Resilient recovery

To provide relief to the public and businessmen affected by the second wave of the pandemic, the government has taken several measures including provision of loans to traders, increasing liquidity in the market, making efforts to speed up the vaccination process etc. Owing to the adoption of these measures, the economy seems to be getting back on track. Furthermore, the Central Government has recently approved a package of Rs 23,123 crore to deal with the imminent third wave of the pandemic, under which the Central Government will contribute Rs 15,000 crore, while the state governments will contribute Rs 8,123 crore.

With the opening of lockdowns in a phased manner, economic activities have started increasing in the country. In June, the total volume of e-way bills jumped 37.1 per cent, while it increased by 26 per cent on a yearly basis. This has driven the speculation that the Goods and Services Tax (GST) collection may increase in the coming months. The Finance Ministry has said in its report that the tax collection of the Central Government in the first two months of FY 2021 has been satisfactory. The Central Government is increasing the expenditure for repair and expansion of roads and railways so that economic activities can be accelerated.

Non-Banking Financial Companies (NBFCs) are also in a better position on the liquidity front than they were a year ago. Because of this, NBFCs are giving loans without much difficulty. Financial institutions which are not banks but accept deposits and provide credit facilities like banks are called NBFCs. NBFCs do not include only financial companies. These companies carry out activities in investment, insurance, chit funds, banking, stockbroking, alternative investments etc. The total number of NBFCs registered with the Reserve Bank of India, as of January 31, 2021, was 9,507 and its total asset size was about 14 per cent of scheduled commercial banks. Today, NBFCs are playing an important role in providing deposit and credit facilities to low-income household groups and Micro, Small and Medium Enterprises (MSMEs). They are also providing credit facilities in those areas where banks do not have access. To those who fail to get loans from banks, NBFCs provide loans on easy terms. The percentage of loans given by them becoming NPA is very less.

According to the data released by the Ministry of Commerce and Industry, exports in June grew 48.34 per cent or USD 32.5 billion on a year-on-year basis due to an increase in global demand for petroleum products, engineering products, gems etc. This is about 30 per cent higher than in June 2020, as sectors such as iron ore, rice, cotton, handloom products, marine products, pharmaceuticals etc. have been registering growth since the beginning of the current financial year.

The country's commodity imports almost doubled to USD 41.87 billion in June as compared to the same period in last year and increased by about 2.05 per cent as compared to June 2019. The overall trade deficit is narrowing due to an increase in exports and lesser gold imports during May and June. It remained at a three-quarter low of USD 31 billion in the first quarter of FY 2021-22. The trade deficit is expected to remain low in the current financial year with the states opening the lockdown in a phased manner and accelerating economic activities.

Non-petroleum and non-gem exports grew by 29 per cent to USD 25.65 billion in June. On the same lines, non-oil and non-gold imports have also increased in June 2021. This indicates a pick-up in economic activity and an improvement in demand. India's goods and services exports are estimated to grow by 32 per cent on a year-on-year basis to USD 49.85 billion in June. Total imports grew by about 74 per cent on a year-on-year basis to USD 52.18 billion. It is noteworthy that the overall global demand continues to be good. That is why the factories are operating at half their capacity despite partial lockdown in various parts of the country. However, India can do even better in exports in the current financial year with the reduction in daily cases of infection and restoration of economic activities.

Debt liability of listed non-financial Public Sector Undertakings (PSUs) has come down for the first time in the last five years. The gains on account of higher metal and energy prices helped these companies reduce their debt liabilities. The consolidated net debt liability of these state-owned companies declined by 6.4 per cent to Rs 6.83 lakh crore at the end of March this year from Rs 7.3 lakh crore at the end of March 2020. Integrated net debt versus equity of non-bank and non-NBFC central PSUs improved to 0.75 times in FY21 from 0.77 times in FY20. The improvement in debt ratio was fuelled by both reduction in gross debt and higher income.

Only four companies — National Thermal Power Corporation (NTPC), Power Grid Corporation, ONGC and Indian Oil — have taken nearly 80 per cent of the loans of PSUs. The consolidated net debt liability of these four PSUs declined by 2.3 per cent year-on-year to Rs 5.6 lakh crore. The reduction in debt liabilities was mainly driven by profits from metal companies such as Steel Authority of India and Hindustan Copper and oil companies such as Indian Oil and Bharat Petroleum Corporation Ltd. SAIL's total debt liabilities declined by 31 per cent to around Rs 35,500 crore during the previous fiscal from Rs 52,200 crore at the end of FY20. Indian Oil's gross debt declined by 14 per cent to Rs 1.09 lakh crore in the previous fiscal, from Rs.1.26 lakh crore a year ago. Similarly, Bharat Petroleum Corporation Limited's gross debt liability declined by 23 per cent year-on-year to around Rs 48,000 crore at the end of last fiscal, from around Rs 62,000 crore a year ago.

Companies such as Indian Oil, BPCL, HPCL, ONGC, NTPC, SAIL and NMDC saw the biggest jump in earnings, while oil companies benefited from inventory gains and metal producers despite lower sales and revenue in the last fiscal. This led to an increase in their profits in FY21. These PSUs also benefited from the fall in interest rates like other companies last year, recording an 18.4 per cent year-on-year decline in their interest cost in FY21.

It can be said that the risk of coronavirus infection is not over yet. Therefore, preventive measures are being taken across the country. The pace of vaccination has been accelerated and the government is still trying to push it further. Efforts are also being made to strengthen health infrastructure. With the corrective measures taken, economic activity is expected to further increase in the coming months.

Views expressed are personal