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India Towards Financial Scourge?

Moody’s Investors Service has projected a new estimate of 11.5 per cent reduction in India’s gross domestic product (GDP) in the current financial year. Earlier, Moody’s had forecast a 4 per cent decline in the Indian economy. The rating agency said on Friday that India’s credit environment is being affected by low growth, high debt and weak financial system. These risks have increased due to the coronavirus epidemic.

Moody’s said that due to deep pressure in the economy and financial system, the country’s financial strength may decline further. This can increase the pressure on credit. Moody’s said that he estimates that the Indian economy will decline by 11.5 per cent in 2020-21. Moody’s has said that the Indian economy will register a growth of 10.6 per cent in the next financial year 2021-22.

Earlier, 

Fitch Ratings affirmed India’s GDP (gross domestic product) growth forecast for the fiscal year 2021 to 10.5 per cent from 5 per cent. Fitch had forecast a 5 per cent growth in June this year. That is, where earlier GDP growth was considered to be -5% due to coronavirus epidemic and lockdown, now it has risen to -10.5%. 

Fitch Ratings has asserted in its report that economic activity has not returned to normal due to limited financial support and a weak financial system.Former Reserve Bank Governor Raghuram Rajan has advised the Modi government, warning that the Indian economy could decline further if the situation is not yet handled.

A few Heydays Rear 

Raghuram Rajan also said that the GDP figures for the first quarter of the year 2020-21 are an alarm for the destruction of the economy. Therefore, the government should be alert. Former RBI Governor Raghuram Rajan made this suggestion in a post on his LinkedIn page. Rajan said, “Unfortunately the activities which had grown very fast in the beginning, have now cooled down again.

Rajan wrote in a post on his LinkedIn page, “Such a huge decline in economic growth is a warning to all of us.” GDP in India declined by 23.9 per cent. (This decline may be even more pronounced after the figures for the unorganized sector).

On the other hand, the countries most affected by Kovid-19 have fallen by 12.4 per cent in Italy and 9.5 per cent in America. He said that a good thing due to such a poor GDP figure could be that the official system would now come out of a state of complacency and focus on some meaningful activities. Rajan Filahal is a professor at the University of Chicago.

Suicidal government strategy

Rajan has said that the government is following a strategy to save resources to give incentive packages in future, which is suicidal. The government is thinking that they will give relief packages after the virus is controlled, but they are underestimating the seriousness of the situation. By then, the economy will suffer a lot.

Decisive Footprints by RBI 

  • RBI has released its framework for the recovery of the outstanding banking debt owed to thousands of companies in the major industrial sectors of the country affected by Kovid-19.
  • This framework has been released on the basis of the report of the KV Kamath Committee.
  • The central bank on Monday made the report of the Kamath Committee public and shortly thereafter issued instructions to banks on how to give relief to the industry in repayment of loans and restructuring their outstanding loans. Have given.
  1. RBI has cleared the way for restructuring the outstanding loans of 26 industrial sectors like automobile, real estate, construction, power, MFCG, hotels, restaurants.
  2. The committee has set different standards for these industries, on the basis of which it has been recommended to prepare a loan restructuring plan for them.
  3. RBI has said that these recommendations have been accepted.

The Kamath Committee has prepared a very technical formula to give aid to these quarters. It will take into account the proportion of total outstanding debt to a total net worth of firms, total debt to total profits, debt service coverage ratio (ability to pay off existing debt) and the ratio of current income and debt payment. These ratios have been prepared after studying the pre-Kovid financial condition of the companies of every sector and the economic impact of Kovid.

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