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Financial News Analysis – 1st Sep’19 | PDF Download

Mega PSB Merger

  •  Finance Minister Niramala Sitharaman:  announced amalgamation of 10 public sector banks into four big banks.
  •  Upfront capital infusion: Rs 55,250  crore
  • Big banks with enhanced capacity to increase credit and bigger risk appetite, with national presence and global reach.

  • Sitharaman said the government is  trying to create big next generation banks.
  • Government’s intention not just to give capital but also give good governance.
  •  The consolidation will aid economies of scale for these banks, resulting in improved cost of funds and operating efficiency.

 GDP Growth Slows

  •  India’s real gross domestic product  (GDP) growth slumped to a 25-quarter low of 5% in Q1FY20.
  • The slowdown is of course upon anØ unfavourable base (Q1FY19 saw 8% GDP expansion).
  • Private consumption, the main engine  of the economy, appears to have suffered the biggest blow with year-onyear growth of just 3.1% (the lowest since Q3FY15).
  • Growth of gross value added (GVA) in  manufacturing also nosedived to 0.6% in Q1FY20, compared with a rather strong 12.1% in the year-ago quarter and 3.1% in Q4FY19.
  •  Construction GVA grew just 5.7% in  Q1FY20 versus 9.6% in the year-ago quarter.
  • Investment-led revival is the  government’s stated goal

CEA on Growth

  •  Chief Economic Adviser K V Subramanian
  • Slowdown in GDP growth is due to domestic and global factors.
  •  Gross domestic product (GDP) data is released  by the National Statistical Office.
  • CEA: government is taking all steps to revive the economy and expressed confidence that the country would be on a high-growth path “very soon”.

Nashik Metro

  • Maharashtra Cabinet on Wednesday approved a ₹2100-crore Nashik metro rail project.
  •  It will operate on electricity and battery power.
  • 2 trackless elevated corridors will be  developed.
  • The Metro-Neo system is a unique concept being adopted for the first time in this country.
  • The buses will have rubber-tyre and draw power from the overhead electric wire having 600-750 V DC supply.

State of the art buses

 Building an innovation economy

  •  India’s economy: growing steadily despite global headwinds
  • National Management Convention the All India Management Association’s annual event, aims to nudge India’s business and policy leadership towards innovation-led policies.
  •  Innovation spawns strong cycles of  investment and consumption and gives new competitive advantages to an economy.

  • If India is to nearly double its  economy over the next five years, fundamental policy and business innovations are needed.
  • The recent stimulus has offered temporary relief, but to achieve lasting robustness the economy needs a big dose of creativity.
  • Knowledge is replacing capital and  labour.
  • New economy: is about value-creation  and not value-extraction
  • Future: companies with intellectual  assets
  • Most powerful global companies:  innovation warriors
  • Very low capital and labour intensity
  •  Global Innovation Index: 57/126
  •  ICT services exports: Rank 1
  •  Engineering and science graduates: Rank 6Ø
  • Global R &D companies: Rank 18
  • Political and business institutions: Rank 80
  •  Human capital and research: Rank 56
  • Innovation linkages  & knowledge absorption: Rank 64
  • Knowledge creation and diffusion: Rank 43
  • Intellectual property creation is basic  to building an innovation economy.
  • For every $100 billion of GDP, India  has less than 200 patent applications compared to 6,000 in China.
  •  UN’s WIPO report 2017: India  awarded 12,400 patents and 86% of those patent approvals were obtained by foreigners.

 Key: reward disruptors and not the  establishment

  • The US, Europe, Japan, Israel and now China have become innovation powerhouses because they favour value-creators over rent-seekers.
  • Silicon Valley has been a model  innovation ecosystem because the start-ups can focus on creating new ways of producing and consuming things and get rich doing it.
  • Government spending on basic  research is critical for developing an innovation ecosystem.
  • Internet, GPS, digital assistant, touchscreen  were all developed with American government’s funding.
  • China has become a leader in 5G, electric vehicles and digital surveillance technologies because of direct government involvement.
  • The government is best-placed to invest in  experimental science and technologies because of its reliable tax revenues, whereas the private sector is best placed to build commercial applications on top of basic R&D because of its efficiency.
  • But it’s critical that a share of private  profits from public investments are ploughed back into basic science and technology research.
  • American tech giants are coming  under pressure to pay more taxes and invest more in research institutions.
  • Regulations and incentives play a  vital role in directing innovations.
  • Each generation of automobiles are  cleaner and safer because of regulatory pressure.
  • Solar and wind energy industries owe  their development to subsidies and tax breaks.
  • India can transform its education  sanitation and healthcare sectors by loading incentives in favour of innovations and against inefficient technologies and operating models.
  • Among emerging economies, China is  a great example of rise to prosperity and power through innovation.
  • India can learn from China’s deliberate  increase in innovation-intensity of its economy.
  • China is the only middle-income country among the 20 most innovative nations and its R&D spending and academic research are rising the fastest in the world.
  • At the 2018 conference of the  Association for the Advancement of Artificial Intelligence, 265 research papers of China were accepted compared to 16 from India.
  •  India has a serious innovation deficit and it has to make up in a rush.
  •  More than the fear of failure, the biggest obstacle to innovation is the idealisation of obedience and safety

 

 

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