Tag: GDP

Empowering growth for all by bridging the credit gap

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

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India is expected to become the world’s third-largest economy by FY2028, with a projected GDP of $5.2 trillion, surpassing Japan and Germany. This growth is primarily due to the remarkable expansion of the micro, small, and medium enterprises (MSME) sector, which currently consists of approximately 63.4 million MSMEs. However, despite this impressive economic narrative, India faces a significant challenge – constrained access to formal credit.

The credit gap in the MSME sector alone in India amounts to a staggering ₹25 trillion, with less than 10% of the Indian population having access to formal credit. This leaves over a billion individuals excluded from the financial mainstream and the overall debt demand from MSMEs in the country amounting to ₹69.3 trillion.

The World Bank data highlights that India’s domestic credit to the private sector is only 55% of its GDP, significantly lower than the global average of 148%. India also lags behind economically robust Asian nations such as China, South Korea and Vietnam.

As India strives towards economic pre-eminence, it is crucial to address this credit gap to ensure sustained and inclusive growth. Enhancing access to formal credit, particularly within the MSME sector, is imperative to ensure the country’s economic resilience and prosperity.

Gaps in traditional lending

The conventional process of accessing credit, primarily through banks or financial institutions, has long been characterised by the submission of paperwork and a subsequent waiting period for a decision. However, this process poses a formidable challenge, particularly for individuals with limited credit history or unconventional financial circumstances, as it heavily depends on credit scores and historical data. Consequently, it potentially leads to the exclusion of certain applicants, which is accentuated for customers who are new to credit and lack a substantial credit history.

Traditional lending institutions’ sluggish adoption of digital reforms and essential technology is compounding this challenge. The hesitancy to embrace technological advancements increases operational costs and diminishes competitiveness for financial institutions. As a result, these institutions struggle to keep pace with the dynamic needs of customers and experience overall inefficiencies in the lending process.

Technology reshaping lending

The modern landscape of digital financial enablers is fundamentally reshaping credit accessibility, especially for segments historically underserved. These entities leverage digital onboarding, assimilating vast amounts of critical data for making credit decisions via API’s and technology-driven underwriting processes, ensuring precise risk assessments, swift loan approvals, efficient disbursements, and streamlined collections.

A prime example is Lentra, which strategically addresses industry challenges, enhancing credit accessibility through its comprehensive Intelligent Cloud lending platform. Lentra’s approach is distinguished by utilising cutting-edge technologies like open APIs and artificial intelligence (AI), enabling automated loan approvals. This expands the banks’ reach and enriches customer engagement while reducing operational costs. Serving over 50 banks and financial institutions in India and Southeast Asia, Lentra processes a substantial volume, having disbursed over $27 billion worth of loans and processing more than 2 million loan applications every month on Intelligent Lending cloud platform.

Crucially, the offerings of firms like Lentra extend beyond conventional creditworthiness assessments. They leverage advanced technologies to monitor loan repayments, eliminating biases in customer interactions and in the process democratising the credit ecosystem.

Lentra Digital Lending Summit 2023

To further showcase such digital tools and foster discussions on expanding credit access, Lentra is organising the Lentra Digital Lending Summit 2023 in association with CNBC-TV18 on December 13. This day-long event will bring together leaders from various financial institutions, fostering discussions on the impact of emerging technologies on lending processes and scalability. The summit represents a unique opportunity to mobilise India’s lending strength and instigate a concerted effort to transform how credit is sought and delivered. With captivating discussions, insightful interactions, and a felicitation ceremony on the agenda, the Lentra Digital Lending Summit 2023 is designed to become a vital cog in India’s economic machinery.

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China reports surprisingly strong growth driven by industry

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

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China’s economic growth beat expectations in the first quarter, as factory output led the expansion bolstering expectations the government can hit its ambitious annual target.

Gross domestic product increased 5.3% in the January-to-March period from a year earlier, data released by the National Bureau of Statistics showed Tuesday. That’s higher than the median estimate of 4.8% in a Bloomberg survey of economists and just above a growth rate of 5.2% in the final quarter of 2023.

Other Key Figures From the Data:

• Industrial production rose 4.5% in March from a year earlier, versus economists’ forecast of 6%
• Industrial output rose 6.1% for the first quarter
• Retail sales climbed 3.1%, missing an expected 4.8% gain
• Fixed-asset investment expanded 4.5% in the first three months, compared with a 4% increase projected by economists. The property sector continued shrinking, with investment plunging 9.5% in the period
• The urban jobless rate dropped to 5.2% last month from 5.3% in February

China’s economic recovery has been unbalanced. Manufacturing is holding up, thanks to resilient overseas demand and Beijing’s efforts to cushion the blow from US trade restrictions by developing advanced technologies at home. But Chinese consumers have been slow to recover their appetite for spending, amid a prolonged real estate downturn that’s weighing on household and business confidence. Factory prices have been in deflation for more than a year, reflecting anemic domestic demand as well as excess capacity in some industries.

China’s growth target for this year is around 5%. Many economists say the government will have to take more action to stabilize the property market, and encourage consumers to spend, in order to hit the goal.

Investors are closely watching one major government effort to boost domestic demand this year: a trade-in program that will encourage businesses to upgrade their machinery and households to buy new cars, refrigerators or washing machines. Shares of Chinese home-appliance makers jumped last week after officials vowed “strong” fiscal support for the plan.

The real estate slump that’s dragging on consumers shows no sign of bottoming. Housing sales and investment continued to decline, despite increased funding for developers and efforts in a growing number of cities to encourage home purchases via cheaper loans or looser restrictions on owning multiple properties. Even some of the country’s biggest builders have plunged into a credit crisis.

The People’s Bank of China may provide more support for cheap loans to housing funds in the coming months via its Pledged Supplemental Lending program, some analysts say.

The central bank on Monday kept the rate of its one-year medium-term lending facility unchanged, and drained cash on net from the banking system via the tool for a second straight month. The PBOC cut its reserve requirement ratio for banks by 50 basis points in February — a move that allows extra lending — and said there’s room for more cuts. But China has reasons to be cautious in any monetary easing, since widening the yield gap with the US risks adding to downward pressure on the yuan.

Beijing is also using fiscal policy to bolster growth, especially by directing more public cash toward infrastructure. Government bond financing slowed in the first quarter, but analysts say that’s mainly because funds raised last year are still being used, and they predict an acceleration in bond sales this quarter to sustain investment.

Strong sales abroad helped balance China’s domestic woes early in the year. But exports declined in March — and with more countries threatening to erect barriers against Chinese goods, there are risks in relying on foreign trade to meet growth targets.

The degree of government support for households and businesses to spend at home will likely depend on how Chinese firms fare on international markets, Goldman Sachs economists led by Hui Shan wrote in a note last week. The Goldman team raised their growth forecast, predicting the 5% target will be met, and said the government doesn’t seem keen to significantly exceed it.

“If external demand is strong, then less domestic stimulus is needed,” they wrote. “If the property market continues to deteriorate, then more easing measures will be introduced.”

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

India is likely to see a growth of 7.6% in FY25, says CII President R Dinesh

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

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R Dinesh, President of the Confederation of Indian Industry (CII) has expressed optimism regarding India’s economic growth prospects for FY25.

In an interview with CNBC-TV18’s Parikshit Luthra, Dinesh highlighted that FY24 was a promising year and projected a growth rate of around 7.6% for FY25.

Dinesh emphasised the positive sentiment among CII members, with more than 70% expecting the first half of FY25 to outperform the latter half of FY24. He attributed this optimism to the focus on enhancing both physical and digital infrastructure, which has led to a reduction in the overall cost of doing business in India, thus enhancing competitiveness.

However, Dinesh stressed the need for continued and inclusive growth, highlighting key areas for reform such as land, labour, and agriculture management.

“CII has spoken about the fact that we need continued growth and inclusive growth. For that, we need reforms regarding land, labour, and to a certain extent, how we manage the agriculture front. And in that it is important that while the Centre does most of the heavy lifting, it is also necessary to build in the consensus, and the implementation at the state level also. So to make that happen, we are suggesting a GST like structure for implementation and tracking that and making it happen in a fast and efficient manner,” Dinesh said.

Furthermore, Dinesh called for government support for Micro, Small, and Medium Enterprises (MSMEs) in transitioning towards sustainability and digitalisation.

Addressing the issue of electoral funding transparency, Dinesh reiterated the industry’s commitment to transparency in electoral financing, emphasising the importance of accountability and openness in the democratic process.

Watch accompanying video for entire conversation.

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

Asian Development Bank raises India’s GDP growth forecast to 7% for FY25

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

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The Asian Development Bank has increased India’s GDP growth forecast for FY25 to 7% from the earlier 6.7%. The ADB said India’s robust growth will be deiven by the demand for public and private sector investment and the gradual improvement in consumer demand.

However, the 2024-25 fiscal’s growth estimate is lower than the 7.6% that was projected for FY23. The ADB said strong investment drove GDP growth in FY23 as consumption was muted.

In December 2023, the ADB had projected that India’s economy would expand 6.7% in FY25. “The economy grew robustly in fiscal 2023 with strong momentum in manufacturing and services. It will continue to grow rapidly over the forecast horizon. Growth will be driven primarily by robust investment demand and improving consumption demand. Inflation will continue its downward trend in tandem with global trends,” the April edition of the ADB stated.

It said growth would remain robust despite it moderating in FY24 and FY25. And for FY26, the ADB has projected it to expand to 7.2%. It said exports are likely to be relatively muted in the 2024-25 fiscal as growth in major advanced economies slows down. However, it will improve in FY25.

“Monetary policy is expected to remain supportive of growth as inflation abates, while fiscal policy aims for consolidation but retains support for capital investment. On balance, growth is forecast to slow to seven per cent in FY2024 but improve to 7.2 per cent in FY2025,” the ADB said.

To boost exports in the medium term, the bank said India requires greater integration into global value chains. Last week, the RBI forecast India’s GDP growth for FY25 at 7% on expectations of moderating inflationary pressures, normal monsoon and sustained momentum in manufacturing and services.

ADB also said that most of developing Asia outside China is poised for expansion in the next two years as inflation eases and consumer demand remains strong.

It said the region’s economy is likely to grow at a 4.9% pace this year and in 2025. It has forecast inflation easing slightly to 3.2% this year and 3% in the next year, compared last year’s estimaate of 3.3%. However, growth in China is set to slow as the real estate sector and domestic demand remain weak, it said.

he ADB said higher service consumption, including tourism, adnd a rebound in semiconductor demand will drive growth in countries outside of China. Key risks remain, including geopolitical tensions, the path of the Federal Reserve’s policy this year, further deterioration in China’s property market and inflation. Food price growth remains an issue in the region as weather events threaten crop yields and export restrictions weigh on trade.

With inputs from PTI and Bloomberg

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RBI reiterates 7% GDP growth forecast for FY25 contrary to market expectations of a raise

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

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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has kept its growth projection for India’s Gross Domestic Product (GDP) unchanged at 7% for the 2024-25 fiscal year, Governor Shaktikanta Das announced on Friday, April 5.

According to a CNBC-TV18 poll, the central bank was expected to raise the GDP growth forecast for FY25 anywhere between 7.1% and 7.5%.

For the first three-quarters of FY25, the GDP growth rates are estimated at 7.1%, 6.9%, and 7%. For the fourth quarter of the fiscal, the growth is projected at 7%.

“This is the third successive year of 7% or higher growth,” Das said. The governor stressed that the growth and inflation dynamics have played out favourably since the last policy. He said robust growth prospects provide policy space to remain focused on inflation.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank told CNBC-TV18, “I think what we need to keep in mind is they seem to be very comfortable from the growth point of view. We were expecting there was some probability that a 7.4%, as indicated in the bulletin could have been revised up as GDP growth. But that too, hasn’t been revised. But we clearly know that there is an indication of an upside that they are seeing on growth front after the bulletin data was out. So I think all-in-all, this is clearly wherein it gives them fair amount of room to wait and watch and let data determine eventually.”

The Governor however highlighted that while inflation is moving closer to target, the last mile of inflation is turning out to be challenging. The RBI MPC has retained its CPI (consumer price index) inflation forecast for FY25 at 4.5%.

The RBI also left its repo rate unchanged at 6.5%, in line with market watchers and economists’ expectations. This was the seventh straight instance of the policy rates being left unchanged by India’s central bank.

Catch all the live updates from RBI MPC announcement here

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

RBI holds repo rate at 6.5% for 7th consecutive time; home, auto EMIs to remain unchanged: TOP HIGHLIGHTS

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

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RBI Monetary Policy 2024 HIGHLIGHTS: The Reserve Bank of India (RBI) Monetary Policy Committee that met for its bi-annual meeting from April 3 to April 5 has decided to maintain key lending rates, withdrawal of accommodation stance and FY25 GDP growth projection, Governor Shaktikanta Das also cautioned banks, NBFCs and other financial entities to give highest priority to governance and adherence to regulatory guidelines. Track RBI Monetary Policy 2024 LIVE updates here

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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

RBI policy on April 5: What is D-Street expecting?

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

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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting is currently underway with the policy decisions scheduled to be announced on April 5, 2024.

The market isn’t expecting any changes in rates or stance just yet. But a CNBC-TV18 poll suggests it will watch out for macro forecasts with a potential gross domestic product (GDP) growth upgrade on the cards.

There’s also an expectation that RBI is going to signal that it will keep liquidity comfortable. If all of this comes through, it is going to be bullish for stocks.

In the CNBC-TV18 poll, 60% of the respondents said that they are going to focus on RBI’s growth and inflation projection with others highlighting that they’re going to watch out for any signal that the stance could be shifted towards neutral or if the tone turns a bit more hawkish given the exuberance in the system which RBI has been highlighting.

Also Read | World Bank upgrades India’s growth forecast to 7.5% for FY24, pegs rate at 6.6% for FY25

No one from the poll expected rates to be tinkered with in this policy. Most of the respondents expect the stance of the policy to be left unchanged at withdrawal of accommodation with just about 10% expecting that RBI will prepare the markets for a shift in stance going ahead.

Most respondents believe the first rate cut is only expected in the October policy, with some expecting it by August, but no earlier than that.

Also Read | Goldman Sachs expects RBI to begin rate cuts from third quarter; prefers these sectors

On the liquidity front, the respondents largely expect RBI to signal comfortable liquidity. Since the last policy, liquidity conditions have eased and RBI has been actively managing liquidity with multiple interventions at both ends. Participants expect that RBI will continue with this and also reiterate its preference to stay nimble with market operations.

The inflation forecast for the current fiscal year is also unlikely to be changed just yet. While vegetable prices continue to remain volatile, the RBI could find some comfort in the softening core inflation, but on the growth front half of the respondents are expecting an upward revision with the domestic growth data remaining robust.

The RBI is expected to raise the GDP growth forecast for FY25 anywhere between 7.1% and 7.5% as per 50% of the respondents.

Apart from these, the governor’s comments in the press conference about recent regulatory measures, for instance, against financial entities, are also things that the Street is going to keenly watch out for.

Also Read | RBI Monetary Policy: 5 factors that could drive the central bank’s rate decision in April

For more, watch the accompanying video

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

Peter Cardillo of Spartan Cap explains why the US Fed might lower interest rates twice this year

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

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Contrary to market expectations of three rate reductions totalling 75 basis points, Peter Cardillo, Chief Market Economist at Spartan Capital Securities, predicts the Fed opting for two cuts, with an initial cut of 50 basis points, followed by another 25 basis point reduction this year.

“This would be a scenario if inflation remains elevated and the US Fed decides not to cut in June, then that means that in September, they could cut by 50 basis points, and then 25 just before year-end, and that would make up the 75-basis point that the market is talking about,” Cardillo told CNBC-TV18.

On March 20, the US central bank decided to keep interest rates unchanged at 5.25-5.50%.

Despite this, it still anticipates three rate cuts in 2024.

The Fed has also revised its forecast for the 2024 gross domestic product (GDP) to 2.1% from 1.4%.

They predict that “core” inflation, excluding volatile food and energy costs, will reach 2.6% by the end of 2024, up from their previous estimate of 2.4%.

In January, core inflation stood at 2.8%, according to the Fed’s preferred measure.

Also Read | US Fed holds rates steady, foresees 3 rate cuts this year

Among other countries, Cardillo is bullish on India as he expects the economy to keep performing strongly. .

“It (India) is catching up to China and, maybe, it might surpass China over the next year or two. And if that happens, it becomes a powerhouse,” he said.

Also Read | Experts anticipate RBI to keep interest rates unchanged in April

For the entire interview, watch the accompanying video

Catch all the latest updates from the stock market here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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

India’s economic trajectory points to upper-middle income status by 2036

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

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India, recognised as the fastest-growing economy among G20 developing nations, is setting its sights on transitioning into a developed economy by 2047. According to India Ratings and Research (Ind-Ra), the current estimated GDP of $3.6 trillion in FY24 could pave the way for India to enter the upper-middle income category (per capita income $4,466-13,845) between FY33 and FY36, reaching a milestone of a $15-trillion economy by FY47.

Ind-Ra has, however, set an ambitious estimate of the country becoming a $30-trillion economy by 2047, dependent on certain factors.

Dr Sunil Kumar Sinha, Senior Director and Principal Economist at Ind-Ra, emphasised the pivotal role of real GDP growth, inflation (GDP deflator), and the INR/USD exchange rate in shaping India’s economic trajectory.

“The onward journey of Indian economy from India Ratings and Research (Ind-Ra) estimated USD3.6 trillion dollars in FY24 will depend on the rate at which the real GDP growth, inflation (GDP deflator) and INR/USD exchange rate evolve,” Sinha said.

“We expect the Indian economy under different scenarios to enter into the upper-middle income category (per capita income USD4,466-13,845) over FY33–FY36 and to a USD15 trillion economy over FY43-FY47,” Sinha added.

Until 2006, the World Bank classified India as a low-income country. In 2007, India moved to the lower-middle income country and since then has remained there. India’s per capita GDP stood at $2,390 in 2022, the report stated.

Ind-Ra’s ambitious estimate of reaching $30 trillion by FY47 requires a substantial annual growth rate of 9.7% in current USD terms from FY24 to FY47. Historical data over the past 50 years highlights that sustaining such a high growth rate for a decade is rare, with only two instances in 1973-1982 and 2003-2012.

While India exhibits robust economic growth, global trade challenges and protectionist measures adopted by developed economies since FY12 pose potential obstacles. The shift towards trade fragmentation and climate-related policy changes further complicates India’s journey towards the $30-trillion target by 2047.

Despite uncertainties surrounding the $30-trillion target, Ind-Ra’s estimates suggest that India’s per capita income could range from $9,218 to $9,920 between FY43 and FY47. This projection places India in proximity to the high-income country threshold of $13,846 per capita.

Beyond economic indicators, Ind-Ra identifies key factors influencing India’s economic trajectory, including energy transition, low carbon manufacturing/services, and the expansion of the middle class. India’s commitment to energy transition, showcased at the COP26 Summit, positions it as a major player in renewable energy, with ambitious targets such as 500GW renewable energy capacity by 2030 and achieving a net-zero economy by 2070.

The focus on low-carbon products and services, as exemplified by India’s first green hydrogen plant-based stainless steel manufacturing facility commissioned in March 2023, is expected to contribute significantly to India’s growth.

Additionally, the rising incomes and aspirational lifestyle of the middle-income class are identified as key drivers of demand for goods and services. According to People Research on India’s Consumer Economy, the middle-class population is projected to grow substantially, reaching 715 million in 2030-31 and 1.02 billion in 2046-47.

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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

Why Keki Mistry thinks REITs are a good investment option

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

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Ex-HDFC CEO believes Real Estate Investment Trusts (REITs) are very important, particularly for those who may not have the funds to invest directly in real estate because of the high prices.

REITs allow you to invest in real estate assets, such as office buildings, and shopping malls without directly owning them.

In a conversation with CNBC-TV18, Keki Mistry, former CEO of HDFC, said REITs help owners convert illiquid assets into liquid assets.

While there can be various kinds of REITs, he noted, in India, there are REITs only for commercial real estate or for retail or shopping malls etc. and not for residential.

Also Read | GST Council may soon clarify tax exemption to Real Estate Regulatory Authority

Mistry pointed out that REITs are very popular in other countries, especially in the US, where the total value the market is approximately $50 trillion, with listed REITs making up about $1.8-1.9 trillion of that amount.

“In India, on the other hand, there are only four listed REITs. In the US there are close to 200 listed REITs, just under 200. So, there is a huge difference between India and the US. The total market cap of all the listed mcap in India is about $4 trillion, roughly, whereas the market cap of all the listed REITs is under $10 billion,” he added.

Also Read | Arvind SmartSpaces eyes 35% revenue growth in FY24, targets Surat real estate

He expects an increase in the market capitalisation of REITs in India as more developers, who have developed large amounts of commercial real estate that is leased out, will eventually want to convert them into REIT structures.

Besides the US, REITs are also popular in the United Kingdom (UK), Japan, and Singapore.

Mistry is optimistic about the Indian real estate sector.

“I believe the growth opportunity in India is phenomenal. We are a very under-penetrated market, mortgages in India are only 11% of the GDP. In the Western world mortgages are 50-60-70% of GDP. China is about 24-25%. India is only 11%. So, there is so much scope to grow,” he added.

For the entire interview, watch the accompanying video

Catch all the latest updates from the stock market here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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