@Leisure - Vol-42 | srei
  • <none>

@Leisure - Vol-42


The Indian economy is doing just fine

The recent rebound in India’s GDP growth rate in September 2017 to 6.3 per cent from 5.7 per cent is indicative that the Indian economy is picking up pace once again. What are the factors that allow us to be positive about the economy and what fills the government with confidence about growth rates? Here are the factors that we should consider:

Economic Growth: As the effects of demonetization and GST implementation wane off, the economic slowdown is also reversing. The real GDP growth has averaged 7.5 per cent in the previous 3 years, while a whopping 8.2 per cent growth was achieved in 2015-16. The reversal in the September quarter of the slowdown is already indicative of things turning positive from here.

Current Account Deficit: India’s current account deficit (CAD) i.e. the difference between the country’s exports and imports, has been a worrying factor for some, but this has been historically true as well. In fact, compared with the past, the CAD situation is much better at present. In FY 12, the CAD was 4.3 per cent, whilst for this financial year, it is expected to be 1.5 per cent. Overall, the CAD situation remains comfortable as it has been retained at under 2 per cent.

High Foreign Exchange Reserves: The country has comfortable foreign exchange reserves, which exceed US$ 400 billion. This gives India considerable security with relation to imports as this amount is sufficient to cover imports for at least one year. The forex reserves have risen over US$ 100 billion since January 2014.

Inflation: India has been able to capitalize on low international oil prices and the average rate of inflation in India has been under 5 per cent since January 2014. As of July 2017, the inflation rate was a mere 1.1 per cent. This may allow the country to move towards a low interest rate regime in the future, further pushing the case for growth. However, at the same time, the Reserve Bank will most likely take a ‘wait and watch’ stance with rates as inflationary pressures can rise due to higher oil prices in the future.

Fiscal Deficit: India has been able to meet its fiscal deficit targets. Compared with FY 12 when the fiscal deficit was 5.2 per cent of the GDP, the current numbers are far improved. Fiscal deficit is stated to be 3.2 per cent of the GDP in 2017-18 by the central government. This is even after the government has increase share of taxes to the states from 32 per cent to 42 per cent.

The fundamentals of the Indian economy are strong and robust; the economy can trek its way back to 7-8 per cent growth in the future. The shocks to the system may have halted the pace of growth temporarily, but there is nothing serious to worry about in the long term.


SREI is about innovative disruption

Srei’s name is derived from the Sanskrit word ‘Shrey’, which means merit or credit. The company has been in existence for nearly 3 decades and has been built from scratch in the pre-liberalisation era. Today, Srei manages Rs. 35,000 crore worth of consolidated assets.

Innovation is the key: Srei focuses on innovative models of responsible growth, which benefits all the stakeholders. The core concepts involve ‘Karma’ as well as ‘Dharma’, while always working with devotion. There is a strong belief in innovative disruption and taking a holistic view. The key drivers for Srei are:

CSR is at the heart of SREI: The Kanoria Foundation is chiefly responsible for all the CSR initiatives of Srei. The thought process has always been not only to create business value, but also societal value through responsible actions. So far, the foundation’s work has helped in the field of education, healthcare, environment and spirituality. The foundation has also undertaken work in helping acid attack victims. In whatever Srei does, the focus is singularly on nation building through hard work and devotion. Srei’s businesses create value in the long term and they must be sustainable so that the foundation can carry out its societal work. The Kanoria Foundation has entities worth nearly USD 10 billion under its umbrella.

Lending for sustainability: Srei is all about innovative disruption, which has helped it transform itself into a distinct and all-encompassing financial institution. Srei services nearly 1 lakh customers that range from construction companies and contractors to others, and has helped meet their needs for nearly two decades as a partner. The company’s goal has been to foster a spirit of entrepreneurship, which will allow for more job creation and in turn, help large swathes of the society. Srei has initiatives like ‘Sahaj’ in place that helps encourage rural entrepreneurship.

Journey ahead: Srei will strive to add value to the lives of the people it touches as it has been doing for the past 28 years. The endeavours of Srei encompass its customers, employees, shareholders, society and the planet itself. The future plans involve maintaining its presence in areas like financing, advisory and development services. The focus thus will remain on keeping profitability in sync with sustainability and societal responsibility.

Growth for Srei is not unidimensional; it is in tandem with the growth of all those who we touch. Finance thus, for Srei, is a holistic tool that can be deployed to build the nation, increase quality of life and generate employment.


Is the run on sovereign bonds coming to an end?

The bull run seen in Indian government securities may be coming to an end as there is a danger that inflation may rise and budget deficit could worsen. The benchmark 10-year yield has already risen by 24 bps in 2017 and there is a danger of it climbing further. Here are some factors that may be leading to an end of the bond party in India.

Changing parameters: The rising prices in India may prevent the Reserve Bank of India (RBI) from cutting rates in the near future. At the previous bi-monthly policy meet, the central bank had held the repo rates at 6 per cent. Japanese financial services company Nomura has said that the policy rates are expected to remain unchanged throughout 2018. The widening of fiscal deficit will also be detrimental for the bond markets. It should be noted that the deficit has already reached 96.1 per cent in the period between April and August 2017.

RBI intervention: As the RBI intervenes to mop up liquidity post demonetization, the yields on the benchmark 10-year bond may remain range bound between 6.65-6.80 per cent till the end of 2017. It is unlikely that the central bank would tolerate a higher yield since the repo rate is at 6 per cent.

The bond market is tempered and subdued, but there is hope as foreign investors are willing to add to their bond positions amidst the selloff. The important thing to consider though is that it is the local state run banks that are the primary drivers of the market as foreigners are subject to investment limits, which are nearly exhausted. A bear market thus looms ahead where bonds are concerned.


Buddy Jokes

Inflation is taxation without legislation – Milton Friedman

A teenager lost his contact lens while playing football. After a thorough but fruitless search, he gave up and went home. When his mom inquired why he looked so forlorn, he told her about having lost his lens. The mother offered to search; they went back to the football field. Within minutes, the teenager’s mother found the lens.

"How did you find it mom?"

"We weren’t looking for the same thing; you were looking for a piece of plastic, I was looking for Rs. 3500."

Q: What happened when the cat swallowed a 10 rupee coin?

A: There was money in the kitty!

Rahul was visiting a farm

Farmer: What would you do if a bull charged you?

Rahul: I’d pay whatever the bull charged.


Buddy Quiz

Quiz: Choose the correct answer:

1. Recently, the GDP growth rate of India has been:

a) 6.6 per cent

b) 6.3 per cent

c) 6.5 per cent

2. The Kanoria Foundation is responsible for:

a) CSR activities

b) PR

c) Logistics

3. Current Account Deficit is:

a) Difference between exports and imports

b) Shortfall in annual budget

c) Missing funds in treasury

4. Fiscal deficit in India is:

a) Falling

b) Static

c) Rising

5. Sahaj is in place to foster:

a) Entrepreneurship

b) Rural Entrepreneurship

c) Urban Entrepreneurship

Answer:1-a, 2-c, 3-a, 4-b, 5-b.