“The past is a place of reference, not a place of residence”
-Roy T. Bennett
There is always an apprehension about the reasons for looking into the past, the reasons for recollecting the past moments, the reasons are rather simple, learning from the mistakes we made, contemplating the actions that led us to our present and for having a brighter and a more promising future.
As 2017 draws to a close, we look back at some of the major developments in the Indian economy that thrust an impact on the working and consequently led to many ups and downs in the economy.
The not so usual Union Budget
This year government decided to break the colonial-era tradition of presenting the Union budget on last working day of February and presented on February 1, 2017. The date of the budget presentation was advanced so that expenditure is authorized by the time the new financial year begins, and tax proposals could be completed before the beginning of the new financial year on 1 April. This year’s budget was mainly focused on 10 schemes; the farming sector, the rural population, energizing youth, the poor and underprivileged health care, infrastructure, the financial sector for stronger institutions, speedy accountability, public services, prudent fiscal management and tax administration for the honest.
This year also saw a major change by merging the Railway Budget with the Union Budget. Since 1924, a separate Railway budget was presented. However, it will retain its autonomous decision making power.
The Trump Effect
The year 2017 saw a burst of optimism for American investors and consumers, with the advent of President Donald Trump, promoting “Buy Americans, Hire American”. This clashed with India’s Prime Minister Mr. Narendra Modi’s “Make in India”, a similar promotion strategy of domestic manufacturing and inward-looking incentives, created an emotion of dissonance amongst the two countries. The H-1B Visa issue was the major point of convergence as 70% of H-1B visa holders are Indians, out of which only 13% are hired by Indian firms. The close rapport between the leaders of the two countries has supported in a happy co-existence.
Impact of GST
On the stroke of the midnight hour on 1st July 2017, the Goods and Services Tax came into effect, giving a major overhaul to the indirect tax regime, by replacing a number of indirect taxes, for a single tax. This resulted in a fluctuating industrial activity throughout the year because of ambiguity regarding the compliance burden of filing tax returns by companies. The goal of this new tax was “One Nation One Tax”, leading to a nationally integrated system of taxation with a limited number of tax slabs. The implementation of this new tax regime with a challenging deadline, led to multiple confusions, leading to a slow growth of the Indian economy. But even with these drawbacks, GST helped India climb 30 places up to 100th rank in the World’s Bank Ease of Doing Business report.
Himachal Pradesh & Gujarat Elections
Again this year, it was a saffron surge as BJP fought Indian National Congress to hold on to Gujarat and outset the ruling INC from Himachal Pradesh. This is the 6th consecutive win for BJP in Gujarat wherein it bagged 99 seats out of 182 to wipe off their main opponent, Congress. The new BJP government led by Vijay Rupani sworn-in as Chief Minister on 26th December at a grand ceremony. But this win has an offside as BJP lost 16 seats from the last election.
In Himachal Pradesh, BJP snatched the crown from Congress by winning 44 out of 68 seats. The new Chief Minister of Himachal Pradesh, Jairam Thakur is all set to rule the state and charged up to deliver ‘good governance’
With only nine states out of NDA’s hand now, it sets a positive path for the party for 2019 union elections.
The Boom of the Stock Markets
The year ended on a high note with Sensex rising 209 points reaching to a lifetime high of 34,056.83 on the final trading day of 2017 and Nifty hitting the record high of 10552. Both Sensex and Nifty saw a rise of 28% and 29% respectively which was driven by liquidity, state election results, positive global cues, government reforms and hopes of earnings growth. The participation from Foreign Institutional Investors(FIIs) has been low but market performed because of the domestic investors.
India’s Volatility Index (India VIX) gained about 9% recently. India VIX is an index given by the NSE which measures the degree of fluctuation or volatility expected by active traders in Nifty50 in next 30 days.
A brief analysis of the Indian Economy
Indian Economy saw a slowdown in 2017 due to the major policy changes which were implemented. But now the economy is on the path to recovery. The growth for the year 2017-18 was about 6.8% and it is expected to go to 7-7.5% in 2018-19 according to CLSA analysts.
India still is one of the fastest growing economies in the world. But despite these numbers, for a majority of people i.e. apart from the top few percent of people working in the formal sector, times have not been well.
Farmers, particularly, have experienced some of their worst years in recent times, despite favorable monsoon.
Even those employed in non-agricultural informal activities suffered from reduced demand, lack of credit, disrupted supply chain etc.
Sectors like construction faced a major setback and large number of people from these industries got unemployed
The growth & growth of Bitcoin
Bitcoin made quite the headlines in 2017. Currently, the most valued digital currency was valued under $1000 at the beginning of the year and it grew by 1300% to more than $14500 by the end of the year. But along the way, it has gone through many ups and downs which has made people unsure about it. Some are calling it a bubble while some believe for it to rise further in coming years. In June-July it went down 36% and even in December it doubled in an intraday trade only to briefly fall by 45%.
What Future Holds
India has experienced winds of change in the years of 2016 and 2017. Demonetisation and GST created ripples in the economy, disruptions from which the economy is still recovering. There is a belief in the country that the economy has returned to its path of high growth.
There are strong expectations of high growth from the economy due to various reforms introduced by the government and the RBI. The recapitalization of banks would lead to increase in the available credit in the economy, creating an enabling for the stagnant private investment to recover and grow.
The manufacturing sector has seen a boost in the infrastructure & construction goods sector as the PMI for them rose from 50.3 to 52.6 from October 2017 to November 2017.
Despite major setbacks, India is expected to become the fifth largest economy fifth largest economy in 2018 in dollar terms overtaking Britain and France. Cheap energy and digital revolution will drive its economic growth. Future seems optimistic for the Indian economy.
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