Davos:The richest 1 per cent in India cornered 73 per cent of the wealth generated in the country last year, a new survey showed on Monday, presenting a worrying picture of rising income inequality.
Besides, 67 crore Indians comprising the population’s poorest half saw their wealth rise by just 1 per cent, as per the survey released by the international rights group Oxfam hours before the start of the annual congregation of the rich and powerful from across the world in this resort town.
The situation appears even more grim globally, where 82 per cent of the wealth generated last year worldwide went to the 1 per cent, while 3.7 billion people that account for the poorest half of population saw no increase in their wealth.
The annual Oxfam survey is keenly watched and is discussed in detail at the World Economic Forum Annual Meeting where rising income and gender inequality is among the key talking points for the world leaders.
Last year’s survey had showed that India’s richest 1 per cent held a huge 58 per cent of the country’s total wealth, higher than the global figure of about 50 per cent.
This year’s survey also showed that the wealth of India’s richest 1 per cent increased by over Rs 20.9 lakh crore during 2017 –an amount equivalent to total budget of the central government in 2017-18, Oxfam India said.
The report titled ‘Reward Work, Not Wealth’, Oxfam said, reveals how the global economy enables wealthy elite to accumulate vast wealth even as hundreds of millions of people struggle to survive on poverty pay.
“2017 saw an unprecedented increase in the number of billionaires, at a rate of one every two days. Billionaire wealth has risen by an average of 13 per cent a year since 2010 — six times faster than the wages of ordinary workers, which have risen by a yearly average of just 2 per cent,” it said.
In India, it will take 941 years for a minimum wage worker in rural India to earn what the top paid executive at a leading Indian garment firm earns in a year, the study found.
In the US, it takes slightly over one working day for a CEO to earn what an ordinary worker makes in a year, it added.
Citing results of the global survey of 120,000 people surveyed in 10 countries, Oxfam said it demonstrates a groundswell of support for action on inequality and nearly two-thirds of all respondents think the gap between the rich and the poor needs to be urgently addressed.
With Prime Minister Narendra Modi attending the WEF meeting in Davos, Oxfam India urged the Indian government to ensure that the country’s economy works for everyone and not just the fortunate few.
It asked the government to promote inclusive growth by encouraging labour-intensive sectors that will create more jobs; investing in agriculture; and effectively implementing the social protection schemes that exist. Oxfam also sought sealing of the “leaking wealth bucket” by taking stringent measures against tax evasion and avoidance, imposing higher tax on super-rich and removing corporate tax breaks.
The survey respondents in countries like the US, UK and India also favoured 60 per cent pay cut for CEOs. The key factors driving up rewards for shareholders and corporate bosses at the expense of workers’ pay and conditions, Oxfam said, include erosion of workers’ rights; excessive influence of big business over government policy- making; and the relentless corporate drive to minimise costs in order to maximise returns to shareholders.
About India, it said the country added 17 new billionaires last year, taking the total number to 101. The Indian billionaires’ wealth increased to over Rs 20.7 lakh crore — increasing during last year by Rs 4.89 lakh crore, an amount sufficient to finance 85 per cent of the all states’ budget on health and education.
It also said India’s top 10 per cent of population holds 73 per cent of the wealth and 37 per cent of India’s billionaires have inherited family wealth. They control 51 per cent of the total wealth of billionaires in the country.
Oxfam India CEO Nisha Agrawal said it is alarming that the benefits of economic growth in India continue to concentrate in fewer hands.
“The billionaire boom is not a sign of a thriving economy but a symptom of a failing economic system. Those working hard, growing food for the country, building infrastructure, working in factories are struggling to fund their child’s education, buy medicines for family members and manage two meals a day. The growing divide undermines democracy and promotes corruption and cronyism,” she said.
The survey also showed that women workers often find themselves at the bottom of the heap and nine out of 10 billionaires are men.
In India, there are only four women billionaires and three of them inherited family wealth.
“It would take around 17.5 days for the best paid executive at a top Indian garment company to earn what a minimum wage worker in rural India will earn in their lifetime (presuming 50 years at work),” Oxfam said.
RBI-industry meet: India Inc pitches for rate cut to prop up growth
New Delhi: Ahead of the monetary policy review, India Inc urged the Reserve Bank of India (RBI) to cut interest rate and reserve ratio to prop up growth.
