{"id":121758,"date":"2021-07-28T19:00:41","date_gmt":"2021-07-28T13:30:41","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=121758"},"modified":"2021-07-28T19:00:41","modified_gmt":"2021-07-28T13:30:41","slug":"beyond-corporate-deleveraging","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/beyond-corporate-deleveraging\/","title":{"rendered":"Beyond corporate deleveraging"},"content":{"rendered":"<p><strong>Source<\/strong>: <a href=\"https:\/\/www.business-standard.com\/article\/opinion\/beyond-corporate-deleveraging-121072701801_1.html\">Business Standard<\/a><\/p>\n<p><strong>Synopsis:<\/strong> Without higher exports, India would not be able to attain higher sustainable growth in the coming years.<\/p>\n<h5><strong>Deleveraging process in India<\/strong><\/h5>\n<ul>\n<li>Indian companies are reducing debt on their books and increasing their cash balance.\u00a0Firms are selling assets and avoiding investment at this stage, to be in a more stable position.<\/li>\n<li>The deleveraging process, however, is not limited to large companies.<\/li>\n<li>The Reserve Bank of India\u2019s latest <strong>Financial Stability Report<\/strong>, for instance, showed that the <strong>debt-to-equity<\/strong> ratio for 1,360 listed private non-financial companies was reduced.<\/li>\n<\/ul>\n<h5><strong>What does this imply?<\/strong><\/h5>\n<ul>\n<li>A reduction in overall corporate debt and an increase in the cash balance, suggest that firms are not willing to invest and are perhaps preparing for a prolonged period of uncertainty.<\/li>\n<li>Thus, private investment is likely to remain subdued in the foreseeable future, which will affect India\u2019s growth prospects.<\/li>\n<li>This also suggests that firms would be distributing more dividends and banks will be lending more to the government.<\/li>\n<\/ul>\n<h5><strong>Government resources are constrained<\/strong><\/h5>\n<ul>\n<li>Private consumption will remain weak, as most households suffered income loss because of the pandemic.\u00a0Normally, under such circumstances, <strong>higher government expenditure<\/strong> is used to revive demand.<\/li>\n<li>As economists Sajjid Chinoy and Toshi Jain of JP Morgan showed in a recent paper, strong government expenditure was a key driver of economic growth in the years before Covid.<\/li>\n<li>Government consumption went up by an annual rate of 9 percent between 2014 and 2019 and increased to 11 percent since 2017.<\/li>\n<li>This resulted in a significant expansion in borrowing, and the pandemic further pushed up the fiscal deficit.<\/li>\n<li>Since the public debt has increased to about 90 percent of gross domestic product, the government\u2019s ability to support growth with higher expenditure would remain limited.<\/li>\n<li>It could push capital expenditure by raising resources through aggressive disinvestment.<\/li>\n<\/ul>\n<h5><strong>Exports are Key to Sustain Growth<\/strong><\/h5>\n<ul>\n<li>Since private consumption and investment, and government expenditure are likely to remain constrained, only higher exports could drive growth.<\/li>\n<li>They would also boost consumption and investment, like they did in the first decade of the century.<\/li>\n<li>Global trade is recovering well and has helped Indian exports in recent months.<\/li>\n<li>But sustainability could become an issue as higher exports are largely being driven by higher global commodities prices.<\/li>\n<li>The government must focus on increasing exports sustainably, which would require a serious re-evaluation of trade policy.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: Business Standard Synopsis: Without higher exports, India would not be able to attain higher sustainable growth in the coming years. Deleveraging process in India Indian companies are reducing debt on their books and increasing their cash balance.\u00a0Firms are selling assets and avoiding investment at this stage, to be in a more stable position. The&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/beyond-corporate-deleveraging\/\">Continue reading <span class=\"screen-reader-text\">Beyond corporate deleveraging<\/span><\/a><\/p>\n","protected":false},"author":10316,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[8624,216],"class_list":["post-121758","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-beyond-corporate-deleveraging","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704883694},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/121758","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10316"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=121758"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/121758\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=121758"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=121758"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=121758"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}