The nation’s biggest festive season may be around the corner, but India’s money troubles don’t seem to be ending anytime soon. In September, GST collections fell to a 19-month low, car sales remained dismal, Sensex decreased by 700 points, and the nation’s growth forecast was cut by almost 1%. In addition, Bangladesh’s economic growth may surpass that of India soon – adding to the latter’s woes. (Quick recap: The Goods and Services Tax or GST is an indirect tax imposed in India on the supply of goods and services.)
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Maruti Suzuki and Tata Motors – the two leading automobile manufacturers in the country reported decreasing sales in September.
“Sales of vehicles across the automobile sector continued their slide in September with the leading manufacturers of passenger vehicles, two-wheelers, and medium and heavy commercial vehicles reporting a sharp fall in their year on year domestic sales last month.
What started as a problem on account of funding and liquidity squeeze in July-August 2018, has now become more of a sentiment issue with individuals looking to postpone and cut down on consumption expenditure.”
On Tuesday evening, the Indian Government also released data that admitted that GST collection had decreased from approx. INR 98 crore in August to approx. INR 92 crore in September.
“Generally-speaking, collections of over Rs 1 lakh crore a month are seen as healthy. The dip in September is, therefore, reflective of the larger slowdown in the Indian economy.”
According to experts much of the panic in the market is due to the ongoing crisis at the Punjab and Maharashtra Cooperative (PMC) Bank, that 6 Things covered here. The bank, that is reeling under strict regulatory notices since last week, “…is providing a glimpse of how the liquidity and debt crisis in India’s real estate sector could very easily spread and spiral out of control.”
“At least 21,049 dummy accounts were used by the Punjab and Maharashtra Co-operative Bank to hide accumulated non-performing assets of realty firm Housing Development and Infrastructure Limited (HDIL), revealed suspended PMC bank managing director Joy Thomas’s letter.
His confession letter to RBI also revealed that the bank’s exposure to bankrupt HDIL has been pegged at Rs 6,500 crore, which is 73 per cent of the bank’s total assets.”
Additionally, “…the latest economic outlook update released by the Asian Development Bank has shown how Bangladesh, and not India, is the standout economy in terms of growth momentum in South Asia.
The structure of Bangladesh’s economy is quite different from India’s. Unlike India, where the services sector contributes overwhelmingly while industry’s contribution is much lower than desired, Bangladesh … has a booming industrial sector.
This allows its economy to create jobs. In India, by contrast, the bulk of the population is still stuck in the agriculture sector, which contributes the least to the GDP. The industrial sector, which has the maximum potential to absorb surplus labour from agriculture, is struggling to grow fast enough and create employment.”
So, what now?
Prime Minister Modi is set to meet representatives of the Finance Ministry soon, and take a call on how to stimulate the stagnating economy. As part of this move, the Indian Railway Catering and Tourism Corporation (IRCTC), is being thrown open to the public. The Government is hoping to earn more than INR 600 crore by selling 20 million shares of this flagship institution.
“The Indian Railways, though, will not receive any proceeds from the IPO of its catering, tourism, and ticketing arm.”
Watch this space. We’ll keep you updated.