From The Desk of Rajesh Bajaj
Redesigning economy India!
Now India is moving very safely and announcing unlock step by step! Yes! Even if India is moving to unlock their Covid-19 lockdown, India is very mindful and managing all those measures of social distance, hygiene and sanitization well at all those respited industry & commercial activities! At the resumption, era lockdown has lowered our economic & growth pace! Yet! The government, industry & commerce are endeavoring to rejuvenate Economy India.
Yet! At the time of resumption, we know the global economic scenario, the projection for GDP India, which is not courageous! According to various rating agencies, surveys, and ground reports, export India is facing multiple headwinds! "Since January 2020, Ind-Ra has taken 25 negative rating actions, 13 positive rating actions and revised the rating Outlook down for another 16 issuers meaningfully exposed exports," says Ind-Ra.
As of today's top 10 export destinations, which contribute about 50% volume of our merchandise export basket where gem & jewellery export also has significant share with the rest! The rating agency said, "A prolonged disruption due to Covid-19 could materially impact companies' credit and liquidity profile in some of the export-heavy sector.
Overall lockdown of Covid-19 hiked up an additional debt of Rs1.67trillon over the top corporate, private sector borrowers may fail to overcome out of such debt during the FY2021-22. The rating agency says, "This is over and above the Rs2.54 trillion anticipated before pandemic onset, taking the cumulative quantum to Rs4.21 trillion. This constitutes 6.63% of the total debt (previous estimate: 4%). Given that 11.57% of the outstanding debt is already stressed, the proportion of stressed debt is likely to increase to 18.21% of the outstanding quantum." The rating agency expects the corresponding credit cost to be 3.57% of the total debt.
On the other hand Brickwork Ratings (BWR) said, "Large corporates with strong liquidity hold up ~Rs
3.3 lakh crore of payables to MSMEs" Clearly the rating agency says, the Rs 3.3trillion are held at the large Corporates in the form of receivable! BWR study based on the top 1,000 companies' data analysis in terms of market capitalization is focused on companies that have negative or low working capital requirements, albeit high creditor days.
Poorly performed debtor corporations are likely to impact banking & financial scenario and may push MSMEs performance, which is high in the post COVID era. So overall post-covid-19 COVID situation indicates the liquidity crunch to MSMEs. Important support measures are needed at merchandise exports, including gem & jewellery!
In a mandatory extended lockdown virtually outside activities, De facto were stopped, the routine trading practice never stopped before! Yet, the government picked the lockdown time to re-shape economy India or say reforming economy India! Leaders of various industry & trade, including gem & jewellery started brainstorming! They discussed and derived many conclusions upon resumption, steps and working attitude, buyer attitude, and virtually aspects! They guided the related trade fraternity!
De facto, the ongoing government, has taken multiple measures during the lockdown by knowing the economic issues across every section of India. The government announced financial measures of about 1.7trilloin for the bottom of the pyramid. To sustain & shape up in a new design of Economy, Infrastructure, Tech-based System, to keep vibrant demography and maintain demand in the market, the government announced their measures worth Rs20 trillion where the allotment of about Rs 5.94trillion was to support MSMEs.
Until now, related Rating Agencies are considering vulnerable and stressed finance of around Rs20 trillion! They calculate all those issues on the back of liquidity crunch at the bottom of the pyramid, at MSMEs and Corporates means, liquidity crunch at banking and financial institutions!
All those factors are enough to say that Economy India may be weak during FY 2021-22 and until two quarters next!
Upon resumption and by learning a new design of economy India-Aatmanirbhar Bharat, optimistic trade & commerce scenario, government's attempt to provide adequate liquidity including the latest MoU with World Bank of Rs10trillion
and efforts of EoDB, Rating agencies, including many financial experts, thinks that India can recover rapidly even in the late of year 2020! And India can bounce in a sharp V-shape growth in FY 2021-22! Now and further, it is sure that in a state of the post-COVID-19 era, India will be an economy of a new design!