In a meeting with RBI Governor Shaktikanta Das in Mumbai, industry chambers suggested various measures to ease tight liquidity situation and reduce high cost of credit in the light of consistently falling inflation.
The Confederation of Indian Industry (CII) suggested the policy measures required to ease the tight liquidity situation by effecting a cut in cash reserve ratio (CRR) by at least 50 basis points (bps), measures to facilitate flow of credit to industry, especially to MSMEs and the infrastructure sector, and steps to address the high cost of credit by considering a reduction of 50 bps in repo rate given that inflation has been consistently low, the chamber said in a statement.
Suggestions come ahead of the sixth bi-monthly monetary policy statement for 2018-19 scheduled to be announced on February 7.
CRR, currently at 4 percent, is the percentage of deposits kept as reserves with the RBI. Repo rate, currently at 6.5 percent, is the rate at which the central bank gives loans to the banks.
CII lauded the RBI for steps taken to ease financing challenges faced by the real sector, especially micro, small and medium enterprises (MSMEs), through various measures such as reducing Turn Around Time (TAT) and measures to boost liquidity in the economy.
On measures to address the financial challenges faced by the MSMEs, CII suggested that the RBI consider limiting the collaterals sought by banks to 133 percent of the exposure and eliminate the need for personal guarantees where sufficient collateral exists.
The chamber delegation, led by its president designate Uday Kotak, also suggested that letters of undertaking (LoUs) for buyers’ credit for the cases where MSMEs investing to expand capacity may be permitted and the RBI might consider allowing banks to sanction buyers’ credit facility to MSMEs, wherever import of raw materials is being done under letter of credit.
The Federation of Indian Chambers of Commerce and Industry (FICCI) also made a pitch for a cut in repo rate and CRR to enable lowering of lending rates by banks.
A reduction in repo rate and CRR would help in reviving the investment cycle in the country and will also boost consumption and support growth, FICCI President Sandip Somany said.
It will also help in reviving the investment cycle in the country and will also boost consumption and support growth.
“The need of the hour is to have an accommodative monetary policy, focusing on growth. The objectives of the Monetary Policy Committee should not be restricted to only price stability but also to consider growth and exchange rate stability,” he said.
On the RBI’s February 12 circular, CII highlighted that while it was aimed at improving the credit discipline and early identification of probable defaults, but it has, however, put pressure on already distressed sectors impacted due to business performance reasons and, hence, should be given sufficient time to resolve the defaults.
Among many key recommendations, CII recommended that the RBI may revisit the lending restrictions on the weak banks under prompt corrective action and consider allowing them to lend to the National Housing Bank which, in turn, can be used to finance housing projects through housing finance companies (HFCs).
The Associated Chambers of Commerce and Industry of India (Assocham) suggested that the economy needs credit loosening so that liquidity can sustain the growth.
The fundraising capability of NBFCs/HFCs has reduced significantly, warranting support from the government. They need to be provided the alternate options for raising funds. This is imperative not just for the health of NBFCs/HFCs but for sustaining the GDP growth rate as well,” Assocham said.
Sectors such as textile, handicraft and leather goods need to be given interest subvention to boost their export capabilities, it said, adding that the rate of interest subvention should be increased from 3 percent to 5 percent to take into account the combined effect of the commercial interest rate and the prevailing inflation.
Telecom sector may stabilise soon post-consolidation: Trai
New Delhi: Trai chairman RS Sharma expressed hope that the telecom sector is set to achieve stability soon post consolidation and the country needs heavy investment in fibre if it is to succeed in 5G technology and services roll out.
“My sense is that the sector is going to acquire stability and looking at the examples around the world scene 3+1 (3 private players and a PSU) is a good number and I don’t see it going down from that,” Sharma said here.
The Indian telecom operators are now reduced to three -Airtel, Vodafone-Idea and Jio and BSNL-MTNL following a bloody battle on tariffs that has seen shut down of operations of many fringe telcos and merger of two big telcos to take on Reliance Jio which unleashed a free and cheap service era that catapulted India to be data consuming nation ahead of US and China combined. But in the process, the incumbent telcos have bled on revenues and profitability and have found it diffcult to even service spectrum loans.
