Minister of Finance & Corporate Affairs, Mrs. Nirmala Sitharaman tabled the Economic Survey 2018-19 in Parliament today. With the theme of Shifting Gears and “Blue Sky” policy-making, India aims to achieve a sustained growth rate of 8% to become a $5trillion economy by 2025.
Source: Economic Survey 2018-19, Press Information Bureau
When the funding winter of 2016 struck India, everyone expected it to send Venture Capitalists and other market players who dare dream of globalization scampering to the warmth of their chipped tile fireplace. While this did indeed happen, it only lasted for a year. The snow cleared sooner than anticipated and mergers and acquisitions have been the flavour of the year. In addition to this, a much greater force has been acting upon the economy. One that is very well capable of spelling trouble for the economy in the long-term. This year saw Walmart Inc, Berkshire Hathaway and ArcelorMittal on a buying spree, taking the total transaction value of private equity-led buyouts and corporate acquisitions over $100 billion. New unicorns such as Udaan and Freshworks were born while Flipkart took centre-stage with its controversy-riddled breakup coupled with a $16 billion acquisition by Walmart. Meanwhile, food delivery unicorns Zomato and Swiggy have taken the acquisition route to strengthen their fleet. Another high-profile deal has been the merger of Idea and Vodafone, one that was completed in August 2018 after a plethora of regulatory approvals. However, the merged entity posted a net loss of Rs. 4974 crore for the July-September quarter and key performance indicators have been dismal. Nonetheless, the merged entity has set FY 2023 as its deadline for completing merger synergies.
With all this activity going on, the fall of the rupee has had its own ramifications on the economy. Believed to have been triggered by a rise in the Fed rates, the rupees’ fall has had widespread consequences on the economy. Notwithstanding the uptick in foreign portfolio investor (FPI) inflows into the economy of late, the rupee is anticipated to maintain a low profile. This unfavourable trend could be attributed to a cut in oil production by OPEC and non-OPEC players by as much as 1.2 million barrels per day.
While the rupee has certainly shown signs of improvement from an all-time low of Rs. 74.6 and is following a somewhat sluggish uptrend, M&As have been slow to show the same vigour. Although the above trends spawn from very different economic ingredients, we believe that a tenacious approach should be followed; one that would help industries operate seamlessly as well as stabilize the domestic currency. With this background, we present few papers in this issue of TJEF. We hope that the readers of the journal benefit from the views and insights of the papers published.
Central Banks and Governments aim for same destination through different paths. There is always an unrest between central bank, which is the sole authority for money supply and government, which aims for welfare of people in any nation.
BREXIT refers to the withdrawal of the United Kingdom from the European Union. The European Union is an economic and political union of 28 European countries. It was established in January 1958 and at that time it was known as the European Economic Community. It was started with only 6 countries and the UK became its member in 1973 along with Denmark and Ireland. A majority of 67.2% of the British citizens had voted in favour of joining the EEC when the UK held its first referendum in 1975. In 1986, UK assumed the presidency of the EEC. In 1992, the EEC was renamed as the European Union. In 1999, 19 out of the 28 countries decided to use a common currency, the Euro. The UK was among the remaining 9 countries which stayed with its own currency, the Sterling Pound. EU represented around 24% of the global nominal GDP ($16.220 trillion) for the year 2015. Among other benefits which a country gets by becoming a member of the EU, free movement of capital, goods, services, and labour between the member nations in the Eurozone is the most prominent one.
In 2013, while many other countries were vying to join the EU, the UK citizens were protesting to get out of the EU. Honouring his election promise, PM David Cameron issued a referendum to decide whether it wants to continue membership under EU or not. The results of the referendum came out on 23rd June 2016and surprised everyone in which 52% people voted for BREXIT whereas 48% voted for remaining within the EU. Although the result of the referendum was not binding on Britain’s parliament, the government decided that it will honour the will of the people. Britain is scheduled to formally leave the EU in March 2019.
Among other political and economic implications, the Brexit event set an example of participatory democracy where citizens took a decision which was impacting them despite the presence of politicians. Any major event in history has had both positives and negatives. Brexit is surely one of them.
Pre Brexit-Relations with the UK
The UK is the largest G20 investor and employer in India and has played a substantial role in the growth and development of India. British companies in India have generated around 790,000 jobs and around 32% of the 1.96 million jobs created by FDI are in the services sector – the UK’s strong point (since services make up around 80% of the British economy). The UK services sector would be the main beneficiary of a future free trade agreement (FTA) with India.
British successes like HSBC, Standard Chartered and G4S have played a significant part in driving business growth in India. British Banking and Financial services firm, HSBC, was one of the first firms to bring electronic banking and financial technology to India. It is one of the leaders in the financial services sector of India and employs more than 32,000 people. Similarly, the leading security solutions group in India, G4S, a British firm, has more than 160 branches in India and employs more than 1,30,000 employees throughout India.
There are collaborations between the two countries such as the Joint Economic and Trade Committee, the Joint Trade Review, the UK India Education and Research Initiative, the Newton Bhabha fund, the UK-India Tech Partnership etc. The 2 countries also entered into an agreement in 2017 to set a corpus of 240 million pounds, both contributing 120 million, to fund clean energy projects in India.
In 2017, India sent more immigrants to the UK for work, than the rest of the world put together. In 2017, out of the total work visas issued by the UK, India received 58% of the total. Number of Indians going to the UK for study also grown by 27% in 2017.