Updates on Indian Economy

Updates on Indian Economy

1. The total assets of (non-banking financial companies) NBFCs has been soaring over the years. Between 31 March 2009 and 31 March 2019, the total assets of NBFCs grew at 18.6% per year on an average, reaching ₹51.47 trillion, including assets of housing finance companies (HFCs). During the same period, the assets of banks grew at 10.7% per year.

2. Banks' lending to NBFCs has been rising over the years which contributed towards their assets expansion. Between 31 March 2008 and 31 March 2020, banks’ lending to NBFCs jumped from ₹78,938 crore to over ₹8.07 trillion, growing at 21.4% per year. Banks’ lending to NBFCs picked up post-March 2017, when it had stood at ₹3.91 trillion, and by March 2020, it had increased at the rate of 27.3% per year. 

Between 30 September 2018 and 31 March 2020, banks loaned more than ₹2.6 trillion to NBFCs, helping them ride their asset-liability mismatch. 

3. India’s Union cabinet on 11th November 2020 approved production-linked incentives for 10 sectors, including pharmaceuticals, food products and white goods, with the biggest chunk earmarked for our auto industry. Over five years, it could receive ₹57,000 crores of the proposed package worth ₹1.46 trillion.

4. The central government on 12th November 2020 announced a ₹2.65 trillion stimulus package focused on job creation, access to credit and farm support, aimed at nurturing the economic recovery. The total of all the relief measures announced by the Centre and the Reserve Bank of India (RBI) amounts to ₹29.87 trillion, or 15% of the gross domestic product (GDP)

Union finance minister Nirmala Sitharaman, who announced the package, cited a host of economic indicators, including goods and services tax (GST) collections, energy consumption, railway freight loading, bank credit flow and foreign direct investments, to claim that a strong economic recovery was underway.

The stimulus package, termed as Aatmanirbhar Bharat 3.0, includes ₹1.45 trillion production-linked incentives for 10 sectors. The stimulus may help underpin a nascent recovery after the economy slumped 23.9% in the June quarter as India implemented one of the world’s most stringent lockdowns to contain the spread of coronavirus.

5. India’s retail inflation remained above 7% in October for a second straight month as vegetable prices stayed at elevated levels, worrying policymakers, who are struggling to pull Asia’s third-largest economy from a deep slump. It was 7.27% in September. Retail inflation has remained above 4%, the middle-point of the Reserve Bank of India’s (RBI) target of 2%-6%, for more than a year.

6. PUBG is set to make a comeback in the country with PUBG Corp. on 12th November 2020 announcing it was preparing to unveil PUBG Mobile India and that it would invest $100 million in India. In September, the Centre had blocked 118 mobile apps, including PUBG, terming them prejudicial to the sovereignty of the nation.

7. The economy of Bihar

The per capita income of Bihar is a third of the national average. This shows a lack of economic activity in the state. The state’s literacy rate is the third-lowest in the country. In 2019-20, the per capita income of Bihar stood at ₹31,287. This was around 33% of the national per capita income of ₹94,954 (in constant terms, adjusted for inflation). This gap, more than anything else, shows the lack of economic activity in the state.

In 2018-19, commercial banks raised deposits worth ₹3,53,279 crore in Bihar, but they were able to lend only ₹1,20,287 crore. This means that the credit deposit ratio of Bihar was just 34%, against an all India average of 78.2%. States like Tamil Nadu and Maharashtra had credit deposit ratios of 109.7% and 106.5%, respectively, signifying that banks lent more money in these states than they borrowed in the form of deposits from it. 

The literacy rate or the percentage of literate persons among people aged 7 years and above in Bihar, stands at 70.9%, the third-lowest in the country. Among women, the rate stands at 60.5%, which means that two out of five women in Bihar, on an average, can’t read or write. This explains the extremely low female labour force participation (LFP) in Bihar. The rate is at 6.4% and 3.9%, in urban and rural areas, respectively. The all India female LFP rate is at 20.4% and 24.6%, for urban and rural areas, respectively.

Notes:

*A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFI facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawnshops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations.

*Retail inflation means the increase in prices of certain products or commodities compared to a base price. In India, retail inflation is linked to the Consumer Price Index(CPI) which is managed by the Ministry of Statistics. CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks.

*White goods are large electrical goods used domestically such as refrigerators and washing machines, typically white in colour.