Category: Growth

These are the top 10 risks to global economic growth right now: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Russia-Ukraine war has increased economic volatility as the US volatility index (VIX) and the economic policy uncertainty (EPU) index have seen a rise. But the rise is not as much as it was in March 2020 when the first wave of the COVID-19 pandemic hit the world.

According to a McKinsey report, the economic volatility is surprisingly low during the period of conflict. However, new potential risks to global economic growth have emerged as a direct consequence of the conflict.

The war’s effects on volatility in energy sources and prices can produce dramatic effects throughout the global economy. Geopolitical instability is also a limiter for businesses as it prevents them from taking risks and expansion. According to the McKinsey Global Survey of executive sentiment of March 2022, geopolitical risk displaced the pandemic and inflation as the biggest threat to global economic growth. Many economic experts have also shared their opinion on the future economic activity given the current market indicators.

Here are the potential risks to global economic growth.

1. Geopolitical instability

Over half of executives who participated in the survey saw geopolitical instability as the biggest potential risk to global economic development. Geopolitical unrest affects confidence of businesses to take risks and increases uncertainty.

2. Inflation

Rising inflation has impacted the cost of living, the cost of doing business, borrowing money, and every other facet of the economy. World Bank president, David Malpass has warned that the risk of inflation and low growth or “stagflation” is also higher.

Interest rates have gone up in most parts of the world to bring down the inflation and they are likely to be raised further, IMF’s Gita Gopinath said in a CNBC report.

ALSO READ: GDP growth estimated at 7.4% for 2022-23: FICCI survey

However, India is better placed than many countries despite the risk of rising inflation and stagflation is also relatively low, as per Chief Economic Advisor of India V Anantha Nageswaran.

3. Possible recession

The World Bank has warned of a recession risk due to the ongoing Russia-Ukraine war. Less developed countries in Europe and East Asia facing a “major recession” are the most vulnerable. “The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank President David Malpass said in a BBC report.

Nobel laureate and Yale professor Robert Shiller had also talked about a good chance of recession happening in sometime in an interview with Bloomberg. JPMorgan Chase CEO Jamie Dimon and billionaire investors like Carl Icahn are also predicting a recession.

4. Volatile energy prices

Since the start of the Russia-Ukraine conflict, the crude oil prices were pushed to a record high. The geopolitical tensions increased instability in the Middle East and added to oil market nervousness. The surge in crude oil prices has caused a rise in food inflation. As per a BBC report, the World Bank has warned that soaring food and energy costs will threaten to throw livelihoods into a reverse spiral causing hardship for the most vulnerable people across the globe.

ALSO READ: World Economic Outlook 2022: IMF cuts global growth for 2022 by 0.8% due to war; Ukraine economy to contract by 35%

5. Supply chain disruption

The conflict in Ukraine has forced most organisations to create more resilient supply chains. The overreliance of Europe, on natural gas and crude oil from Russia, as well as dependence on both Russia and Ukraine for key agricultural commodities has emerged as a key vulnerability for the global economy.

As per a CBS news report, the disruption in grain shipments from Russia and Ukraine, that provide nearly one-third of the world’s wheat supply, has caused the food prices in Africa and Asia to skyrocket. The international aid groups have warned that hundreds of thousands of people could starve this summer as a result.

6. Rising interest rates

To combat inflation, central banks around the globe are hiking interest rates. This affects borrowers and businesses in different ways as the rates on financial products like loans and mortgages change. India witnessed a steep surge in both retail and wholesale inflation, causing the central bank to hike repo rates by another 50 basis points to 4.90 percent and two more hikes of 35 bps and 25bps are expected in the next two monetary policies.

Meanwhile, Jamie Dimon, CEO of JP Morgan Chase, has warned about an economic hurricane on the horizon as fallout from Russia’s war in Ukraine and the effects of surging inflation. He has warned that the US Federal Reserve will tip the economy into recession in a bid to control spending and inflation.

7. Labour shortages

The current global labour shortage is impacting healthcare, transport, hospitality, social assistance, and foodservice industries. While COVID-19 triggered the trend, geopolitical tensions have added to the problem.