While the talk of India not missing the 5G bus is loud on private telcos and the government, the Trai chairman had a word of caution — India can be a frontrunner in deployment of 5G but a lot will hinge on bolstering investments in fibre infrastructure, which is currently inadequate and trailing countries like China.
“In 5G space, we can leapfrog inadequacies which we have in physical world, all of which can be overcome with use of information and communication technologies…There is a serious concern that while people are talking of 5G as a slogan but it won’t happen unless we put a lot of investment in fibre. Without fibre, 5G will not happen. 5G is going to have important use-cases in India because it will be a platform over which all the applications will be run. But it will not happen if there is no fibre”, Sharma said. He was speaking at the India Digital Summit organised by Internet and Mobile Association of India (IAMAI). At the same time, he said the investment need not just come from the TSPs (telecom service providers) it should also come from eco system companies as well.
“It is not just telecom companies that will need to invest. There are several avenues to generate investment and we are already seeing it happen now.” For instance, telecom service providers are already sharing tower. Infrastructure sharing could be one of the keys for the 5G network,” Sharma said. He said the fiberisation of the whole country is a must for the success of 5G.
India has only 22 per cent of mobile towers connected on fibre, while 78 per cent are without fibre, on wireless. China on the other hand, has 80 per cent connectivity through fibre and the rest through wireless. The optical fibre cable laid today till date is equal to optical fibre cable laid in China in one single year,” Sharma said adding fixed infrastructure will be critical for attaining a reliable and sustainable growth. Policies need to focus on promoting investments in infrastructure, he said.
“The National Digital Communications Policy (NDCP) contains those set of policies and statements and we need to operationalise those to ensure investment,” Sharma said. The new telecom policy – NDCP – aims to attract USD 100 billion investment and create four million jobs in the sector by 2022. It seeks to provide universal broadband connectivity at 50 Mbps to every citizen by 2022, and also talks of enhancing the contribution of digital communications sector to 8 per cent of India’s GDP, from the about 6 per cent now.
The TRAI chief further said there would be a need to unbundle service and infrastructure layers at some point, and fibre sharing could be one of the options in infrastructure sharing. “We think end-of-end service provisioning will not happen in 5G,” Sharma said. He further said, the connectivity problems in the country need to be solved with urgency, and regulations should not be “constrained” by the fact that only a certain set of service providers should provide a particular service. “No one should have the monopoly of providing services to people of this country, and we should solve this problem by whatever means and instruments we can deploy,” he said.
GDP growth likely to be tad higher at 7.5 pc in FY20, says Ind-Ra
New Delhi: The country’s economy is likely to grow a tad higher at 7.5 per cent in 2019-20 on account of steady improvement in major sectors — industry and services, said India Ratings and Research (Ind-Ra).
According to the advance estimates of the Central Statistics Office (CSO), the economy may clock a growth rate of 7.2 per cent in the current financial year, up from 6.7 per cent in the previous year.
Ind-Ra, a Fitch Group company, expects gross domestic product (GDP) growth to be a “tad higher” at 7.5 per cent in fiscal 2019-20.
After demonetisation and the GST implementation, the agency had expected 2018-19 to be a year of quick recovery and, indeed, the recovery has been sharp with GDP growth coming in at 7.2 per cent, it said.
It further said GDP growth would have been even better but for the global headwinds caused by an abrupt rise in crude oil prices and strengthening of the US dollar, among other factors.
“However, GDP growth in 2019-20 will be more dispersed and evenly balanced across sectors as well as demand-side growth drivers,” Ind-Ra said.
Over the past few years, private final consumption expenditure and government final consumption expenditure have been the primary growth drivers of Indian economic growth.
Ind-Ra said it believes that investments are slowly but steadily gaining traction, with gross fixed capital formation growing 12.2 per cent in the current fiscal and projected to clock 10.3 per cent in the next year.
“This is certainly a comforting development, but the flip side of this development is that it is primarily driven by the government capex (capital expenditure), as incremental private corporate capex has yet to revive” it said.
It further said that due to the slowdown in private corporate and household capex, GDP growth has failed to accelerate and sustain itself close to or in excess of 8 per cent.