With a much awaited budget that was more an election victory speech and less a serious economic and fiscal policy statement and one which was heavy on intent and light on content, and with the Indian economy languishing, it predicts a year of a continuing down turn in the Indian economy and a further deterioration in its macro indices. Unfortunately, being in an election state of mind, which the winning BJP always is, the Finance Minister painted a very rosy picture, even unwilling to accept all that ails the Indian economy. Our economy faces serious challenges, at a time when a global slowdown is imminent with potential volatility on account of a rampaging Trump in the China shop, and all four engines of our growth under stress and slowdown viz. private investment, government spending, consumer spending and exports. To top it is the threat of a Chinese invasion of our economy as it seeks a large market for its slowing economy.
Here is what we think that this financial year will be and what should you expect:-
Interest rate cuts by the RBI of another 50 basis points this year.
- Despite that credit offtake for new projects will be slow due to lack of confidence.
- NPA crisis will remain unresolved and more will arise from sectors like MUDRA, MSME, diamonds, real estate, NBFC etc., which will come under stress.
- There will be no major pick up in FDI inflows.
- The MSME sector will remain stressed and problems will get severe.
- GDP growth will be patchy and uncertain which will adversely affect consumer demand, GST collections and employment.
- GST and income tax collections will be below targets.
- Stock markets will be bearish, with any rally being false and temporary for want of support of good corporate results.
- Exports will not pick up and India will not take advantage of the USA, China trade war.
- Corporate frauds and collapses will increase.
And finally Air India will not get a buyer as the government promises in its present form, Jet Airways will get no credible buyer, and Vijay Mallya. Nirav Modi, Mehul Chokshi, will not come back. Be prepared for a year of tall promises, poor performance, poor liquidity and doctored figures.