Improvement is also visible in the exploitation of the production capacity of the companies in India’s manufacturing sector. Generally, in case of utilization of production capacity more than 75 percent, industrial units start thinking about increasing their production capacity.
India’s GDP has registered a growth of 7.8 percent in the first quarter of the financial year 2023-24, April-June 2023, due to the incomparable improvement in the service sector, amidst various economic problems facing the global level. The said growth rate in India’s economy is in stark contrast to the 3 per cent growth forecast for the calendar year 2023 and 2024 as compared to the 3.5 per cent growth rate recorded globally in the calendar year 2022 by the International Monetary Fund recently. With the aim of solving the problem of inflation in various countries globally, the growth rate of the global economy was reduced by the International Monetary Fund from 3.5 percent to 3 percent due to the continuous increase in the interest rates. In the context of India, it was earlier estimated that India’s GDP would register a growth of 5.9 percent during the calendar year 2023. However, in April 2023, this estimate was increased to 6.1 percent.
The Reserve Bank of India had projected India’s economic growth rate to be 7.8 percent during the first quarter of the financial year 2023-24 and 6.5 percent during the financial year 2023-24. However, on the basis of continuous positive changes during the first quarter of the financial year 2023-24 as compared to the fourth quarter of the financial year 2022-23, January-March 2023, in 43 key economic indicators by the State Bank of India, it was estimated that India’s growth rate during the first quarter will be 8.3 percent.
A tremendous jump has been registered in the capital expenditure of the Central Government. During the first quarter of the Central Government’s budget for the financial year 2023-24, capital expenditure of 27.8 percent has been completed. A similar increase in capital expenditure is also visible in the budgeted expenditure of many state governments. For example, Andhra Pradesh, Telangana, Madhya Pradesh have seen a growth rate of 41 percent in capital expenditure. Similar growth is also visible in the profitability of the companies. During the first quarter of the financial year 2023-24, a 30 percent increase (as compared to the previous quarter) has been registered in the amount of profit after paying tax of the companies. Especially the companies of bank, auto, information technology, pharma and refinery sector have achieved huge growth rate. It is worth noting here that before the January-March 2023 quarter, some pressure was visible in the profitability of companies in some sectors, but since then the situation is showing rapid improvement.
India’s manufacturing sector companies are also showing improvement in the utilization of production capacity, which has now reached above 75 percent. Generally, in case of utilization of production capacity more than 75 percent, industrial units start thinking about increasing their production capacity. The industrial units of India are now seen to have reached this position because the amount of loan being provided by the banks has been showing a steady rise for some time now. The loans of all scheduled commercial banks have registered a growth of 19.7 per cent during the period April-July 2023 as compared to 14.5 per cent during the same period last year. The growth rate in loan amount has been consistently in double digits for the last several quarters. While the rate of growth in deposits of these banks has been 12.9 percent, which was only 9.2 percent in the same period last year. This rate of increase in loan amount has also been possible due to continuous rate of increase in interest rates. PSBs in particular are now on a strong footing, registering steady improvement in their financial health (increase in loan amount, increase in profitability, increase in capital adequacy ratio, reduction in non-performing assets, etc.) . Public sector banks have earned a net profit of Rs 34,418 crore in the first quarter of the financial year 2023-24, while it was around one lakh crore rupees in the entire financial year 2022-23. The share price of these banks in the capital market has also registered an incomparable increase in recent times. If the banks of any country reach a strong position, then there is ease in the availability of loans to the industries of other regions of that country and due to this, the production of various industries starts registering an increase. That is why banks are kept in a central role in the industrial sector.
India’s internal economy, on various economic parameters, is continuously improving, due to which India’s growth rate has been 7.8 percent in the first quarter of the financial year 2023-24. But, at the same time, now some such incidents are happening at the global level, the effect of which is being read positively on the Indian economy. Especially the economy of China, which is the second largest economy in the world, is facing a very serious situation in recent times. Various measures being taken by the Chinese government to improve the economic condition of the country are not showing any positive effect. Unfavorable demography, China’s increasing distance with America and European countries and China’s lack of cordial relations with its neighboring countries are being told that the economic condition of China is likely to worsen further. In China, the economic model that has been running successfully during the last 40 years is now under threat. Many economists globally now believe that the Chinese economy appears to be entering an era of very slow growth.
If the economic crisis continues in China’s economy, then the Indian economy is directly benefiting from it, because anyway, after the Corona epidemic, a global thinking has developed in the industry that along with China, It is very important to have a production unit in any other country as well. This idea has been named ‘China+1’. But, now amidst the ever-deepening economic crisis in China, many multinational companies are seriously considering relocating their industrial units from China to other countries and some companies have even shifted their manufacturing units to other countries. have been done. The possibility of India getting maximum benefit from this policy of multinational companies is being expressed.
According to an information released by the Bank for International Settlements, the total debt taken by the Chinese government and state-owned companies at various levels had reached about 300 percent of China’s GDP by the year 2022, which was 200 percent in the year 2012. were less than Now many state-run companies in China are struggling to reduce this debt burden and they also have to take loans to pay the interest on the loans. The unemployment rate among youth in China has exceeded 21 percent. The number of elderly people in China’s total population is increasing rapidly as young citizens avoid having children. China is currently going through a state of deflation. Despite the money in the hands of the citizens of China, they are not purchasing the products, due to which the prices of various products are decreasing, the profitability of the companies is adversely affected, the companies are reducing their production, which ultimately leads to the unemployment rate. Increasing.
If China’s economy continues to decline for a long time, then the Indian industry should take advantage of these circumstances. This is the right time for Indian companies to make their presence felt in the countries where the export of Chinese products is decreasing. China’s relations are not good with many western and neighboring countries, all these countries are friendly countries of India. Amidst these circumstances, the industry of India should come forward and promote their products in these markets. Multinational companies migrating from China should be attracted to India so that they transfer their industrial units to India. This will give more impetus to economic activities in India. Although India’s economy has already reached a very strong stage, it can be given more thrust so that India’s growth rate can reach around 10 percent.
– Prahlad Sabnani
retired deputy general manager
state Bank of India