8. Increased economic volatility

The war has increased economic volatility. The global coordination of sanctions has impacted businesses across sectors globally. Also, the fluctuating energy prices have increased volatility in the markets.

9. COVID-19 pandemic

COVID-19 continues to impact the global economy as the threat is still lingering especially in parts of Greater China. China is key supplier to many industries and disruption in supply due to lockdowns has pushed many sectors such as the tech sector to cut down production.

10. Domestic political conflict

Domestic political conflict continues to be on the list as social tensions in many countries are on the rise. Over 10 percent of the respondents in McKinsey’s survey mentioned it as a threat to economic development.

The past three years have witnessed several changes in trade policy of leading economies such as the US and EU. With continuous developments in geopolitical relations, business leaders are eyeing the rapid changes in policies as a threat to economic growth

 ALSO READ: Citi India ups inflation forecast for FY23; cuts GDP growth forecast marginally

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

PepsiCo India to invest Rs 186 crore in UP to expand its largest plant

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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PepsiCo India announced on Friday that it will invest an extra Rs 186 crore in the development and expansion of its food production facility in Kosi Kalan, Mathura, Uttar Pradesh. The total investment by PepsiCo in its largest greenfield foods production plant, which produces Lay’s potato chips, will be Rs 1,022 crore.

The company will boost the capacity of its state-of-the-art foods factory as part of its growth strategy by establishing a new manufacturing line that will create one of the world’s leading nacho chip brand Doritos, the company said in a statement. 

PepsiCo India committed its investment in the state at the 3rd ground-breaking ceremony of the investor summit in Lucknow, Uttar Pradesh, in the presence of Prime Minister Narendra Modi, Uttar Pradesh Chief Minister Yogi Adityanath, and other key dignitaries.

Also read: Reliance Brands to buy 40% in Plastic Legno to strengthen India’s toy manufacturing

Ahmed ElSheikh, President of PepsiCo India, stated that the progressive ecosystem and industrial climate in Uttar Pradesh has provided the company with some wonderful opportunities, and has enabled them to  build up a greenfield foods facility in Kosi in less than two years because of the state’s industry-friendly laws and simplicity of doing business.

“The state-of-the-art facility is fuelling the economic ecosystem and creating job opportunities in UP. Given the tremendous response, we are happy to further raise our investment by INR 186 crore in the state. This latest investment is yet another testament of our ‘Unnati Ki Sajhedhari’ with the state of Uttar Pradesh and is also in line with the Indian Government’s vision of Atmanirbhar Bharath,” ElSheikh added.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Karnataka can offer more than IT, says CM Basavaraj Bommai at Davos

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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It’s day two at the World Economic Forum in Davos and six Indian states have been chosen to represent India at the World Economic Forum with each having a separate pavilion. This includes Maharashtra, Telangana, Madhya Pradesh, Andhra Pradesh, Karnataka and Tamil Nadu.

CNBC-TV18’s Shereen Bhan spoke to Karnataka Chief Minister Basavaraj Bommai along with Murugesh Nirani, Minister for Large and Medium Industries, and C Ashwathnarayan, Minister for IT & Bio-Technology.

Talking about Karnataka’s role Bommai said, “Global emerging situation where Indian role has become much more important than ever before in economic growth. The second is the emerging situation within India, where states have been aggressively proposing themselves in a way that all the investments should come to them. It is a good healthy competition, it is a most welcome competition.”

He added, “Karnataka has got much more than IT. IT has caught the world imagination because of its performance over the last two decades. Along with IT, bio-technology has grown immensely in Karnataka, especially the R&D in bio-technology where world renowned companies are already working in Bangalore.”

Bommai said Karnataka is strong in manufacturing which is its traditional strength right from 40s and 50s. The next one is aerospace, an area which you cannot think of without Karnataka and Bangalore. Also the defence sector – DRDO which is in a very big way and every year the investment is going exponentially.

On FDI, Nirani said, “We have announced good policy also, new industrial policy, which is nowhere in the other state. Even our FDI in the last year, in all four quarters the state was number 1 in the country. Almost 40 to 42 percent investment is coming to Karnataka.”

