India’s GDP grew by 6.2% in the December quarter backed by key growth factors including increased consumer spending, higher growth expenditure and increased export rates.
Indian economy is expected to maintain a projected growth rate of 6.5% in FY25.
Decreased inflation rates, tax reduction and strong investments stimulates the growth factor of the economy.
V Anantha Nageswaran, Chief Economic Adviser states three possible reasons for the hike in India’s GDP.
Chief Economist of Bank of Baroda, Madan Sabnavis stated that the rural economy has performed well and will be one of the supporting factor of growth.
New Delhi: India’s economic growth increased significantly to 6.2% in the December quarter (FY25), a great recovery from 5.6% in the September quarter. This indicates that there is still a lot of work that has to be done in the final quarter to achieve the revised growth target of 6.5% in the Fiscal year. Despite achieving this target, the growth rate for FY25 would still be lower than the previous year’s 9.2%(Difference of 2.7%). This notable hike in India’s GDP is supported by three major growth factors including increased consumer spending, higher government expenditure, and an increase in export rates.
Chief Economic Adviser, V Anantha Nageswaran says, ” Exports are driving growth with exports excluding petroleum, gems, and jewelry growing almost 10% from April to January, government’s capital expenditure is on track for the current financial year.”
Further, he adds, “The massive gathering of 50-60 crore people in the ‘Mahakumbh festival’ has led to significant expenditure in January and February that contributes to the GDP.”
6.5% Growth rate expected for Indian Economy in FY25
The Indian economy is expected to maintain a projected growth rate of 6.5% in FY25. In support of the statement, Various sectors of the Indian Economy are performing well which contributes to the rise of the country’s GDP:
The agricultural sector reported a growth of 5.6% in Q3, FY24
The Manufacturing sector grew by 3.5% in Q3.
The Mining sector increased by 1.35% in the last quarter.
Utility services such as electricity, gas, and water supply grew by 5.2% in the last quarter.
Hospitality and transport services reported a growth of 6.7% in Q3.
According to Madan Sabnavis, Chief Economist at Bank of Baroda, “The sector-wise strong performance indicates a healthy rural economy which is the key factor for driving growth in India’s economy and a significant growth can be expected in the coming years.”
Economists believe achieving the expected growth rate of 7% might be challenging.
Indian economists believe that India needs to grow 7% or even more in Q4 to achieve the growth rate target of 6.5% in FY25. Global tensions and inflation rate might be a reason for investors to drop off their decisions. It would eventually affect the business and corporate sectors.
Web3 to add $1.1 trillion to India’s GDP by 2032. Over 450 Web3 startups in India raised $1.3 billion in funding by April 2023.
Web3 is the next generation of the internet, built on blockchain technology. It is a decentralized and open web that gives users more control over their data and privacy. Web3 is still in its early stages of development, but it has the potential to revolutionize many industries and sectors.
Web3 is impacting the Indian economy in several ways. One of the most significant impacts is on economic growth. A report by theUS-India Strategic Partnership Forum found that Web3 could add $1.1 trillion to India’s GDP by 2032. This growth would be driven by several factors, including the creation of new jobs, the expansion of existing businesses, and the development of new industries.
A report by NASSCOM found that over 450 Web3 startups in India had raised $1.3 billion in funding by April 2023. This funding is being used to develop new Web3 products and servicesand to hire new employees. The Web3 job market in India is expected to continue to grow in the years to come, as more and more businesses adopt Web3 technology.
Another way that Web3 is impacting the Indian economy is by promoting financial inclusion. Web3 could help to bring financial services to millions of Indians who are currently unbanked or underbanked. For example, decentralized finance (DeFi) applications can provide loans and other financial services to people without a bank account. It is also fostering innovation in a wide range of sectors, including finance, healthcare, and education. For example, Indian startups are developing Web3-based applications for everything from supply chain management to medical records. These applications have the potential to improve efficiency, transparency, and security in a variety of industries.
