Political instability can lead to financial crisis in country

Ludhiana, April 16, 2014: Avtar Singh, President and Upkar Singh Ahuja, General Secretary, Chamber of Industrial and Commercial (CICU), Ludhiana stated in joint statement that India is passing through very crucial time.  
They said followings are the factors which indicate the financial situation of the country for the previous few months.  
They mentioned that the need of the hour is a stable government which can formulate long term policies for a sustainable growth.  Sustainable growth is one of the key factors for building a strong nation in terms of economy.  Sentiments of the Investors and Businessmen are very weak which are major contributing factor for poor performance in various Sectors.  
DECLINE IN GDP GROWTH

I)    India’s GDP growth recorded a growth of 8.6% in 2009-10 and 8.9% in 2010-11 which sharply decelerated to 6.7% per a year, later and finally a decade low growth of 4.5% in 2012-13.The country slipped to below a 5% GDP Growth Rate for two consecutive years.

II)    A number of Projects were stalled as Policy paralysis hampered decision making, resulting in; many Projects either becoming unviable or delayed beyond imagination.

III)    If you can’t do the development, you cannot survive.

IV)    Lack of Economic Reforms and Policy uncertainty is to be blamed for decline in quantity and quality of Investments.

V)    A host of other Sectors include the neglect of Structural Reforms and that influence Investments.

VI)    A change from practice of dolling house subsidies and licences is the need of the hour.  Initiatives such direct transfer revamping of Tax Code and liberalizing FDI are some of the measures.

DECLINE IN FII INVESTMENT

I)    FII Investments had declined drastically from 2012-13 from Rs.39569 crore in 2012, Rs.51064 crore in 2013 to Rs.5642 crore in 2014 as per SEBI Report up to 12.3.2014.

II)    It is estimated that more than Rs.6.00 Lac crore worth of projects have been stuck at various stages due to environment clearance, non availability of land or policy paralysis.

III)    The Stock Market is hoping that a stable Government with strong leader would lift market sentiments.

INADEQUATE INFRASTRUCTURE

I)    India needs US$ 1.00 Trillion (about Rs.60.00 Lac crore) over the next 5 years to shore up its crumbling Inadequate Infrastructure.  

II)    The need of the hour is to create an environment where Investors are not secured of locking up Capital in long gestation Projects such as Roads, Ports and Highways.
DIP IN AUTO SALES

I)    Passenger vehicle sales in India slumped 6% in 2013-14, making the biggest route in a decade.  

II)    Among passenger vehicle, car sales decline 5% to 17.86 lac Units, SUV sales dipped 5% to 5.25 lac Units, Van sales shrunk 20% to 1.90 Units and 3 Wheelers sales dipped to 11% to 2.79 lac Units during 2013-14.

III)    Commercial vehicles considered the barrow meter of the economy was worst hit with sales declining 20% to 6.32 lac. Units.

IV)    A lot depends on the outcome of elections, economic stability and policy initiative of the incoming Governments to drive Industry growth.

TRADE DEFICIT

I)    India’s Exports grew 3.98% to US$ 312.35 billion in 2013-14, while imports dipped 8.11% to US$ 450.94 billion narrowing the Trade Deficit to US$ 138.59 billion.

II)    The cumulative figures for the period of April-March FY 2014 shows exports at US$ 312.35 billion as compared to US$ 300.04 billion in April-March FY 2013 with a growth of 3.98%; while the cumulative imports for April-March FY 2014 stands at US$ 450.94 billion as compared to US$ 490.74 billion in April-March FY 2013 with a growth of (-) 8.11%.  The cumulative figures for the balance of trade for the period of April-March FY 2014 stands at US$ (-) 138.59 billion as compared to US$ (-) 190.33 billion in April-March FY 2013.

INDUSTRIAL OUTPUT CONTRACTS

I)    After a feeble signs of a recovery, Industrial Production once again slipped into negative territory and contracted 1.9% in February’ 2014 due to poor performance in manufacturing, especially, capital goods.  

II)    Factory output as measured by the Index of Industrial Production (IIP) showed a decline of 0.1% during the 11 month period from April’ 2013 to February’ 2014, compared with growth of 0.9% in the corresponding period a year earlier.
LARGE SCALE LAYOFFS

I)    Across various Sectors, Companies in India are estimated to have created over 10 Lac new jobs last year, but weak economic trends also resulted in large scale layoffs and considerably cut into job market additions during 2013.

II)    A surge in job creation would make largest potential contribution to poverty reduction.

III)    Accelerating job creation by adding 115 million non-farm jobs by 2022 which would absorb the expected growth of 69 million in the working age population, raise the labour force participation rate by some 2-3%, and reduce the share of farm jobs from 49% of total employment in 2012 to 37% in 2022.

POLITICAL INSTABILITY AFTER LS ELECTIONS

I)    As the General Election draws closer any political instability after May’ 2014 post results will drag the beleaguered Indian economy which will lead to erosion of Investors confidence in the economy.

II)    The International Community is watching Indian election with closer interest than in the past decades because of global economy’s greater integration and India’s larger strategic role in it.

III)    India is facing many problems including income and social inequalities, crippling corruption, scant energy and abysmal infrastructure which are well known.

POLITICAL STABILITY WOULD BE POSITIVE FOR THE  ECONOMY

I)    Upcoming Election is the biggest economic event of the country as its outcome will decide what rate the country’s GDP would grow in future years.

II)    This Election will be a transformational one and Industry could see a total change in which the Government ushers in an enabling business environment.

III)    The fact is India’s commercial fortune are invariably tied with the new policies and pronouncements made by the Government.

IV)    The manufacturing Industry is looking forward to Government pushing for a level field for Made-in-India in the Global Market.  It is the key for the Industry to get policy support to grow in today’s market situation.

V)    India’s economy needs overhaul after spurting over haywire prices and real industrial deceleration.  More ambitious Structural Reform to boost economic growth through reforms of labour market, trade, investment and making Industry more competitive are of paramount importance.  

VI)    The increased prospects of a stable and pro-reform Government will boost economy as various procedural and other bottlenecks relating to mega Infrastructure Projects, key Industrial and freight corridors need to be removed on priority basis to give fillip to the growth of the economy.

DECLINE IN FDI IN SERVICES SECTOR

I)    Foreign Direct Investment (FDI) in to the Services Sector which includes Banks, Insurance, Outsourcing, R&D, Couriers and Technology Testing had declined by about 61% year-on-year to US$ 1.8 Billion during April-January’ 2013.  Services Sector had received FDI worth US$ 4.66 Billion during April-January’ 2013 according to data from Department of Industrial Policy Finance Promotion.

II)    Overall Foreign Inflows into the country have declined to US$ 18.79 billion during the first 10 months of 2013-14 from US$ 19.10 billion in April-January’ 2013.

III)    The Services Sector accounts for over 60% to India GDP.  In 2012-13 Foreign Investment in Services fell to US $ 4.83 billion from US$ 5.21 billion in 2011-12.

FDI inflows have also declined in Sectors including Construction, Hotel and Tourism.  The declined in Investments could affect country’s balance of payment and rupee.

In view of the above, need of the hour is a stable Government that can focus on all over development of the Country.