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HDFC Bank establishes rural banking as a separate segment

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Largest private sector lender HDFC Bank on Thursday announced that it has carved out rural banking as a separate vertical and will be opening 1,060 branches in mofussil areas and semi-urban pockets as part of the increased focus in FY23.

Earlier, rural banking was a part of the wider retail branch banking vertical, and the bank has appointed Anil Bhavnani, who has been working with it for 19 years, to head the newly-carved rural banking vertical, according to a statement.

It can be noted that there seems to be an increased focus on the rural banking business among lenders, especially in the private sector who were earlier blamed for focusing only on the cash-spinning urban pockets which had prompted policy to mandate rural presence.

Axis Bank had last year announced the ‘Bharat Banking’ initiative aimed at the same market while a slew of others have invested in the predominantly rural market-focused microfinance institutions.

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The largest private sector lender said the move is a part of making the bank future ready, and will address the untapped opportunities in the market. Bhavnani said this is both a challenge as well as an opportunity, and added that the increased focus will see more branches getting opened in the rural and semi-urban areas which he will look after.

According to the statement, the bank will open 1,064 branches under the rural banking vertical in FY23 as against 1,000 branches opened in the last two fiscal years.

At present, the semi-urban and rural areas have 6,342 or 50 percent of its branches. The bank has tied up with Institute of Rural Management, Anand to chalk its rural initiative strategy which will look at consumer behaviour, customer satisfaction, service design, and service delivery.

It is looking to build new products and services related to rural transport economy, forest economy, agri economy, and other allied activities, it said, adding that the focus is also on providing one stop shop solution to small farmers, workers, and traders.

Also read: HDFC home loan instalments increase after RBI repo rate hike

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Microblogging platform Koo is banking on quick user growth to surpass Twitter in India within a year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Amid the buzz over Elon Musk’s proposed takeover of Twitter, India’s homegrown microblogging platform Koo is aiming at overtaking it in the country within a year in terms of user base, which has seen a rapid growth, a senior company official said.

Started in March 2020, the social media platform has witnessed 30 million downloads with 10 times growth in user base in the last 12 months, and it is expecting the number to cross 100 million by the end of 2022, Koo Co Founder and CEO Aprameya Radhakrishna told PTI.

Also read: Twitter plunges 20% as Elon Musk says deal temporarily on hold

The platform, which is currently available in India in 10 languages, including English, has operations in Nigeria, and is looking at more multilingual countries like Indonesia as “priority” nations for overseas expansion, he said.

It has already raised $45 million and will “revisit funding plans” by the end of 2022, he said, adding, the company would be “ready to explore different types of monetisation” options in the next couple of years.

“We have 7-8 million active users every month and are expecting 100 million downloads by the end of 2022. In India, we are larger than Twitter in terms of the non-English user base, and our aim is to capture the domestic market and become the largest microblogging platform in the country. We will do that in the next 12 months,” Radhakrishna told .

Also read: Twitter fires managers, freezes hiring amid Elon Musk’s buyout turmoil

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Forex business to reach pre-COVID level before the end of October, says Thomas Cook

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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There has been a resurgence in forex business after a slump due to the COVID pandemic. By end of this quarter or before the end of next quarter, the forex business is expected to be back to the pre-COVID levels, says Thomas Cook (India).

Deepesh Varma, Senior Vice President – Foreign Exchange, Thomas Cook (India) said, “In the last two quarters, Thomas Cook’s (India) forex business is at 70 percent of the pre-COVID levels.”

He added, “By this quarter or in the (second quarter of this fiscal), the business should be at 2019 levels. That’s the growth that we are seeing.” The resumption of international flights will further bolster the growth in the forex business.

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The company has seen growth driven by remittance of fees for education and remittance for close relatives. “Both these businesses have helped us. And we have done more than 2019 numbers during the pandemic,” Varma stated.