Mr. Alankar Saxena, CTO of Mudrex, said, “Web3 is starting to transform the Indian economy already. It enables secure digital identity solutions, reduces fraud, and improves supply chain transparency. NFTs and decentralized finance (DeFi) platforms are gaining traction, opening new investment opportunities. Overall, Web3 is poised to reshape various sectors, fostering innovation and economic growth.”
As per a recent report published by Chainalysis, India ranks first globally in Grassroots Crypto Adoption. In terms of the raw volume of transactions, the country has the second-greatest number in the world, beating out those of several other, wealthier nations. About 75,000 people in the country are engaged in the sector at present. This number constitutes 11% of the global talent.
Mr. Dilip Chenoy, Chairman of Bharat Web3 Association said, “The widespread adoption of Web3 in the country is visible across the spectrum of applications that have evolved out of the technology. For example, consider DeFi. The country has been the number one adopter of DeFi in terms of value received on the chain, with an estimated $88 billion received in 2020-21. The NFT market alone generated a revenue of $9 million in 2023 and is expected to grow significantly over the next few years.”
Further, he also mentioned that use cases of the technology have emerged across sectors over the years with public and private sector organizations implementing Web3 for solutions related to education, lending, real estate, service delivery, healthcare, and more.
The government of Maharashtra recently issued caste certificates to its 65,000 residents via LegitDoc — a polygon public blockchain-based platform. Further, the Delhi Forensic Science Laboratory (DFSL) and the Delhi Police have integrated blockchain technology into their e-forensic application, ensuring an immutable and transparent record of the chain of custody for evidence.
Investments in Indian Web3 Startups
Opportunities and Challenges for Web3 to Grow in India
Mr. Trishneet Arora, Founder and CEO of TAC Security pointed out a few key opportunities and challenges existing in the Indian Web3 space.
Opportunities
Decentralized Finance (DeFi) Adoption: India’s financial landscape is poised for transformation with DeFi. The opportunity for decentralized lending, borrowing, and trading platforms to provide financial inclusion and accessibility to millions of unbanked or underbanked Indians is immense.
Blockchain-based Supply Chains: India’s supply chain challenges, particularly in agriculture, can benefit from blockchain’s transparency and traceability. Blockchain-based solutions offer the opportunity to streamline supply chains, reduce fraud, and improve food safety.
Digital Identity Solutions: India’s push for digital identity solutions is an opportunity for Web3 to provide secure, self-sovereign identity solutions.
NFT Market Growth: India’s thriving art and entertainment industry can benefit from NFTs, allowing creators to monetize digital assets.
Smart Contracts for Legal Tech: Smart contracts can revolutionize the legal industry by automating agreements and reducing the need for intermediaries.
Data Privacy and Ownership: The growing concern for data privacy and ownership provides opportunities for Web3 solutions that empower individuals to control their data.
DApps for Business: Decentralized applications (DApps) built on blockchain offer increased transparency and security. They can find applications in supply chain management, finance, and more.
Challenges
Regulatory Uncertainty: The evolving regulatory landscape for cryptocurrencies and blockchain in India poses a challenge.
Cybersecurity Threats: With the growth of Web3, cybersecurity threats become more complex. TAC Security faces the challenge of staying ahead of emerging threats and vulnerabilities to provide robust cybersecurity solutions.
Lack of Awareness: Widespread adoption of Web3 technologies in India may be hindered by a lack of awareness and understanding. TAC Security can contribute to education and awareness efforts to address this challenge.
Infrastructure and Connectivity: Web3 relies on a robust digital infrastructure and reliable internet connectivity. Addressing infrastructure gaps and improving connectivity in remote areas can be challenging but essential for Web3 growth.
User Trust and Adoption: Building user trust in Web3 applications and encouraging adoption is crucial.
Scalability: As Web3 platforms gain popularity, scalability becomes a challenge.
Interoperability: The interoperability of different Web3 technologies and blockchains is vital for seamless integration.
Web3 presents a transformative potential for India, with opportunities spanning finance, supply chains, digital identity, and more. However, it also comes with regulatory, cybersecurity, and infrastructure challenges that TAC Security must address to facilitate its growth and secure its implementation effectively.
