The year 2020 will be remembered for the pandemic it has been a race to survive so far. For India, frequent parlance has changed post March 24, soon after the Nocturne lockdown announcement. The grim circumstance was explained to the masses, and the lockdown was welcomed by the whole nation composing the New Delhi concerto (a great deal like Bach’s Brandenburg concertos, sans the noise) by the collective banging of utensils and, later, lighting the conventional diya.
The year was not with no its top rated-10 compositions in the financial field.
At quantity 10 is the dynamic allegro of financial forecasts. Growth price projections began from a low positive in April to a low damaging in June, and went via a moderate damaging in July to a higher damaging by September (the peak), and then to a moderate damaging in December. Whether it will turn positive at the finish of the year is a query everybody is asking.
Number 9 was the lilt from the government enabling delivery of liquor to our properties. This occurred as the states’ coffers ran dry and some of them created provisions to provide liquor to properties, even though it was ‘not on the house’ as the beverages had been taxed several occasions more than to get the coins clinking.
RBI’s octave was 8th on the charts. After lowering interest prices repeatedly, the central bank opted for a liquidity deluge. It was the atmanirbhar wide variety of QE exactly where the one of a kind LTROs had been brought in to complement the Operation Twist on the monetary floor as funds kept flowing to banks. The outcome was that there had been no borrowers, and the revenue went back to RBI in the reverse repo auctions. Finally, the QE was rolled back, and banks had been offered the choice of repaying these LTROs, which they did with alacrity.
At quantity 7 was the central bank andante exactly where the MPC lastly mentioned, with no uttering the words, that it will target not just inflation but also development. The popular words of the ECB, ‘do whatever it takes’, is now a battle cry, and the MPC created it clear that even if inflation is beyond 6%, development will dominate its list of priorities and the stance will be accommodative. It is not surprising that the industry, left with small to speak about, is now surmising that the terms of reference of the MPC will modify. One forgets that this was legislative action on inflation-targeting and not a Mint Street selection.
The serenade on oil rates is 6th on the billboard. The futures rates in the US went to the damaging area as there was no storage capacity. Prices recovered soon after the virus threat abated and went back to the $40-50 area. But, the government took benefit and went ahead and kept growing taxes on petrol and diesel, with the former now crossing the `90 mark. Given that the cost which includes dealer margins is about Rs 30-31/litre, the balance goes to the government as our tank fills up. No wonder these commodities will by no means come below GST.
The GST requiem, at quantity 5, was the rather acrimonious battle involving the Centre and non-NDA states more than compensation. The GST terms of engagement had been that any loss suffered by states, which had been assured of compensation at the price of 14% development per annum, would come from the cess. But what occurs when GST collections of the Centre and states crash and the cess fund has dried up? Just like Hamlet’s conundrum, it was a case of who would borrow the funds.
Technically, the Centre was ideal in insisting initially on not borrowing for the reason that the guarantee was to spend from the fund. If the nicely went dry, it could be offered only from future flows. Finally, the Centre agreed to borrow and lend to states, and the latter would spend interest and service the loan from future cess flows. It was a case of realpolitik triumphing more than explanation.
Dalal Street’s aria is quantity 4—the Sensex zoomed, like the use of Zoom for meetings across the nation. Excited brokers had been on Television saying that they knew all the time that the nation was out of the dumps and stock rates ratified this feeling. FPI funds flowed in and mutual funds place in revenue (exactly where else could deposit holders go with taxable returns of 5-5.5%). Corporate earnings got lifted in Q2 as sales plummeted, but that was for the reason that firms reduce back expenses, primarily in the employees domain, to hold shareholders and markets happy. Now, 50,000 is not far off (probably by March), and the markets are currently searching at even 60,000 becoming on the radar by Diwali subsequent year. Turning poet Shelley’s immortal line more than, “If winter comes, can spring be far behind?”
At the third location was the RBI paper on enabling corporates to also apply for banking licence, which brought out the soprano in unison. Wasn’t this currently there in their books? But, the discussion paper, which was not a selection, but an opinion-looking for note, stirred outrage and the singular voice was that this really should not be permitted as there was a conflict of interest and that if business enterprise homes came in, they would channel the funds to themselves. Sounds absurd, but there are a lot of takers for this line of believed as numerous pages in the newspapers and numerous hour of airtime on Television have been committed to debating this situation. Such a statement sounds odd, as even though the regulator does not have guidelines in location for screening the exact same and each fly-by-evening operator would be permitted to set up their bank. If corporates are all so undesirable, why are banks lending to them? Clearly, there was bizarre logic at play right here, and that is why it is up on the list.
The second on the billboard was the fugue that accompanied the way in which policies had been announced. The term ‘atmanirbhar’ spurred patriotism in the month of May even as migrants struggled to get dwelling. There had been a series of policies that went via 5 extensive energy-point presentations on 5 days, with every single one particular getting a refresher on the prior day/days policies. The close-to-Rs 20-lakh-crore relief package was topped up in October and November with the second and third rounds, to touch Rs 30 lakh crore. It was actually like the epic series of Star Wars 1, 2 and 3.
‘Top of the charts’ is the Delhi rondo, with farmers gathered to protest against the farm Bills. Everyone is arguing with everybody else on this situation, and a relatively pragmatic policy place up by the government has now been opposed by almost everybody. Did we not say that the mandi program was inefficient and added to expense? Did we not really feel that farmers really should have a ideal to sell wherever they want? Did we not usually conclude that the arhatiyas are exploitative? Did we not agree that contract farming is an option that one particular can opt for to commercialise agriculture? That is what the government has proposed as an option and supplied farmers a selection. However, the plank is diverse now as it has been supposed that the government will do away with MSP and the exact same corporates (who are going to storm the banking program and fund themselves) will now swallow farmers. There is clearly no area for logical arguments when conjecture and speculation are taken to be the dogmatic truth.
Happy New Year!
The author is chief economist, CARE Ratings, and the author of ‘Hits & Misses: The Indian Banking Story’. Views are private