Indian Equity Market Relatively Resilient Compared to Other Major Emerging Market Economies, says the Economy Survey
Financial Inclusion Proceeding Apace under PMJD Yojana
The Economic Survey 2015-16 presented today in the Parliament by the Union Finance Minister Shri Arun Jaitley states that despite volatility in global financial markets, the Indian equity market has been relatively resiliant during this period compared to the other major emerging market economies. The market has rebounded time and time again, and it is hoped that as the global financial market settle down, India can become the leading investment destination owing to its robust macroeconomic fundamentals. Banking sector gross credit deployment has been sluggish duirng the financial year. Increasing levels of gross Non Performing Assets (NPA) have reduced the banking sectors capacity to lend. Sluggish growth and increasing indebtedness in some sectors of the economy have impacted the assets quality of banks and this is a cause of concern. Financial inclusion is proceeding apace under the Pradhan Mantri Jan Dhan Yojana while the Atal Pension Yojana is extending the reach of the New Pension Scheme. Financial Inclusion Proceeding Apace under PMJD Yojana
The Economic Survey 2015-16 states that the agreement on monetary policy frameswork signed between the Government and the Reserve Bank of India in February 2015 shape the monetary policy stance in 2015-16. Liquidity conditions were generally tight during the first quarter of 2015-16, mainly due to slow government spending in the beginning of the year. In the second quarter, liquidity conditions eased significantly but in the third quarter again the liquidity conditions tightened mainly due to festive season currency demand. The RBI anchored its policy rate to achieve the domestic inflation targets consistant with growth. The value of rupee also remained comparatively stable during this period. Average borrowings by banks have increased significantly in the immediate aftermath of US fed rate hike, resulting in appreciation of the rupee. However, subsequent to easing of liquidity conditions, the rupee started depreciating.
Economic Survey 2015-16 states that during the current financial year, year on year growth in gross bank credit outstanding has remained around 10%. The sluggish growth can be attributed to incomplete transmission of the monitory policy, unwillingness of banks to lend credit on account of rising NPAs, and more attractive interest rates for borrowers in the bond markets. The year on year growth in time deposits fell to 10.6% in December 2016. This is because household saving are channelized to other areas like gold and real estate. The slowdown in time deposits has been slowing the growth of bank credit as time deposits remain the most important and cheaper source of banks funding.
The credit off take by the industry sector for the bank has been slowing. The deployment of gross bank credit to industry grew at 5.3% year on year in December 2015. Gross bank credit to the services sector grew at sub 7% in May November 2015 though it increased to 9.2% in December 2015. The agriculture sector too saw a downturn from November 2014. Only the personal loans segment, which benefited from the repo rate cut, has been showing accelerating growth from January 2015. The analysis of non food credit shows that consumption expenditure has been the key driver for the economy during the current financial year. The Economic Survey expresses concern that the share of industry has come down significantly. The decline reflects the muted markets sentiments leading to slowdown in private investment demand and industrial growth, poor earnings growth of the corporate sector, and risk aversion on the part of the banks.
On the performance of the Scheduled Commercial Banks (SCBs), the Survey says that the slowdown in growth in the balance sheets of banks witnessed since 2011-12 continued in 2015-16. The moderation in growth of assets of SCBs can mainly be attributed to tepid growth in loans and advances. Growth in investments also slowed down marginally. The survey recommends that given the deterioration in asset quality and gradual implementation of Basel III, banks will have to improve their capital positions to meet unforeseen losses in future. The estimated capital requirement is likely to be about Rs 1,80,000 crore by 2018-19. Of this total requirement, the government of India proposes to make Rs 70,000 crore available out of budgetary allocations during the current and succeeding years.
Economic Survey 2015-16 states that the asset quality of SCBs has come under stress during the recent times. Gross NPAs of SCBs as a proportion of gross advances increased to 5.1% from 4.6% between March and September 2015. Mining, Iron and Steel, textiles, infrastructure and aviation sectors contributed 53% of the total stressed advances.
Economic Survey 2015-16 mentions that the number of new basic saving bank deposit accounts rose considerably during the year on account of the governments initiative under Pradhan Mantri Jan Dhan Yojna. The number of such account increased to 44.1 crore for the period ending September 2015 and total number of banking outlets went up to 5.67 lakhs.
In 2015-16 (April-December), resource mobilization through the public and right issues has surged rapidly as compared to the last financial year. During this period, 71 companies raised Rs 51,311 crore from the capital market compared to Rs 11,581 crore during the corresponding period of 2014-15. Resources mobilized by Mutual Funds also increased substantially to Rs 1,61,696 crore from Rs 87,942 crore mobilized during the same period of the previous year. During 2015-16 so far, the Indian Securities Market has remained subdued. The Bombay Stock Exchange Sensex declined by 8.5% (Up to January 5, 2016) over March 2015, mainly on account of turmoil in Global Equity Markets.
The net investment by Foreign Institutional Investors/FPIs in the Indian market has been Rs 63,663 crore in 2015 as compared to Rs 2,56,213 crore in 2014.
The total insurance premium generated by the insurance sector increased from Rs. 3,94,235 crore in 2013-14 to Rs 4,15,252 crore in 2014-15. During the period, Life Insurance premium registered a growth of 4.4% whereas the General Insurance business grew by 9%. Till December 2015, a total of 112.82 lakh members/subscribers have been enrolled under the National Pension Scheme. Three schemes Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jivan Jyoti Bima Yojana (PMJJBY), and the Atal Pension Yojana(APY), - were launched in 2015 in the insurance and pension sectors for creating a universal social security system for all Indians, especially for the poor and the underpreviledged.