The education segment has even surpassed the pre-pandemic 2019 level by 111 percent over the third quarter of the 2019-20 fiscal, and recovered by 174 percent in the third quarter of the 2021-22 fiscal over the corresponding period in the previous financial year. Nearly 40 percent of their forex business comes from education. Varma attributes this growth to the digital transformation of the company. It is estimated that over 1 lakh students studying overseas use the remittance services of the company.

The company launched Ghar pe Forex — doorstep delivery in two hours — during the peak of the pandemic, attracting students planning to go overseas and their families. It signed up over 1,500 FXMate partners (FXMate is a digital tool to support business-to-business partners with virtual forex services) who operate via a digital platform, generating sales of Rs 375 crore for the company. In addition, the company had launched the Virtual Forex Branch equipping its teams with VPN telephony/auto-diallers to stay connected and assist customers from the safety of their homes.

Also Read: Taj owner Indian Hotels says wounds of the pandemic have fully healed

The company serves over 1 million retail customers every year, via its website and over 100 Forex stores located across 65 metros and tier 2-4 cities/towns pan India.

From a foreign exchange business point of view, Varma added it will always be a hybrid model, it cannot be a purely physical or a purely online business.

Taking a cue from the present scenario of ‘pent-up demand’ among travellers, Varma said the present quarter is the travel season, but the travel season may well continue for the whole year.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Capex improves across sectors; investment in manufacturing jumps 210%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The India private capital expenditure (capex) cycle wheel is turning at a high speed. A report by Goldman Sachs highlights that fresh investment announcements in the last fiscal jumped 145 to 150 percent compared to the FY21 — a year ravaged by the COVID pandemic. The manufacturing sector was the clear outlier with a 210 percent growth when it came to new investment announcements.

While the increase was aided by mega project announcements, especially in the steel sector, traditional sectors like petrochemicals, cement, automobiles and new age sectors like electronics, e-vehicles, data centres also made a significant contribution. That’s not all, the number of projects announced last fiscal was 80 percent higher than in FY21.

Overall, the capex vehicle has improved, said  B Thiagarajan, MD, Blue Star. He said the company is now investing what it should have done years ago. Blue Star is investing close to Rs 400 crore this fiscal, Thiagarajan said.

Also read: Indian factories could be buzzing soon if global inflation doesn’t break the owners’ spirit

He observed that multiple industrial sectors were seeing a lot of capital investment and added that the company’s growth story is solid; they haven’t seen such demand in the past decade.

“In the B2C space, we have increased the prices thrice last year – in April, July and October and yet the market demand stood up. Now again in April we have increased and still the demand is good. So there is lot of optimism in the market place,” he said.

“Our annual capex would have been around Rs 150 crore and what we are foreseeing is that in about three years’ time, we may have to invest more. It is the demand that is growing and in order to fulfill the demand you have to expand the capacity,” he added.

Meanwhile, Ashish Bhandari, MD & CEO, Thermax, said demand was strong across multiple sectors, resulting in growth.

Also read: Commerce Ministry makes case for encouraging manufacture of 102 items to cut imports

“We are seeing strength across multiple sectors, demand is strong but that said the commodity price increase is a dampener and this particular effect has the potential to bring the entire growth story down in coming quarters. So right now things are very good but there are dark clouds on the horizon,” he said.

Bhandari said food, pharmaceuticals and chemicials picked up initially, but that steel, refining and petrochemicals saw better growth prospects last year.

“When we came out of COVID our capacity utilization was at 60-70 percent, we have now crossed the 90 percent threshold. So I think we can still increase capacity with our existing plants by being innovative, by leveraging our subcontractors, adding shifts etc. So we will be active in terms of adding new capacity,” Bhandari said.

“We are also planning to build plants in multiple product lines investing quite a bit on newer technology whether it be digital, newer capabilities, R&D all of it. So it is not just smattering of companies, I think the larger sector overall is gearing up to hit new levels,” he added.

Also read: Indonesia stuns markets as it widens export ban to include CPO, refined palm oil

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

19 firms file applications under PLI scheme for white goods in second round

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As many as 19 companies, including LG Electronics and Wipro, have filed applications with proposed investments of Rs 1,548 crore to avail benefits under the production-linked incentive (PLI) scheme for white goods in the second round, the commerce and industry ministry said on Tuesday.