Mr. Kumar Gaurav, Founder and CEO of Cashaa said, “Until the uncertainty in regulations persists, the investment community cannot go full steam in backing this technological development in the country and large-scale mass adoption will also not be possible. Educating the user base about the potential and challenges of this technology is also lacking at the moment.”
Role of Government and Private Sector in Supporting the Growth
The Government has taken a keen interest in the development of Web3 in the country with the Ministry of Information and Technology (MeitY) working to develop the National Blockchain Framework and advance the National Blockchain Strategy. The Bharat Web3 Association (BWA) also conducted a workshop in collaboration with the Ministry of Information and Technology as part of a larger effort to demystify Web3 and bridge the gap between the government and the private sector.
Mr. Chenoy, of Bharat Web3 Association, said, “The government and private sector have also been collaborating on Capacity Building and Education in the Web3 space. Private as well as government universities are increasingly integrating dedicated Web3 curriculums and programs to familiarize students with the nuances of Web3 and develop a specific skill set for future growth within the sector.”
He further mentioned that the governments can also provide financial support to startups engaged in the Web3 space through funding programs, grants, tax breaks, and other incentives to incentivize the growth of the Web3 sector in India.
India has also seen major developments in terms of regulation over the past 2 years. The major developments include MeitY releasing the National Strategy on Blockchain, The Advertising Standards Council of India releasing guidelines for advertising VDAs, inclusion of VDAs under the purview of the Income Tax Act, 1961, The Indian Computer Emergency Response Team (CERT-In) issuing guidelines for Virtual Asset Service Providers (VASPs) under the IT Act 2001, National Cyber Crime reporting portal creating a channel for customers to report fraud in the industry, and Prevention of Money Laundering Act registering VASPs as ‘reporting entities’.
Additionally, state governments have also taken a proactive approach to the growth of the Web3 sector. This can be seen through the development of regulatory sandboxes, which provide a controlled environment for testing and experimentation with Web3 technologies in a compliant manner. The Telangana Regulatory Sandbox initiated by the Government of Telangana, allows startups, innovators, and corporates to test their solutions in a controlled environment over up to 6 months. Several state governments are now interested in the creation of a regulatory sandbox to promote the growth of Web3 startups in their states.
Mr. Arora, of TAC Security highlighted several key developments in India’s Web3 landscape. Private sector entities, particularly startups, are actively driving Web3 solutions across sectors like finance, healthcare, and supply chain, bolstering Web3 technology’s growth. Private investors and venture capital firms provide essential funding, expediting innovation. Companies are integrating Web3 tech into their operations, such as blockchain for supply chain management and DeFi in finance. Collaborations between private organizations and educational institutions are addressing the skills gap in the industry, while advocacy groups promote Web3 technologies. Additionally, private cybersecurity firms, including TAC Security, are enhancing security for Web3 platforms. Mr. Arora stressed the significance of public-private collaboration in India, with the government working on regulatory frameworks and digital infrastructure, while the private sector fuels Web3 innovation, investment, and adoption, ensuring its sustainable growth in the country.
Nishant Sachdev, VP-Strategy, Compunnel, mentioned that India’s extensive tech population has the potential to significantly contribute to Web3. He highlighted that Compunnel’s AI-supported recruitment platforms are dedicated to matching the appropriate talent with the changing requirements within this domain.
He also pointed out the significance of the rising middle class and how it can impact business dynamics. Nishant Sachdev emphasized that their market research, powered by OpenAI, is focused on identifying the evolving investment trends within this demographic. This research aids businesses in customizing their offerings to align with the changing preferences and needs of the middle class.
Web3 technologies have the potential to impact a wide range of industries in India. While their influence can extend to many sectors, some specific industries are likely to be significantly impacted by Web3:
Finance and Banking: Web3 technologies, especially blockchain and decentralized finance (DeFi), can revolutionize traditional banking and financial services. They offer opportunities for faster and more cost-effective transactions, financial inclusion, and secure digital assets management.
Supply Chain Management: Blockchain-based supply chain solutions can enhance transparency, traceability, and efficiency in industries like agriculture, manufacturing, and logistics. This can lead to reduced fraud, improved product quality, and streamlined processes.
