A series of lows punctuated with highs

Sushma Ramachandran

This was a year of fluctuating fortunes for the Indian economy. The stock markets and the rupee went up and down while other economic news were also either extremely positive or the reverse throughout 2018.

The year began with Nirav Modi fleeing the country but the massive scam, estimated at Rs 13,400 crore, unfolded in February. The banking industry was further jolted as ICICI Bank CEO, Chanda Kochhar came under a cloud due to her husband's links with Videocon, leading to her exit ultimately. 

On the positive side, there was some progress over bringing back rogue industrialist Vijay Mallya as a British court approved India's extradition request, raising hopes of recovering unpaid Rs 9,000-cr loans. 

In banking sector there was some hope of resolving the NPA crisis by invoking the new bankruptcy code and selling corporate assets.

On the oil front, too, year began on a negative note for India, a big oil importer, as global prices began rising in January reaching $80 per barrel by mid-year. This was accompanied by a rapid fall in the rupee till it touched Rs 74 against the dollar in October. Domestic fuel prices consequently kept rising much to consumers' dismay. The scenario was , however, reversed suddenly in October when world prices began softening. Prices of the benchmark Brent crude are now at around $56 per barrel, a big windfall for India. Simultaneously, the rupee began rising against the dollar to settle at Rs 69.70 by December.

More good news was in the offing as the GDP growth for the first quarter of 2018-19 fiscal reached 8.2 per cent, dipping to 7.1 per cent in the second. Still, about 7.4 per cent growth is expected this fiscal, ensuring India retains the tag of fastest growing economy.

Despite these positive indicators, widespread agrarian distress took centre stage as lakhs of farmers took out protest marches in various cities. This seemingly had some impact as farm loans were waived off in several states, including Madhya Pradesh and Rajasthan.

In the corporate world, US retail giant, Walmart acquired homegrown unicorn Flipkart in April. Another major development was the proposed sale of public sector Air India but this fell through due to lack of buyers. Jet Airways, too, ran into rough weather and began looking for a strategic partner. On the positive side, TCS became the first Indian IT firm to cross a market capitalisation of $100 billion.

India was hit by high tariffs on steel and aluminium exports to the US as America’s trade war with China spilled over to India. In retaliation, India considered levying punitive tariffs on the US but then decided to resolve the issue by negotiations. 

The simmering dispute between the central bank and the government resulted in the abrupt resignation of Reserve Bank governor Urjit Patel in November. The crisis was resolved by the immediate appointment of former bureaucrat Shaktikanta Das in his place. Stock markets that had been volatile during the year remained relatively stable despite this development. Earlier there was a political slugfest over the release of back series GDP data that scaled down growth rates during the UPA era.

December brought a Christmas gift as GST  rates on 23 goods and services, including TV sets, cinema tickets, frozen vegetables and digital cameras were reduced. Finance Minister Arun Jaitley also assured that cement would soon be removed from the 28 per cent  slab while giving hope that the country will soon end the era of single tax slab. This could be between the existing 12 and 18 per cent rates, ensuring that the original aim of the GST being a single tax system is ultimately achieved.

Stock markets were volatile during the year with a huge outflow of foreign portfolio investments coinciding with a sharp dip in the Sensex in September. The year ended with markets sliding largely due to global cues like the shutdown of the US government. On the positive side, India's stock markets rose in size to become the seventh largest in the world, based on market capitalisation.

The year, one of highs and lows, ended on a mixed note as falling oil prices, low inflation and a stronger rupee brought cheer while markets remained bearish and farmers' distress was heightened. The government can only hope for a more positive outlook next year as it heads towards elections.

India 77 in ease of doing biz

India has jumped 23 places to the 77th position in the World Bank's 'Ease of doing business' ranking that was released in October. This development could help the country attract more foreign investments. India had ranked a dismal 100th in World Bank's Doing Business Report in 2017.

NPS streamlined

The Union Cabinet on December 6 approved the proposal to streamline the National Pension System (NPS). Mandatory contribution by the Central Government was enhanced from the existing 10 per cent to 14 per cent for employees covered under NPS Tier-I. This will benefit to approximately 18 lakh Central Government employees. 

Insuring India’s health

Ayushman Bharat Yojana was launched across the country in September. The scheme focuses on providing universal healthcare facilities to the poor. It is meant to provide annual health insurance cover of Rs 5 lakh per family to more than 10 crore households and will benefit over 50 crore Indians.

In the news

Crisis at NBFCs 

Non-banking finance companies (NBFCs) in India are going through a rough phase following defaults by once blue-chip infrastructure lender, Infrastructure Leasing and Financial Services, on short-term debt obligations. The liquidity crunch in the sector has created tension between the RBI and the government. 

Fortis sale on hold

With the Supreme Court maintaining a status quo on the sale of Fortis Healthcare, Malaysian Group-IHH Healthcare Berhad, that won the bid, will have to wait. In July, after a long bidding war, Fortis Healthcare promoted by Malvinder and Shivinder Singh, was sold to IHH Health for Rs 4,000 crore. Cash-strapped Fortis Healthcare operates about 30 private hospitals in India.