Maha, UP spearhead India’s post-pandemic growth: SBI report - Business Guardian
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Maha, UP spearhead India’s post-pandemic growth: SBI report



On the Gross State Domestic Product (GSDP) front, Gujarat has notably doubled its economic output, marking a 2.2 times increase over the last decade.

Amidst the challenges posed by the COVID-19 pandemic, the Indian economy has shown remarkable resilience, marked by a significant surge in average real GDP growth to 8.1 per cent, a substantial rise from the 5.7 per cent growth witnessed in the pre-pandemic period. As per the most recent report by State Bank of India (SBI) Research, Maharashtra and Uttar Pradesh have taken the lead in contributing to the 235 basis point (bp) growth, with 56 bps and 40 bps respectively, while the remaining 90 bps have originated from other states. On the Gross State Domestic Product (GSDP) front, Gujarat has notably doubled its economic output, marking a 2.2-fold increase over the last decade.

Following closely behind are states such as Karnataka, Assam, Andhra Pradesh, Odisha, Telangana, Sikkim, and Madhya Pradesh, showcasing significant economic momentum and development. The report also underscores the rise in per capita income across several states, with Gujarat exhibiting the most substantial growth, increasing by 1.9 times. Karnataka, Andhra Pradesh, Telangana, and Assam trail closely, reflecting commendable economic advancements. Moreover, Gujarat, Karnataka, and Telangana have outperformed other states in terms of per capita income, further cementing their positions as economic powerhouses.

While some states such as Uttar Pradesh, Chhattisgarh, Bihar, and Madhya Pradesh have maintained stable per capita income growth trajectories, others like Jharkhand, Rajasthan, West Bengal, Maharashtra, Punjab, Delhi, and Goa have experienced deceleration in this aspect. Furthermore, the report highlights a significant reduction in state-wide inequality in terms of per capita net state domestic product (NSDP) following the COVID-19 pandemic. From FY19 to FY22, per capita NSDP inequality decreased from 0.523 to 0.480, indicating a positive trend towards greater economic inclusivity and equality across states.

Commenting on the findings, the SBI Research team emphasized the importance of continued policy support and targeted interventions to sustain and enhance economic growth momentum across all states. They also stressed the need for collaborative efforts between the central and state governments to address regional disparities and foster inclusive growth strategies. The SBI Research report serves as a resource for policymakers, economists, and stakeholders, providing insights into the evolving dynamics of the Indian economy and guiding future development initiatives.

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Climate Change Forecasted to Result in $38 Trillion Annual Economic Losses Globally by 2049



Notably, climate damages have been on an upward trajectory, with annual losses averaging $500 billion, equivalent to 2% of the United States’ GDP, since 2016.

Climate change poses a formidable threat to the global economy, with researchers projecting annual losses amounting to a staggering $38 trillion by the year 2049. This ominous forecast comes from the esteemed Potsdam Institute for Climate Impact Research (PIK), which highlights the devastating impact of extreme weather events on agricultural yields, labor productivity, and critical infrastructure.

The dire consequences of planetary warming are further elucidated in a recent study published in Nature. According to this research, global income is expected to plummet by 19% by mid-century compared to a scenario where climate change isn’t a factor. Drawing upon data spanning over 1,600 regions worldwide across the past four decades, the study provides a comprehensive assessment of the future ramifications of a warmer planet on economic growth.

Leonie Wenz, a prominent scientist at PIK leading the study, issues a stark warning, emphasizing that unless emissions are drastically curtailed, economic losses will escalate exponentially. Wenz underscores the urgency of immediate action, asserting that failure to address emissions will culminate in even graver economic repercussions, potentially reaching a staggering 60% reduction in global income by the year 2100.

Attributed largely to human-made greenhouse gas emissions, the world has experienced an average temperature increase of 1.1°C since pre-industrial times. This uptick has precipitated a surge in extreme weather events, collectively costing a monumental $7 trillion over the past three decades, as reported by Bloomberg Intelligence.