The government in March reopened the application window for its Rs 6,238-crore PLI scheme for air-conditioners (ACs) and LED lights with an aim to accommodate more players as several firms have expressed interest in the initiative. The ministry said that among the 19 applicants, eight are for AC components and 11 for LED Lights.

Over the next five years, these 19 companies are expected to achieve production of about Rs 26,880 crore of components of ACs and LED Lights and generate direct employment of 5,522 people, it added. Several companies like LG Electronics, Mitsubishi Electric, Adani Copper Tubes, Jindal Poly films, Crompton Greaves, Wipro, Zeco Aircon, Starion India and Swaminathan Enterprises are among companies which have applied for manufacturing components of Air conditioners and LED Lights, it said.

Also read: Government approves 61 applications under PLI scheme for textiles

Applications have been filed for the production of components which are not manufactured in India presently with sufficient capacity. “Nineteen companies have filed applications for PLI scheme for white goods in the second round of applications with committed investments of Rs 1,548 crore,” it added.

The ministry said that altogether, the scheme will bring investment in the component manufacturing eco-system of ACs and LED Lights industry to the tune of Rs 7,074 crore and generate about 2 lakh direct and indirect employment opportunities. The scheme is expected to lead to a total production of components of ACs and LEDs in India of about Rs 1,07,134 crore.

Initially, online applications were received from June 15, 2021, till September 15, 2021. A total of 52 companies had filed their application. After evaluation of all the applications, 42 applicants with a committed investment of Rs 4,614 crore were selected as beneficiaries under the scheme. The online application window for the second round was open from March 10 to April 25 this year. The selection of final applicants will be done within 60 days from the date of closure of the application window.

Also read: Adani JV, IdeaForge among 14 firms selected for drone manufacturing PLI scheme

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Samsung aims for 36% share of overall Indian TV market this year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Consumer electronic maker Samsung India expects a nearly 25 percent growth in the LED TV segment this year as well as aims to capture around 36 percent share of the overall TV market by bringing products with the right proposition and new technologies, according to a senior company official. Besides, the company expects to grow “quite significantly” in the premium TV segment, where it aims to take its market share to 65 percent in 2022 from 50 percent last year.

Expanding its offering in the premium TV segment, Samsung on Tuesday launched its ultra-premium 2022 Neo QLED 8K and Neo QLED TVs in India, with prices starting from Rs 3.24 lakh and Rs 1.14 lakh respectively. “Last year, we had a share of 31.7 percent in terms of the entire TV industry and with these launches, we are aiming to take it to 36 percent (by value),” Samsung India Head of Sales, Marketing and Operations, Consumer Electronics Business Mohandeep Singh said.

Both from screen size and technology perspective, he said the company has a relevant proposition for the Indian consumers. “In 2021, Samsung India grew by 54 percent and we expect a growth of 25 percent this year. It should take our market share to 36 percent,” Singh said.

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According to industry analysts, the Indian television market is expected to be around $4.6 billion in 2022. The penetration level of TV in Indian homes is around 65 percent. Moreover, within that, panel TV is available for 15 percent of households only, Singh said.

“For us, there is a huge enough headroom to grow,” Singh added. Driven by a rise in disposable income in India, the premium TV segment has witnessed significant growth, Singh said, adding that now people are looking for larger and better TVs integrated with new technologies delivering better picture and sound quality.

Samsung India, part of South Korean chaebol Samsung, has witnessed a two-fold growth for its QLED TV range (Quantum Dot Light-Emitting Diode) in 2021, which is synonymous with the premium market in India, Singh said. “We have around 50 percent market share in the premium segment and with the launch of this TV, we are looking to enhance our market share to 65 percent,” Singh said, adding, ”our plan is to triple it after doubling it last year. We plan to grow 3X in the QLED segment”.

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Samsung India, which earlier used to dominate the Indian LED panel market, now faces tough competition from several new entrants. Most of them have forayed into the segment in the last 3-4 years with attractive price points, starting from as low as Rs 12,000 onwards in the entry-level segment of 32 inches. When asked about increasing competition, Singh said, ”as far as Samsung is concerned, we are committed to serving the consumer at all price points, from entry-level to most premium level”.

