Corporate Stress Test
Stagnant or shrinking economy, high inflation and rising unemployment characterised by 'Stagflation' pose one of the biggest economic challenges for recovery. A situation where both monetary and fiscal measures - the tools in the hands of governments to steer the economy - don't just fail to work but also negate each other when exercised.
Just as India's plunge into recession is not official yet (since the data for contraction in the July-September quarter will only be formally announced at the end of November), the country's dive into stagflation is also not officially acknowledged. But India is indeed in stagflation - for at least the past 6-8 months. Dipak Mondal takes you through India's road to stagflation and why getting out will be a herculean task.
A shaky economy puts every component through stress tests. India Inc. is among those bearing the brunt of that. With Rs 15.52 lakh crore of debt newly categorised as 'stressed' and another Rs 22.20 lakh crore of corporate debt already in stressed sectors from the pre-Covid era, corporate India stares at defaults, selling or shutting of businesses and widespread ratings downgrades. Globally, almost 4,000 firms have been downgraded by S&P in June this year. In India, whether it is due to sector-specific reasons or structural weaknesses within companies, the banking sector's total exposure to stressed industries is Rs 37.72 lakh crore, almost 38 per cent of banks' entire loans given. Anand Adhikari, Nevin John and Niti Kiran scan the corporate landscape to bring you how corporate India is dealing with debt stress.
But despite the gloom and doom surrounding us, if there's anything that brings a ray of hope to the Indian economy right now, it's rural India. Unlike urban establishment, consumption in rural heartland is not just intact but has accelerated, thanks to the Centre's pro-rural initiatives in the Atma Nirbhar Bharat package, including pumping an additional Rs 40,000 crore into MGNREGA this year. From electronics to cars, furniture and apparel or food, smaller towns are outpacing metros and big cities in consumption. For companies such as Britannia, rural India has been a revelation, delivering three times the revenue growth of urban India since lockdown. But with Coronavirus spreading widely in rural India now, it's a big question mark whether this trend can sustain?
Centre has another plan for rural India - the new push to liberalise Indian agriculture which will allow farmers to sell their produce to whoever they choose to sell to. But there are challenges as big as the promise of the new liberalisation Bills for agriculture. More importantly, as Joe C. Mathew explains, why farmers continue to protest against the three Bills all across the country, particularly in Punjab and Haryana.
Meanwhile, Nyrika Holkar, 38, has been transforming operations at the 123-year old Godrej & Boyce, a complex entity dealing in 10 businesses ranging from consumer goods and appliances, furniture to complex engineering and security solutions since 2017. Over the next few years she promises to bring in new consumer-centric technology, digitisation and improved customer reach. Don't miss Nevin John's interview with the vivacious Holkar.
