The holiday season might bring a second breath to the Indian economy
Countries like India have seen the biggest drawback of the crisis. This is because of the huge population and relatively stable economic state of the country. The massive shut down has caused a rise in the interest rates and affected the monetary and fiscal policies of the economy.
Though, as mentioned before, just like some other countries, India is one of those who have come up with a certain strategy, which involved reliance on the upcoming holidays. The authorities consider the drastic improvement of the economy and banking circumstances with the festivals coming up. This is especially the case for Christmas to the New Year period. So the upcoming two quarters should still be reasonably good for the overall economic state of India.
Loans
The SBI, HDFC Bank, and ICICI have published and released their loan book, which has grown from 2 to 6% since the summer of 2020. As manufacturing has been slowed down because of the massive shut down of the country, lending decreased by 0.2%, and the corporate loans are kept on pause.
This stood as the main concern for the largest banks in India. They have stepped in for offering changes for consumer loans. The bank representatives claim that people shall necessarily take advantage of the low-interest rates to buy houses, cars as well as a holiday gift, which will be reopening during the festival season. All of the mentioned should contribute to the boost of the local economy and perhaps give the send breath to people and financial institutions.
The economic changes obviously affect market changes. Currently, the demand for the forex market has decreased as the stock prices have seen the slump as well. The main reason here is that the irreversible inflation of currencies has taken place, which is why by the end of the year the countries most probably will observe a significant loss of income. While the prices for goods remain the same, yet the currencies keep devaluing, the expenses shall increase, and the income decrease. Consequently, this will necessarily affect the stock prices, which will also see a major slump in certain industries, making it the most vivid connection between forex and stocks, in the current situation.
State bank of India has overseen the retail loan growth from July to September, unlike the almost shrinking previous three months, when the first wave of COVID-19 occurred worldwide. The banks are benefiting from more money in the hands of government employees as Prime Minister Narendra Modi, stated in his speech. He looks up to safeguard the economy from the coronavirus, which is showing early signs of easing in the nation with the second-worst outbreak the country has ever seen.
“We don’t expect to see any major challenges in the quality of the retail loan book because the customers we serve are mostly in government and quasi-government jobs,” SBI Chairman Dinesh Khara said on a call. “We are giving home loans mainly to first-time home buyers, similarly 95% of our unsecured personal loans are to government and defense employees” who are relatively safe customers, he said.
Taxes
India has the third-largest economy in Asia, and seeing this economy sink is not easy neither for the outsiders nor for the insiders. The same goes for the forex industry in India. The statements and outlook over the past activity can be seen from Axiory, a growing FX brokerage offering an analysis of the global pandemic outcome and impact. The taxes, as well as trading, have shown the drawback of the decline in numbers altogether. The rigidly third economy saw a 24% slump, only within the three months period from April to June. This is the time, when the prime minister of the country, shut down the country because of the pandemic.
The same indicators can be seen in the private sector, when the biggest listed company such as Reliance Industries Ltd, had to cut off twice as many employees as they initially planned. The company also saw a valid slump, which is way above 10%. The consultancies predict even bigger changes across the sector next year. The predictions are based on the daily infection numbers, which are constantly between 50,000 and 100,000.
While the second wave of a pandemic is still ongoing and has a bigger risk for India, the central bank Governor Shaktikanta Das, said that some worse changes and challenges might be coming within the next year. Though he also remains positive about the festival season. Das is the one to slash the interest rates to the lowest positions ever positioned in history. But he has a plan of staying closer to the number by the end of the fiscal year, which is March, allowing lenders to pass on the benefits to customers.
Banking service providers are massively avoiding giving away the unsecured loans, as the companies are cutting off stuff and the payment procedures are no longer secure and safe. The boost in sales can be vivid though. Payment services Ltd, which is the largest card-issuing Indian company, made public statements addressing the soured assets jump, from 1.4 to 7.5%. The retain spending increased by 50% and the credit card loans rose to 6.7%. The banks are yet giving loans mostly to the governmental officials, as they have relatively secure payments. This is because they have jobs and are capable of proceeding with payments, while other people are left out. The next few months will determine a lot to the country’s economy as well as to private sectors.
