in India, will start getting deliveries on February 26, Samsung India said in a statement.

Buyers from Samsung online store will be offered premium “white glove” delivery, the company said. According to sources, Galaxy Z Flip which is available in two colours — Mirror Purple and Mirror Black — will be up for pre-bookings again from February 28 and subsequent deliveries will begin in March.

Samsung
The Rs. 1.10 lakh Samsung Galaxy Z Flip foldable smartphone went out of stock within minutes during its first sale in India on Friday. IANS

The Galaxy Z Flip comes with a first-of-its-kind foldable glass that features a 6.7-inch display that folds into a stylish and compact form factor. It’s a dual-SIM smartphone, with one eSIM and one Nano-SIM card slot. E-sim services are currently available on Airtel and Jio networks.

ALSO READ: Legendary Musician AR Rehman Says “I am Politically illiterate by Choice”

In India, the device comes with Snapdrgon 855+ processor and 8/256 GB memory combination. Galaxy Z Flip comes with accidental damage coverage, which includes one-time screen protection and a 24X7 dedicated call centre support in India. (IANS)