Healthcare: Web3 technologies can secure and streamline electronic health records, ensuring data privacy and interoperability. Smart contracts can automate insurance claims, and telemedicine can benefit from decentralized applications (DApps).
Government and Governance: Blockchain has the potential to enhance government services, such as land record management, voting systems, and identity verification. This can lead to reduced corruption, increased transparency, and efficient public service delivery.
Art and Entertainment: Non-fungible tokens (NFTs) on Web3 platforms have opened up new avenues for artists, musicians, and content creators to monetize their digital assets. The entertainment industry can leverage blockchain for rights management.
Education: Blockchain can be used to verify academic credentials and qualifications, reducing fraud, and simplifying the verification process for educational institutions and employers.
Real Estate: Property transactions and land records can be made more secure and efficient with blockchain technology, reducing the risk of fraud and disputes.
Agriculture: Web3 can help farmers by providing transparent and secure supply chain solutions. It can also facilitate access to financing and markets for agricultural products.
Energy and Utilities: Blockchain can enable transparent energy trading and reduce fraud in utility billing. Decentralized energy grids can enhance energy distribution efficiency.
Legal Services: Smart contracts on blockchain can automate legal agreements, making legal processes more efficient and cost-effective.
Insurance: The insurance industry can benefit from smart contracts for claims processing and more accurate risk assessment.
Retail and E-commerce: Web3 technologies can enhance customer trust through transparent supply chains and secure online transactions.
Cybersecurity: With the adoption of Web3, the need for robust cybersecurity solutions to protect digital assets and user data becomes even more critical.
Mr. Chenoy mentioned that Apollo Hospitals is employing the Metaverse for various purposes, including patient consultations before and after surgeries. Additionally, they are utilizing it for staff training to facilitate patient counseling in a virtual reality setting. The objective is to enhance patient outcomes by offering a personalized approach to each patient, ultimately leading to increased patient satisfaction.
Furthermore, Flipkart has introduced the Flipverse, a marketplace designed to foster more immersive interactions between consumers and brands. It achieves this by granting access to brands, supercoins, and digital collectibles. The Flipverse is designed to provide gamified, interactive, and immersive shopping experiences.
In the automotive sector in India, several manufacturers have ventured into the world of the metaverse. At the recent Auto Expo 2023, MG Motor India unveiled the MGverse, a futuristic 3D metaverse platform. This platform allows users to virtually explore the MG Pavilion at the Auto Expo 2023 from any location, offering a virtual tour of the event.
Also, in West Bengal, the New Town Kolkata Development Authority (NKDA) has outlined plans to release 500,000 non-fungible tokens (NFTs) to enhance the land mutation process. Land mutation is a legal procedure involving the registration and transfer of land ownership.
While these industries stand to be significantly impacted, it’s essential to note that Web3 technologies are highly versatile and can find applications in various sectors, contributing to innovation and transformation across the Indian economy.
A software-facilitated economy created on platforms like YouTube, TikTok, Instagram, Facebook, Twitch, Spotify, Substack, OnlyFans, Tiki, and Patreon that allows creators and influencers to earn revenue is known as the Creator Economy.
As the internet evolved over the years, so did its use. The virtual universe of the world wide web became the home of not just users and consumers, but creators. Individuals turned producers managing their own brands. This resulted in revolutionizing the way content was produced, distributed, and consumed. And the Creator Economy came into being.
It was Paul Saffo from Stanford University who suggested that the creator economy came into being in 1997 as the ‘new economy’. Creators during that time were people who worked with animation and illustrations, although, with no discernible marketplace infrastructure to generate revenue. It was YouTube that coined the term ‘creator’ in 2011 that, at the time, applied to individuals who were famous on the platform. The term has rapidly gained popular acceptance and now applies to individuals who create online content. Hence, the creator economy is defined as an economic system built by independent content creators who are connected to their audience and businesses via the internet. The content created can be in the form of text, podcasts, music, videos, digital books, games, etc. This content can be monetized by sharing it on ad-sponsored platforms, partnering with brands, charging subscription fees, providing services, and much more. Some examples of content creators are TikTok stars Charlie D’Amelio, PewDiePie, and Addison Rae.
