Economic Highlights
New
Delhi, 25 September 2023
Malls Closing, Stocks Fall
ECONOMY RISES WITH HIGH DEBT
By Shivaji Sarkar
If the
country is doing well as per popular belief, why then are shopping malls and
showrooms across the country closing down even in well off Ahmedabad and seven
other cities? It’s not a riddle but a reality that the world’s supposedly fifth
or third economy has to strive with. Malls may not be indicator of an economy,
some may argue, but precious wealth was sunk in it to showcase the economy. The
showrooms, restaurants are in a precarious state almost everywhere.
Stocks
are crashing with the US announcing a possibility of a rate hike. In three
sessions, or three days, the BSE lost 1600 points. The rising crude prices and
weaker rupee has added to the problems.Let us go beyond. The stock market is in
a tizzy and losing heavily during the week with the US toughening its interest
rates. The rupee has sunk below Rs 83 once again. The Comptroller and Auditor
General (CAG) says either the funds are diverted or are not parked properly.
The Reserve Bank of India (RBI) finds savings dwindling.
The
country’s debts are on the rise and GDP growth is on government induced
expenditure passed off as infra spending. The over Rs 2 lakh crore a year dole
to 81 crore people and investments in demolitions and constructions also add to
‘satisfying’ GDP statistics. Often the growing fiscal deficit is ignored as a
‘normal’ phenomenon. The debts also continue to rise.
According
to the International Monetary Funds’ World Economic Outlook, the size of
the Indian economy will increase from $3.2 trillion in 2021-22 to $3.5 trillion
in 2022-23 and cross $5 trillion in 2026-27. It does not say that of this even
in 2021, there was national debt of $2.43 trillion and it is rising. Maybe it
is the Charvak economy of “rinamkritvaghritampivet” – have a lavish
style even with a debt.
The RBI
finds India’s household savings slide to their lowest in nearly five decades.
Net financial savings of households fell to 5.1 percent in 2022-23 (FY23) down
from 7.2 percent in 2021-22. The Charvak debt economy hit them to as financial
liabilities, debt, rose sharply by 5.8 percent of GDP in FY23 compared to 3.8
percent FY 22. It follows almost a national debt graph.
The rate
of increase in financial liabilities, loans, last fiscal was the second highest
since Independence. In FY2007, it was sharper at 6.7 percent. The Finance Ministry
has countered it with stating that gold sales have increased, and people are
buying cars. Bullion market figures speak less. Many may be buying gold benama
as private industrial investments have come down. This should be viewed as
warning signs. The car sales are done on credit and is not diversion of
savings.
So are
the closures of malls and showrooms. Knight Frank’s “Think India, Think Retail
2022 – Reinventing Indian Shopping Malls” reports stated that as many as 21
percent of 57 malls across top 8 cities are in different state of dilapidation.
There are multiple factors behind the stocks of ghost malls in the country.
These include: lack of due diligence, mall shortcomings such as size and
ownership patterns, design issues, faulty layout with dark alleys, lack of
customer walk flow management, low occupancy and lack of anchor tenants.As over
40 percent of spaces are vacant, the report calls these “ghost malls”. In
itself,this is an indicator of low footfall, demand or sales.
Net
financial assets are calculated by subtracting financial liabilities from
overall financial assets, says the RBI. Household liabilities include loans
from banks and Financial Institutions. Assets include bank deposits,
investments in financial institutions and other instruments.In 2022-23, net
financial assets declined to Rs 13.8 trillion against Rs 17 trillion in
2020-21. Net gross assets grew 14 percent in 2020-21. Consequently, liabilities
witnessed 76 percent growth, outpacing the growth in assets.
The rise
in personal loan has been a trend before the 2007-08 sub-prime crisis. The
world has seen how small credits had led to a global meltdown. Personal loans
now account for more than two-third of total outstanding loans in the Rs 50
lakh category and more than Rs 50 lakh to 1 crore category. Even beyond this, there
has been a sharp increase in personal loans in the last decade.
While
this has a positive side of dependence of the people on a continued income and
possibly income growth, on the other side is that the tax-GDP ratio has not
seen that kind of an improvement despite as is being claimed higher tax revenue
collection this year. Unless the tax-GDP ratio shows a real rise, the
government will find it difficult to reconcile the aspirations of the poor with
their material deprivation.
This is
to be compared with the annual growth in the government and the private
consumption. The sum of Private Final Consumption Expenditure (GFCF) was 4.9
percent in the June quarter. But the Government Final Consumption Expenditure
(GFCE) was at 8 percent. This is for the fifth consecutive quarter when GFCE
growth has been greater than the PFCE. It means private expenditure is at a
lower level and the economy is driven by government expenses. It looks bright
but it is led by huge government loans internal and external.
This is
reflected in high external credit of Rs 4.39 lakh crore, pointed out by the CAG
in 2020-21. The audit points out to some irregularities in accounting as well.
But the fact remains that government debts are increasing. It also points out
that 15 PSUs were disinvested as well. In short, the finances need a proper
management and is an indicator that the economy needs to be improved in a
number of ways to have the best of the benefits.
Levies
and cesses collected by the Centre, which it is not obligated to share with the
States, lie idle or are spirited away to other causes, violating the terms
under which the cesses were supposed to be collected in the first place.
There
are numerous instances of improper accounting, funds being parked outside the
government’s accounts, and the payment obligations of the Centre being
deliberately suppressed to show lower liability or hidden in a forest of
footnotes.This sums up why the shopping malls are not functioning or stocks are
crashing, and it needs a lot to rev up the economy beyond the government
finances.---INFA
(Copyright, India News & Feature Alliance)
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