Notably, climate damages have been on an upward trajectory, with annual losses averaging $500 billion, equivalent to 2% of the United States’ GDP, since 2016. Regrettably, developing nations, despite contributing minimally to global warming, bear the brunt of these losses and damages.

In light of these grim projections, researchers advocate for stringent measures aimed at emissions reduction and limiting global warming to a maximum of 2°C by the century’s end. Such measures, they argue, represent the most cost-effective approach to mitigating further climate-induced damages. Leonie Wenz emphasizes the economic rationale behind climate protection, stressing that the financial savings accrued from emission reductions far outweigh the costs, even without factoring in the invaluable non-economic benefits such as safeguarding life and preserving biodiversity. However, achieving these goals will necessitate heightened adaptation efforts.

Alarmingly, countries deemed least culpable for climate change are poised to suffer disproportionately severe economic losses, with projected income reductions 60% greater than their higher-income counterparts and 40% greater than nations with higher emissions. Compounding this disparity is the glaring lack of resources available to these vulnerable nations for adapting to the prevailing impacts of climate change.

Despite the pervasive belief that only developing nations will bear the brunt of climate-induced economic losses, Leonie Wenz asserts that the repercussions will reverberate globally, affecting even highly developed nations like Germany, France, and the United States. Wenz also underscores a grim reality – only regions situated at very high latitudes stand to benefit from warmer temperatures, further exacerbating the unequal distribution of climate impacts.

Central to the severity of projected economic losses is the comprehensive nature of the assessment, which factors in not only temperature increases but also additional climate variables such as extreme rainfall and the manifold impacts of extreme weather events on agriculture, labor productivity, and public health.

In advocating for a paradigm shift towards renewable energy systems, Anders Levermann, a co-author of the study, emphasizes the imperative of structural change for ensuring global security and averting catastrophic consequences. He warns against the perils of maintaining the status quo, stressing the urgent need for proactive measures to mitigate the impending crisis.

In summation, the prognosis is dire – unless decisive action is taken to curb emissions and mitigate the impacts of climate change, the global economy faces a bleak future characterized by unprecedented economic losses and irreparable damage.

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India to Sustain Role as Global Growth Engine in the Foreseeable Future: IMF Executive Director



Krishnamurthy V. Subramaniam, the Executive Director of the International Monetary Fund (IMF), said on Tuesday that India will continue to be a driver for global growth in the foreseeable future.

In an interview with ANI, he noted that India, ever since the COVID-19 pandemic, has witnessed consistent growth at 7 percent plus. He predicted that India will have 8 percent growth in the fourth quarter and called it “good” growth considering the current global economic situation.

Asked where India stands amid the current global economy, he responded, “I think India will continue to be the driver for global growth in the foreseeable future. The maximum sort of contributor to global growth. I expect growth in India to be consistently above 7 percent in this decade. You would recall back in September 2021, when I was with the government as well. I predicted that India will emerge out of COVID with 7 percent plus growth. So I continue to maintain that assessment.”

Subramaniam, India’s former Chief Economic Adviser, said that the IMF has revised its projection for growth for India in 2024 to 7.8 percent, which he emphasized reflects overall growth.

On being asked about how India’s economy is viewed in the IMF meetings being held in the US, he said, “So, if you look at the Indian economy now, ever since COVID, it has grown consistently at 7 percent plus, 9.7 percent the year after COVID, then 7 percent, and then this year, 8.2 percent, 8.1 percent, and 8.4 percent growth in the first three quarters. So even with a much lower 7.3 percent growth, if it so happens, actually in the fourth quarter, India will have an average of 8 percent growth. And I think that is very good in the current global economic situation. As I said, 3.1 percent expectation for the global economy.”

“Now, the fund itself has revised its projection for growth for India for this year to 7.8 percent, which is reflecting the overall growth. I do want to also mention, I think, that if you look at productivity improvements, this is something that is really important. If you look at the Penn World Table’s data, which is actually what economists use across the world to understand the drivers of growth,. In India, pre-2014 productivity growth annually was 1.3 percent; in contrast, the rate of productivity growth post-2014 has been 2.7 percent, which is more than double. And I think that is a very important driver for growth to continue to be high and for it to be sustainable going forward,” he added.