Samsung would continue to cater to the consumer’s requirement, ensure to deliver the “right proposition” required by them, be relevant and sustain and grow in the market, he added. “We are focused on growing the Indian market and serving every consumer, whether it’s online and offline, entry-level or premium, we would continue,” he added.

Presently, Samsung domestically manufactures 90 percent of its TV sold in India at its own factories and through OEMs.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

From US to UK to India, why was tax collection at record highs despite weak economic recovery?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s tax collection for FY22 has indeed turned out to be about Rs 2 trillion more than the revised estimates, which in turn were a good Rs 3 trillion more than the budgeted estimates of last year. This final tax revenue beat doesn’t come as a surprise. I had written at the time of the presentation of the FY23 budget that tax revenues for FY22 are being underestimated.

In fact, I had argued that even by very conservative estimates, the net tax revenue to the Centre in FY22 would be Rs 19.3-20 trillion versus Rs 17.65 trillion indicated in the revised estimates.

Now, let’s try to analyse why tax collections were at a record high when India’s GDP as of end of FY22 is likely to have been only 1.8 percent more than the output in March 2020–two years ago.  Let us start by noting that this high tax collection is the experience in quite a few other countries as well.

Justin Theal and Alexandra Fall of the Pew Charitable Trusts point out that tax collections in more than half the states of the US in the latest year surpassed the collections they would have made if they had grown at the pre-pandemic pace.

Also read: Indianomics: Experts discuss impact of food inflation on economy

A Reuters report similarly claims that Japan’s tax collections  for the year ended March 31 were at a record high, far surpassing the budget estimates. And more recently, the UK government’s Dept of Finance report points out that for calendar 2021 all tax heads — income tax, corporation tax and VAT — grew between 17-30 percent over the year-ago levels.

So what explains the record tax collections from US to UK to India to Japan, in a year which saw good recovery from a weak base but economic growth in most countries didn’t cross the level they would have attained if they had grown at the pre pandemic pace.

This should be the subject of enquiry by researchers in the IMF (International Monetary Fund) and economists in global banks like Citi and JPMorgan. Here are a few possible reasons:

Also read: Economists believe monetary policy needs course correction as April inflation likely to cross 7%

1. Firstly, in all countries goods purchases outstripped those of services for most of calendar years 2020 and 2021.  In all countries, it is easier to tax the entire chain of manufactured goods, while many services that are informal escape the tax net.

2. Secondly and more importantly, the past half-year has seen rising inflation, and inflation always elevates the nominal parameters. High product prices led to super-normal profits for metal companies, as also for other product companies that could pass on price hikes. Also, customs duty collections in many countries including India rose as the nominal value of the imports rose.

3. Thirdly, huge stimuli from many governments like US, UK, EU and Japan led to a pick up in global trade in 2021. India too reported record exports of $418 billion in FY22, as also record imports of $610 billion. Both push up the entire ecosystem  of manufacturing to result in higher tax collection.

4. In most countries, the pandemic tended to strengthen the formal sector at the expense of the informal sector. A K-shaped recovery has been the upshot in many economies, with an ultra-loose monetary policy abetting the process, by rewarding borrowers ( who are typically fewer and richer) at the expense of savers (who are poorer and more numerous).

Also read: SBI Chairman wary of inflation but says growth continues to be main focus

While the curious case of record tax collections in a context of sub-par economic recovery needs to be analysed thoroughly, the moot point is whether tax collections will continue to grow at this rapid clip.

If we look at our guess of reasons, there may be a question mark over some of the factors that probably caused the record tax collections. Services growth has picked up and goods purchases have struggled at least in mass consumption items, from soaps to scooters.  Global trade may suffer due to the Russia-Ukraine war and the resultant sanctions on Russia. Also global economic activity is likely to slowdown as central banks have begun rolling back the extraordinary accommodation. However, inflation looks set to continue and has even accelerated in the energy complex. This, and the high base of FY22, may keep tax collections robust in FY23 too.

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow