India’s economic growth unexpectedly slid to a three-year low in the last quarter, delivering a blow to Prime Minister Narendra Modi who is facing criticism for disrupting business activity through his shock cash squeeze last year.
Gross domestic product grew 5.7 per cent in April-June, its slowest pace since the January-March quarter 2014, government data showed.
It was a marked slowdown from a 6.1 per cent growth in the January-March period and was far worse than the median forecast for a 6.6 per cent in a Reuters poll. It was in line with the poll’s lowest estimate.
Although growth was already slowing, Modi’s decision last November to scrap high-value old banknotes — a bid to flush out the money Indians hide from tax officials — wiped out about 86 percent of currency in circulation virtually overnight.
While his drive to unearth unaccounted wealth did not deliver the desired result, it hurt consumer demand in an economy where most people are paid in — and buy what they need with — cash.
Since then, an improvement in high frequency indicators such as sales of two-wheel vehicles, oil consumption, cargo traffic and rail freight raised hopes that the impact of the cash clampdown had bottomed out.
The GDP data belied those hopes. Confusion ahead of the launch of a new goods and services tax (GST) also seems to have dampened economic activity.
“The numbers seem to suggest that the slowdown from last the quarter has intensified due to the combination of long-term slowdown and temporary shock factors like demonetisation and GST,” said Abheek Barua, chief economist with HDFC in New Delhi. “We have to revise our GDP outlook numbers for the full year.”
A draw-down in inventories in the lead up to the tax change dragged down the manufacturing sector, which slowed to 1.2 per cent in the June quarter from a 10.7 percent growth last year.
With companies still grappling with new tax rules, business surveys are pointing to more pain ahead. Services and manufacturing activity contracted at their fastest rate in years in July, the month that the GST was launched.
After Thursday’s disappointing figures, economists are looking to review their full-year growth estimates.
“These trends will prompt a downward revision,” said Radhika Rao, an economist at DBS Bank in Singapore.
Annual growth in consumer spending, which powers more than half of the $2 trillion economy, slowed to 6.7 per cent in the June quarter from 7.3 per cent a quarter ago. Government spending too slowed. It grew 17.2 per cent year-on-year compared with a near 32 per cent year-on-year growth in the March quarter.
However, in a silver lining for Asia’s third-largest economy, the services sector gathered steam, posting a growth of 8.7 per cent in the latest quarter, up from 7.2 per cent in the previous three months.
Capital investment also rebounded from a 2.1 per cent contraction in the March quarter.
RBI needs to ensure stability: Shaktikanta Das
New Delhi: The head of the Reserve Bank of India (RBI) said he would take the steps necessary to maintain financial stability in the country and help create favourable conditions for growth.
India’s economy has grown because of measures such as the nationwide goods and services tax and the insolvency and bankruptcy code that prevents wilful defaulters from bidding for stressed assets, Shaktikanta Das said in his address to an investor roundtable.
The country’s growth story is backed by its strong domestic fundamentals, he said, citing lower inflation.
Annual retail inflation rate dropped to an 18-month low of 2.19 per cent in December, strengthening the views of some economists that the central bank could ease monetary policy next month.
India’s top business groups on Thursday urged the central bank to cut its benchmark interest rate by at least half a percentage point and lower the cash reserve ratio it imposes on banks.
The country also needs to watch out for any sudden turbulence in the gloal financial market, Das said.
Centre removes two PNB executive directors for lapses in Rs 13,500-cr fraud
Chennai:The Central government has removed two Punjab National Bank (PNB) Executive Directors — Sanjiv Sharan and K.Veera Brahmaji Rao — for the lapses in the Rs 13,500 crore fraud allegedly perpetrated by absconding diamantaire Nirav Modi.
The PNB has intimated the action to the stock exchanges.
“We welcome the Central government’s action to dismiss the two Executive Directors. The scam of such proportions could not have happened without the knowledge of the top management,” C.H. Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA), told IANS.
“Perhaps for the first time, the Centra has removed the Executive Directors of a nationalised bank under the Nationalised Banks (Management and Miscellaneous Provision) Scheme, 1970. All these days it was said the top management of government-owned banks — Chairman, Managing Director, Executive Directors — are governed only by the contract of appointment.
“It is also good that the central government has followed the due process of giving the two PNB Executive Directors opportunity to put forth their views before dismissing them,” Venkatachalam added.
According to the Central government’s notification, on July 3, 2018, Sharan and Rao were issued a show cause notice as to why they could not be removed from office for having failed to exercise proper control over the functioning of PNB, thus enabling the fraud through the misuse of SWIFT at the bank’s Brady House branch in Mumbai.
After considering Sharan and Rao’s replies and the comments of the bank’s Board, the Centre removed them from office as it found it was expedient in the interests of PNB.
According to the notification, the dismissal of Rao is subject to the outcome of a plea in the Delhi High Court.
“We are happy to see some action being taken. Whether it is only the two Executive Directors and other officials are also involved in the scam has to be probed in full,” Venkatachalam said.
According to him, in the past, low-level officers would have been the scapegoats for such massive scams.
“With the action taken on the top management, people will be satisfied that public sector bank officials are answerable for their lapses,” Venkatachalam added.
In this new world, data is the new wealth: Ambani
Mumbai: Reliance Industries chairman and managing director Mukesh Ambani urged Prime Minister Narendra Modi to take steps against ‘data colonisation’, specially by global corporations, stating that Indian data must be owned by Indians.
Invoking Mahatma Gandhi’s movement against political colonisation, Ambani said India now needs a new movement against data colonisation.
“Gandhiji led India’s movement against political colonisation. Today, we have to collectively launch a new movement against data colonisation,” he said Gandhinagar at the Vibrant Gujarat Global Summit.
Stressing that, in this new world, data is the new wealth, Ambani said, “India’s data must be controlled and owned by Indian people and not by corporate, especially global corporations.”
He further said, “For India to succeed in this data driven revolution, we will have to migrate the control and ownership of Indian data back to India. In other words, give Indian wealth back to every Indian.”
Stating that the “entire world has come to recognise” Modi “as a man of action”, Ambani said, “Honorable Prime Minister, am sure you will make this one of the principal goals of your digital India mission.”
Later in the day, countering Ambani’s call, Governor – Commonwealth of Kentucky, Matthew Griswold, asked Modi “to think in the opposite” in order to realise the tremendous opportunity that lies in Indo-US partnership.
“Honorable prime minister you have been asked from this stage to think about limiting the amount of competition, limiting the exchange of ideas, information and goods. I would encourage you to think in the opposite,” he said.
While stating that it is important to put the people of India first, Griswold said, “It is also important to put their opportunity and our opportunity as citizens of the world to trade with one another and exchange ideas because iron sharpens iron.”
The greatest possibility comes from the exchange of these idea, he added.
“If we can cut the regulations, cut the bureaucracy, cut the red tape, the opportunity is enormous between our nations,” he added that India is now the 10th largest trading partner for the US and “climbing quickly”.
“The opportunity before us between India and the United States is incredible, but responsibility falls on each of one us, those of us in elected positions, those of you in the industry, those of you who represent various constituencies, we have much work to do…we must do this, ” Griswold said.