India’s GDP grew at a massive 8.4 percent during the October–December quarter of the current financial year 2023–24, and the country continued to remain the fastest-growing major economy.

The Indian economy grew 7.8 percent and 7.6 percent during the preceding two quarters, April-June and July-September, according to data released by the Ministry of Statistics and Programme Implementation in February this year.

Asked about critics’ opinions about India’s economy, he referred to two former chief statisticians’ remarks regarding the Indian economy. He said that Pranab Sen and TCA Anant, in an interview, mentioned that there was nothing to worry about about India’s GDP.

“I would say two things. Firstly, if you look at the commentary given by statistical experts, there was an interview of two former chief statisticians, Pranab Sen and TCA Anant, and one former chairman of the National Statistical Commission, PC Mohanan, all of whom were asked about some of the economists’ criticism of the GDP methodology and GDP numbers, and they were unanimous that there is nothing to worry about or nothing to sort of that is untoward about the GDP number. So, I think that there are so many statistical experts across the spectrum saying that the GDP numbers can be trusted. I think I would go by that; let me also add my own assessment,” he said.

He noted that India’s growth in gross value-added versus GDP in the first quarter stood at 8.2 percent.

He said that there was no difference between growth in gross value-added and GDP.

“If you look at the growth in gross value-added versus GDP, in the first quarter, it was 8.2 percent for both, so there was no difference between growth in gross value-added and GDP. In the second quarter, gross value-added grew at 7.7 percent; that was just 40 basis points less than 8.1 percent growth in the GDP in the second quarter,” Subramaniam said.

“Only in the third quarter has there been a higher wedge, with gross value-added growing at 6.5 percent versus 8.4 percent for GDP; even that is quite well understood given the tax buoyancy. I’ve looked at the numbers over the last decade, and the median number for tax buoyancy has been 1.6, or, in other words, a 1 percent increase in GDP growth. Nominal GDP growth has translated into 1.6 percent in terms of the median, so in tax growth, I think when you put all these three aspects together, I think some of the criticism or people saying that they’re surprised about the GDP growth is completely unwarranted,” he added.

On being asked about economist Thomas Piketty’s report, in which he mentioned that India’s income inequality is worse than that under British rule, he stated, “If you look at the recent consumption survey that has been released and now experts have actually clarified very clearly that the 2011–12 consumption survey and the 2022–23 consumption survey are indeed comparable because the survey method is indeed the same, when you look at those numbers, both poverty and inequality have declined significantly.”

“For instance, using the USD 1.9 per capita per day in 2011, PPP numbers have declined from 12 percent to 2 percent. That’s a significant decline. Even using a higher threshold of USD 3.2 per capita per day again in 2011 purchasing power parity, the decline has been from more than 50 percent to less than 30 percent. So I think it’s significant. The same survey numbers also reveal that inequality has declined, and this is carefully constructed data using a very large consumption survey. Both urban and rural inequality have declined,” he added.

Speaking about the decline in the Gini coefficient, he said, “For instance, the Gini coefficient has actually declined from 36 in 2012 to, I think, less than 30 in 2022; this is for urban areas and rural areas; the Gini has declined from 29 to 27. So, I think the carefully constructed data from consumption clearly shows that consumption inequality has declined significantly, and as for the analysis done by Thomas Piketty, I think it is a sort of mix of a lot of data, especially tax data, and I think there are clearly methodological concerns.”

“For instance, if you look at capital gains, which are treated as income, in the tax data, that is not treated as being counted as part of GDP calculations. So also, there are some very heroic assumptions that have to be made in order to be able to actually assess inequality just from tax data, which is that taxes are paid by a very small section. Because in order to compare inequality, you have to actually look at the tax data vis-à-vis those people who actually are a large section who don’t pay taxes, so I think lots of heroic assumptions have to be made, and I think if they do it far more without any overt and covert biases, I think what they would find would be closer to what the consumption survey data is clearly revealing, which is a significant decline in inequality right now,” he added.

Lauding India’s digital infrastructure, he stressed that it is an important lesson for the Global South.

He recalled his visit to India and said that he used digital modes of payment for buying vegetables at the local market with his mother. He noted that local vendors are accepting digital payments in India. He stressed that digital infrastructure in India is an important lesson for the Global South, and it has been created as a public good.

“This is an aspect, especially at the IMF board, that really gladdens my heart.

If you look at how digital transactions are done in India, you can use your phone to pay for a glass of coconut water or a coffee, or even if, a few months ago, I was actually with my mom and went for some shopping, basically for vegetables, in the local mandi, and I pulled out my phone and I was able to pay, so it’s just become so widespread and everybody is using one.

One can even actually go and shop, for instance, in a Sarojini Nagar or in a fashion street in Bombay, and the street vendors are also actually taking digital payments,” he said.

“That’s the kind of widespread use of digital payments that has basically happened. And that’s what is reflected in the IMF’s being very appreciative of the kind of infrastructure that has been created.

One critical aspect, and these are actually important lessons for the Global South, is that this digital infrastructure has been created as a public good.

The sovereign has created it rather than allowing or requiring the private sector to create it. What that means is that when the private sector creates such infrastructure, it can become a monopoly, and therefore the prices may not be affordable for everybody.

In contrast, the sovereign Indian government creating this access has been widespread. And I think that’s a very important lesson for the Global South,” he added.

He said that Prime Minister Narendra Modi has said that India is willing to share its knowledge about digital infrastructure with other nations.

He stated that the use of digital infrastructure for remittances globally can reduce time and have enormous efficiency gains.

He said, “I think the Honourable Prime Minister has been on record saying that India is more than happy to actually share the knowledge from this with all the countries, including the advanced economies.

For instance, there are a lot of remittances, and I think the use of this digital infrastructure for remittances globally can actually reduce not really not only the time but even the cost for this, and I think that can be enormous efficiency gains for the global economy, so not only the Global South but even advanced economies can I think learn from India on this aspect.”

Asked about concerns regarding the geopolitical situation and crisis in West Asia, he said, “So, I think the current meetings come at a time when the economy can express some cautious optimism about it.

If you look at the projections for global growth, compared to 3.1 percent, which was a projection in January, the IMF has revised them 10 basis points higher to 3.2 percent. So, there is some cautious optimism.”

“I think the situation in West Asia is still evolving, and overall, the impact of that on global growth is something that will be difficult to predict. My sense is that, compared to, for instance, the war in Europe, which had significant implications for the supply side, the impact directly on the economy, I think, will be lower.

It does add uncertainty, for sure, but unlike in the case of the war in Europe, there won’t be a direct impact on aggregate supply or demand in the global economy. So, I would continue to be cautiously optimistic about the current global economic situation,” he added.

Notably, Israel has launched a counter-offensive against Hamas after the terrorist group launched an all-out attack on Tel Aviv on October 7. Israel has vowed to destroy Hamas. Amid the ongoing war between Israel and Hamas, Iran has launched a series of strikes on Israel in retaliation for a suspected Israeli attack on the Iranian consulate in Damascus, Syria, earlier this month.

Asked about some commentators’ views regarding India’s GDP growth, he said, “I think shared on that earlier I said that the gross value-added actually, as you saw in the first-quarter growth in gross value added and that in GDP was the same 8.2 percent, second quarter 7.7 percent for gross value added, while GDP growth was 8.1 percent, not a large difference, only in the third quarter. And as I also said, statistical experts across the spectrum have actually clearly opined that the GDP methodology and these GDP numbers are quite robust.”

Lauding the growth of the Indian economy, he said that the Indian economy is doing very well. He further said that Bangladesh and Sri Lanka are part of IMF programs and added that these nations are implementing a lot of IMF programs.

He said, “I think the Indian economy is clearly doing very well. A couple of countries that are part of my portfolio, Bangladesh and Sri Lanka, are actually part of IMF programs now. Sri Lanka, as we all know, has had some economic difficulties and is going through them. I think they’re implementing a lot of reform programs.”

“Bangladesh is also part of the IMF program. And I think things are also looking cautiously optimistic. A new government has come into power. But I think clearly, in terms of the overall state of the economy, India seems to be clearly the star there,” he added.

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Raghuram Rajan urges India to harness demographic dividends and prioritize job creation



Former RBI governor Raghuram Rajan has underscored India’s failure to fully leverage its demographic dividends, emphasizing the critical need to enhance human capital and skill sets. Speaking at a conference titled “Charting India’s Path to an Advanced Economy by 2047” held at George Washington University, Rajan highlighted India’s current growth rate of approximately 6 percent, which he deemed insufficient given the country’s demographic advantage.

Despite being in the midst of a demographic dividend, Rajan noted that India’s growth rate falls short of the levels achieved by countries like China and Korea during their respective demographic dividend periods. He cautioned against complacency, suggesting that the 6 percent growth rate, when stripped of GDP number inflation, reveals a less impressive performance.

Rajan stressed the urgent need for job creation and advocated for a focus on enhancing people’s capabilities and transforming available job opportunities. He criticized the allocation of significant funds towards chip manufacturing subsidies while neglecting job-intensive sectors like leather, which has contributed to India’s escalating unemployment crisis.

Highlighting the importance of addressing job creation in sectors such as leather, Rajan urged policymakers to identify and rectify underlying issues rather than solely relying on subsidies. He cautioned against neglecting industries that are more labor-intensive, emphasizing the long-standing nature of India’s job problem.

Moreover, Rajan addressed the trend of Indian innovators establishing businesses abroad due to easier access to global markets. He called for a reflection on the factors driving this phenomenon and stressed the importance of fostering domestic innovation and job growth across various sectors.

Despite acknowledging the entrepreneurial spirit of Indian youth, Rajan emphasized the need for systemic changes to create a conducive environment for innovation and job creation within the country. His remarks underscored the imperative for policymakers to prioritize investments in human capital development and address structural barriers to economic growth.

Raghuram Rajan’s insights underscore a pressing concern facing India’s economic trajectory: the imperative to harness its demographic dividends effectively. With a burgeoning population and a significant proportion of young people entering the workforce, India possesses a demographic advantage that could fuel robust economic growth if leveraged appropriately.

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Senior citizen deposits skyrocket 150% to Rs 34 lakh cr in 6 years



This represents a remarkable 81% increase in account numbers and a staggering 150% jump in total deposits compared to 2018.

According to a research report by the State Bank of India, the share of senior citizen term deposits has doubled over the last five years, reaching 30% in fiscal year 24. Many individuals have opted to secure their savings at higher interest rates before potential rate cuts by the Reserve Bank of India (RBI). The report reveals an impressive 74 million senior citizen term deposit accounts in India, collectively valued at Rs 34 lakh crore.
This signifies an outstanding 81% surge in account numbers and a remarkable 150% increase in total deposits compared to 2018. “The increased in deposit rates, the higher interest rate differential for senior citizens and the special deposit schemes for senior citizens (for example WE-CARE by SBI) has propelled a tectonic shift in deposits accretion for citizens ably supported by also Government initiatives on SCSS, Mahila Samman Savings Certificate and so on,” noted the report.
Rapid surge in senior deposits :-
The report estimate suggests that there are around 74 million senior citizens term deposits accounts in the country with total deposit of Rs 34 lakh crore. Out of such 74 million accounts, almost 73 million accounts are in the size of up to Rs 15 lakh. By assuming 7.5% interest on Sr citizen bank deposits, Rs 2.6 lakh crore is the interest earned. In 2018, SBI had estimated that there are around 41 million senior citizens term deposits accounts in the country with total deposit of Rs 14 lakh crore. So, in 6 years, there has been an increase of 81% growth in number of accounts and 150% in amounts. “Interestingly, these 74 million accounts is a significant jump from that in FY19, when we had estimated that there were around 41 million senior citizens term deposits accounts in the country with total deposit of Rs 14 lakh crores.
So, in a short span of 5 years, there has been an increase of 81% growth in number of accounts and 143% in amount in this cohort! The average balance in the accounts has grown handsomely by 38.7%, to Rs 4.6 lakh cr from earlier Rs 3.3 lakh crore, “ said Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser State Bank of India. In recognition of challenges faced by the senior citizen in sunset years with medical and other care needs growing exponentially as nuclearization of families gains velocity, the government has deftly ensured superior interest offerings through specialized schemes like SCSS as also card rates of banks having 50-75 bps mark-up for this segment.
The Government of India’s Senior Citizen Savings Scheme (SCSS) has emerged as a cornerstone of this financial upswing. Launched to safeguard senior income, SCSS allows deposits up to Rs 30 lakh with a guaranteed 5-year tenure and an attractive 8.2% interest rate. This, coupled with tax benefits and a secure investment environment, has proven immensely popular. The report reveals that SCSS outstanding deposits in H1 FY24 stand at Rs 1.62 lakh crore, a significant 89% increase since FY14.
Banks enhance Offers with special senior citizen benefits :-
Commercial banks are also vying for a share of the senior savings pie by offering competitive rates. Many banks provide a 50 basis point (bps) premium over the standard card rate for senior citizens. Additionally, leading banks like SBI and HDFC have introduced special fixed deposit schemes with tenures tailored for seniors and interest rates 75 bps higher than regular rates. These initiatives, along with SBI Green Rupee Term Deposit’s additional 100 bps for green initiatives, further incentivize senior savings.
Harnessing the Power of Compounding: Maximizing Interest Income :-
The report estimates that senior citizens earn a combined Rs 2.7 lakh crore in interest annually. This includes Rs 13,299 crore from SCSS and a significant Rs 2.5 lakh crore from regular bank deposits. Assuming an average 10% tax burden on this income, the government stands to gain approximately Rs 27,106 in taxes.

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India travel industry set to soar, revenue nears $24 billion in 2024



India’s travel and tourism market is on track to reach a revenue of USD 23.72 billion in 2024, with an estimated annual growth rate of 9.62% according to the India Brand Equity Foundation (IBEF). Projections indicate that this growth trajectory will propel the market volume to USD 34.25 billion by 2028. Prime Minister Narendra Modi’s emphasis on preserving India’s rich heritage while developing world-class tourism infrastructure has been pivotal in shaping the sector’s growth. The recent announcement of 100% Foreign Direct Investment (FDI) in tourism-related ventures, including hotels and recreational facilities, aims to foster further development in the industry.

The package holidays market is emerging as the largest segment, with a projected market volume of USD 10.48 billion in 2024. By 2028, the number of users in this segment is expected to increase significantly, reaching 64.74 million. The average revenue per user (ARPU) in the package holidays market is forecasted to be USD 209.70 by 2028, with online sales contributing 60% of the total revenue. In alignment with global trends, India’s tourism industry is focusing on promoting sustainable and eco-friendly travel options to attract travellers.

The sector is poised to contribute USD 250 billion to the country’s GDP by 2030, generating employment for 137 million individuals. Prime Minister Modi’s recent dedication and launch of 52 tourism sector projects worth over Rs 1400 crores under the Swadesh Darshan and PRASHAD Scheme demonstrate the government’s commitment to tourism infrastructure development. These projects aim to enhance visitor experiences and promote community participation in tourism initiatives.

Additionally, visionary campaigns such as ‘Dekho Apna Desh People’s Choice 2024’ and ‘Chalo India Global Diaspora Campaign’ seek to engage citizens and the Indian diaspora in promoting tourism and showcasing India’s cultural heritage. The revamped Swadesh Darshan 2.0 Scheme further underscores the government’s commitment to integrated destination development and community engagement in tourism projects. With India’s tourism industry poised for exponential growth, driven by infrastructure development and rising disposable incomes, the nation is set to emerge as a leading global tourism destination.

Through strategic partnerships and innovative campaigns, India aims to unlock its vast tourism potential and position itself as a premier destination for travellers worldwide. India’s tourism sector is undergoing a transformative phase, characterized by robust infrastructure development, technological advancements, and evolving consumer preferences. The government’s proactive measures, such as the promotion of sustainable tourism practices and the facilitation of foreign investment, are instrumental in driving the industry’s growth trajectory.

The emphasis on promoting local communities’ participation in tourism initiatives not only enhances visitor experiences but also contributes to inclusive development and empowerment. By leveraging India’s diverse cultural heritage and natural attractions, the tourism sector has the potential to become a major driver of economic growth and job creation. Strategic initiatives like the ‘Dekho Apna Desh People’s Choice 2024’ campaign and the ‘Chalo India Global Diaspora Campaign’ play a pivotal role in engaging stakeholders and fostering a sense of pride in India’s rich heritage.

These campaigns aim to showcase the country’s cultural diversity and historical significance to a global audience, thereby enhancing its appeal as a tourist destination. Moreover, the government’s commitment to integrated destination development through schemes like Swadesh Darshan and PRASHAD underscores its vision for sustainable tourism. By investing in infrastructure projects at pilgrimage sites, heritage destinations, and recreational facilities, India aims to enhance visitor experiences and boost tourism revenue.

As the tourism industry continues to evolve, innovation and collaboration will be key drivers of its success. Strategic partnerships with stakeholders across sectors, including hospitality, transportation, and technology, will facilitate the seamless integration of services and enhance the overall tourist experience. Looking ahead, India’s tourism industry is poised for exponential growth, fuelled by a combination of favourable policies, infrastructure development, and increasing international recognition.

By capitalizing on its unique strengths and addressing emerging challenges, India has the potential to emerge as a premier global tourism destination, offering enriching experiences for travellers from around the world. Through concerted efforts and a shared vision for sustainable development, India is well-positioned to realize its ambition of becoming a leading player in the global tourism landscape. As the nation continues on its journey towards economic prosperity and inclusive growth, tourism will undoubtedly remain a cornerstone of its development agenda.

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Fitch Ratings affirms stable outlook for PSU banks, cites India’s growth, resilience



Funding remains a strength for PNB as customer deposits constituted about 91 per cent of total funding in 9MFY24 by our estimates, driven by high depositor confidence due to the bank’s close state linkages.

Fitch Ratings has affirmed a stable outlook for public sector banks in India it rates, with the rating action underlined by India’s robust medium-term growth potential supported by expectation of a GDP growth of 7 per cent in 2024 and 6.5 per cent in 2025 and investment prospects. “The economy remains resilient as healthy business sentiment, buoyant financial markets and the government’s capital spending buffered global economic headwinds and inflation. These factors are conducive for banks to sustain profitable business, provided risks are well-managed,” the Fitch report points out.

The ratings of Canara Bank, State Bank of India, Union Bank of India and Punjab National Bank among others are driven by criteria ranging from government support, strong operating environment, dominant presence, double digit loan growth, strong profitability and dominance of deposits and modest capital buffers. The score of ‘bb+’ given on operating environment (OE) of the State Bank of India is precisely because of this view of India’s robust medium-term growth potential.

According to Fitch, the State Bank of India has the highest probability of extraordinary state support among Indian banks, if required. This takes into consideration SBI’s market position as the largest Indian bank, the state’s 56.9 per cent controlling ownership and its broader policy role than peers. The rating agency has also given a stable outlook on the international depository receipt (IDR) which is a negotiable certificate issued by a bank, representing ownership of a number of shares of stock in a foreign company that the bank holds in trust.

The bank’s business profile score of ‘bbb-’ is the highest among Indian banks and reflects the Fitch view of SBI’s ability to generate business consistently through the cycle while managing risk better than peer state banks. It also reflects the competitive advantages of its dominant size and market share and unparalleled domestic reach that offset the sector’s limited pricing power. Still, government influence can weigh on SBI’s traditional business model – loans are about 60% of assets – and even more so on its risk appetite, similar to other state banks. The risk profile score of ‘bb’ given on double-digit loan growth takes into consideration its advantage over peers in portfolio selection due to scale, brand loyalty and widespread presence. Fitch Ratings believes that the bank’s appetite for risk has been higher than is typical for a bank with its market position — despite total loan growth slowing to 14.5 per cent yoy in 9MFY24, from 16 per cent in the financial year ended March 2023 (FY23).

The other bank affirmed by Fitch Ratings as ‘outlook stable’ is Canara Bank at ‘BBB-’, reflecting the Fitch view of a high probability of extraordinary state support for the bank, if required. This takes into consideration the state’s 63 per cent ownership as well as the bank’s large size and reach and the assessment of the state’s strong propensity to support the banking system in general. Canara’s business profile score of ‘bb+’ reflects the bank’s strong local franchise and reach as India’s fourth-largest state bank. This is counterbalanced by the bank’s high risk appetite, which has weighed on its traditional business model in the past and was partly a result of government influence, similar to other state banks.

According to Fitch, growth appetite of Canara Bank is higher for farm loans, along with some opportunistic growth in corporate loans in recent years, although Canara appears to have been more cautious towards retail loans than its peers. The Fitch estimate is that that the loan/customer deposit ratio rose by about 200bp in 9MFY24, from 79 per cent in FY23, and is now close to the 82 per cent level in FY18. It expects the ratio to increase moderately over the next one to two years, although the bank’s excess investments in liquid government securities should continue to support liquidity. In the case of Punjab National Bank, the rating action of Punjab National Bank at ‘BBB‐’; Outlook Stable’ draws from the Fitch view that PNB’s long-term IDR and Government Support Rating (GSR) or shareholder support rating (SSR) are at the same level as India’s sovereign rating (BBB-/Stable).

This reflects Fitch’s expectation of a high probability of extraordinary state support for the bank, if required. This takes into consideration its large size with a market share of 6 per cent in sector assets and 7 per cent in deposits, the state’s 73 per cent ownership, and PNB’s quasi-policy role through social lending. The bank’s business profile score reflects the bank’s large franchise and its ability to support profitable business generation. However, this is counterbalanced by PNB’s larger risk appetite – due partly to the government’s influence – that has weighed on its traditional business model, similar to other state banks.

This has resulted in significant earnings volatility over the previous cycle, although volatility has eased amid the clean-up of bad loans, observes Fitch Ratings. Funding remains a strength for PNB as customer deposits constituted about 91 per cent of total funding in 9MFY24 by our estimates, driven by high depositor confidence due to the bank’s close state linkages. The ‘BBB‐’; Outlook Stable’ rating by Fitch for Union Bank of India again rests on the bank’s long-term IDR and GSR being at the same level as the Indian sovereign’s IDR (BBB-/ stable), reflecting the view of a high probability of extraordinary state support for UBI.

The bank’s large size with a market share of 5 per cent in sector assets and 6 per cent in deposits, the state’s 75 per cent ownership and its quasi-policy role through social lending are factored into the action. The risk profile score considers its evolving portfolio mix, but also the bank’s growth appetite returning, including in corporate loans, which could test its enhanced underwriting standards and risk controls.

The bank’s funding also remains a strength as customer deposits constituted about 95 per cent of total non-equity funding in 9MFY24, driven by high depositor confidence due to the bank’s close state linkages. Fitch estimate is that Union’s loans/customer deposits rose to 77.8 per cent in 9MFY24, from 73.7 per cent at FY23 and there is moderate headroom for the ratio to rise, as it is approaching the pre-Covid-19 levels of 79.3 per cent.

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