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Correspondent

23 August 2024 at 4:29:04 pm

Festive Surge

India’s bazaars have glittered this Diwali with the unmistakable glow of consumer confidence. The country’s festive sales crossed a staggering Rs. 6 lakh crore with goods alone accounting for Rs. 5.4 lakh crore and services contributing Rs. 65,000 crore. More remarkable still, the bulk of this spending flowed through India’s traditional markets rather than e-commerce platforms. After years of economic caution and digital dominance, Indians are once again shopping in person and buying local....

Festive Surge

India’s bazaars have glittered this Diwali with the unmistakable glow of consumer confidence. The country’s festive sales crossed a staggering Rs. 6 lakh crore with goods alone accounting for Rs. 5.4 lakh crore and services contributing Rs. 65,000 crore. More remarkable still, the bulk of this spending flowed through India’s traditional markets rather than e-commerce platforms. After years of economic caution and digital dominance, Indians are once again shopping in person and buying local. This reversal owes much to policy. The recent rationalisation of the Goods and Services Tax (GST) which trimmed rates across categories from garments to home furnishings, has given consumption a timely push. Finance Minister Nirmala Sitharaman’s September rate cuts, combined with income tax relief and easing interest rates, have strengthened household budgets just as inflation softened. The middle class, long squeezed between rising costs and stagnant wages, has found reason to spend again. Retailers report that shoppers filled their bags with everything from lab-grown diamonds and casual wear to consumer durables and décor, blurring the line between necessity and indulgence. The effect has been broad-based. According to Crisil Ratings, 40 organised apparel retailers, who together generate roughly a third of the sector’s revenue, could see growth of 13–14 percent this financial year, aided by a 200-basis-point bump from GST cuts alone. Small traders too have flourished. The Confederation of All India Traders (CAIT) estimates that 85 percent of total festive trade came from non-corporate and traditional markets, a robust comeback for brick-and-mortar retail that had been under siege from online rivals. This surge signals a subtle but significant cultural shift. The “Vocal for Local” and “Swadeshi Diwali” campaigns struck a patriotic chord, with consumers reportedly preferring Indian-made products to imported ones. Demand for Chinese goods fell sharply, while sales of Indian-manufactured products rose by a quarter over last year. For the first time in years, “buying Indian” has become both an act of economic participation and of national pride. The sectoral spread of this boom underlines its breadth. Groceries and fast-moving consumer goods accounted for 12 percent of the total, gold and jewellery 10 percent, and electronics 8 percent. Even traditionally modest categories like home furnishings, décor and confectionery recorded double-digit growth. In the smaller towns that anchor India’s consumption story, traders say stable prices and improved affordability kept registers ringing late into the festive weekend. Yet, much of this buoyancy rests on a fragile equilibrium. Inflation remains contained, and interest rates have been eased, but both could tighten again. Sustaining this spurt will require continued fiscal prudence and regulatory clarity, especially as digital commerce continues to expand its reach. Yet for now, the signs are auspicious. After years of subdued demand and inflationary unease, India’s shoppers appear to have rediscovered their appetite for consumption and their faith in domestic enterprise. The result is not only a record-breaking Diwali, but a reaffirmation of the local marketplace as the heartbeat of India’s economy.

The bold reforms to turn around PSBs

Updated: Oct 21, 2024

PSB

Last time, I analysed the status of PSBs when NDA took over the reins in 2014. The Government immediately initiated the bold reforms to turn around PSBs. The results surprised the financial and political circles as PSBs earned a record profit of Rs. 1.41 Lakh Crores in FY24 from massive losses of Rs 85,390 Crores. This doom-to-bloom story of PSBs was achieved through consistent efforts by the government during last 10 years.

Government initiatives to revive PSBs after 2014 The government implemented a comprehensive 4R strategy: Recognising NPAs transparently, Resolution and Recovery, Recapitalising PSBs, and Reforms in the financial ecosystem.


1. The first step was Recognising NPAs transparently by unearthing the NPAs hidden under the carpet by previous regime. The painstaking Asset Quality Review (AQR) Exercise was undertaken for this. The amount of Rs. 2.27 Lakh Crores shown as total Gross NPAs of PSBs on 31 st March 2014, ie 4.7 per cent of gross advances, became Rs. 5.4 Lakh Crores as on March 2016 Rs.8.95 Lakh Crore as on 31 st March 2018 after the Asset Quality Review Exercise unearthed the hidden NPAs. This shows that huge quanta of NPAs were buried under the Carpet.


2. A massive Resolution and Recovery initiative was undertaken. To strengthen this The Insolvency and Bankruptcy Code was (IBC) introduced on 28 th May 2016. It gave a clear legal framework for banks to recover large NPA amounts from defaulters and allowed eligible companies to close down bad businesses. The IBC, among different channels, is the key mechanism for banks to recover stressed assets. IBC accounted for the greatest recovery mechanism, as in 2022-23, 43 per cent of the total amount recovered was through IBC alone. These clean up measures started showing results; GNPAs of PSBs dropped to Rs.4.28 Lakh Crores ie 5 per cent of Gross Advances. The Gross NPA ratio reached a historical multi-year low of 2.8 per cent, with net NPA at 0.6 per cent of Gross Advances by March 2024. The stern measures were initiated to prevent defaulters from taking new loans to pay back old ones. Wilful defaulters were stopped from starting new businesses. They were not even allowed to raise money from stock markets. This prevented the repetition of the disaster by again creating new NPAs.


3. The third step was Strengthening of PSBs by infusing capital which is called as Recapitalisation. This builds confidence in the ability of these banks to stay afloat. As part of the strategy, the government infused an unprecedented amount of Rs 3,10,997 crore to recapitalise PSBs during 2016-17 to 2020-21. For this Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalisation bonds.

The recapitalisation programme provided much-needed support to the PSBs and prevented the possibility of any default on their part.


4. All these measures started showing results. The total outstanding credit of PSBs has surged by over 90 per cent during last 10 years and reached to Rs. 87.55 lakh crore in FY24.


5. Simultaneously the Government initiated the Banking Sector reforms and addressed issues of credit discipline, ensured responsible lending and improved governance. Besides, there was the adoption of technology, and amalgamation of banks, and the general confidence of bankers was maintained. Banks Board Bureau (BBB) was established on April 1, 2016 as an autonomous body tasked to search and select appropriate persons for the Board of Public Sector Banks for professionalising their management and recommend measures to improve Corporate Governance. BBB was replaced by Financial Services Institution Bureau (FSIB) on July 1, 2022 with chairman and mandate remaining the same. However instead of lauding these remarkable achievements of Government, political critics are attributing a motive of government to privatize these PSBs by strengthening them. In the next article this aspect will be discussed.

(To be continued…)

(The writer is a Freelance Author and Speaker on Banking. Views personal.)

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