YouTube: The Birthplace of the Creator Economy
The Working
The umbrella of the creator economy covers an entire ecosystem encapsulating creators, consumers, advertisers, and other stakeholders that significantly affect the way content is created, distributed, consumed, and monetized. The stakeholders within this realm are –
1. Creators also known as infopreneurs who engage in creating various types of content on a variety of topics to build and engage their audiences and monetize their creations. These creators can be Vloggers or Bloggers who give information and advice on specialized topics, Entertainers using their skills of writing, creating music or expressing through other art forms, Guides and Experts sharing their knowledge on products or services and Celebrities who use their popularity to create content.
2. Consumers are the target audience of the creators who engage with them or follow their opinions for entertainment or information. Consumers also support creators monetarily through content subscription.
3. Platforms are used equally by the creators and consumers to engage with each other. These are third party facilitators that help creation, distribution, consumption and monetization of content. YouTube and Instagram are examples of such platforms.
4. Businesses advertise their wares and services through content creators. Partnering with influencers allows these businesses a direct access to their target audience. It also helps to make marketing campaigns effective. Influencers earn highly from brands through this partnership.
5. Tools are solutions that help the stakeholders to create and distribute content and also provide valuable performance insights to creators and businesses.
Business Models of Creator Economy
As new and emerging as this economy is, it has introduced innovative business models that has allowed successful career sustainability for creators. Off the many business models that have sprung around this economy, some commonly successful ones are –
1. Platform Revenue Sharing
As the most popular business model with the least barrier entry, it is used by creators who enjoy a significantly large following and want to diversify their earning sources. Creators monetize their content by earning a portion of the advertisement revenue that is generated from their channel pages and posts.
As the name suggests this commission earning based model helps both the creators to generate revenue and the businesses to generate credible leads. Through this business model, creators share coupon codes or special links that they receive. These are then tracked by the platform to ascertain if such leads have converted into actual sales.
3. Product Placement
This type of business model works on brand partnerships where creators and influencers are paid to use or feature brands and products in their content. Creators are remunerated for mentioning the products and services and providing website links in their content. Product Placement model is preferred by influencers who enjoy a large following as their fees per mention depends on their audience reach and penetration.
This model works on exclusive contracts between a business and the influencer. The influencer agrees to exclusively promote the business or brand by featuring it in their content.
5. Subscription
There are several platforms like Instagram that offer a subscription based business model. This entails viewers paying a subscription fee to watch exclusive content, live streams and videos which are otherwise not accessible. This type of business model presents a great opportunity for creators to grow their direct fan-to-creator revenue.
6. Self-Brand Offering
There are creators who also launch their own products and services including accessories, clothing lines, bags, purses, etc that helps them in generating revenue and establish their own separate business that is sustainable.
India & The Creator Economy
Between the years 2018 and 2022, startups within the creator economy in India have raised USD 2.5 billion and as per reports, it is growing at a CAGR of 25%. The main reasons behind its growth trajectory are flexible office hours, remote work and renewal of passion pursuits.
According to Tamseel Hussain of Livemint – “Doctors are joining the creator economy and creating shows on various health issues, farmers teaching other farmers organic farming through story telling or even brands enabling their own community members to share powerful stories instead of going to influencers.”
The driving indicators of the Indian creator economy’s growth potential are the fundamental changes in consumer behaviour, consumption patterns and the increasing number of first-time creators showcasing their talent.
Reiterating this Tamseel Hussain said – “The rise of affordable smartphones and internet-access packages, coupled with digital media, has made being a creator easier. The capacity of hungry audiences demanding a variety of content is also a massive driver. Today stories are everywhere, from social media platforms to televisions, OTT, offline screens and even food and shopping apps. This is changing the landscape for the creator economy, especially in smaller Indian towns and cities, by building new opportunities for creators and offering unique stories to people where they spend the most time.”
The already growing creator economy was, then, disrupted by the outbreak of the coronavirus pandemic. The severe lockdowns pushed imaginative boundaries as creators flocked the digital space showcasing a wide variety of talent and monetizing their content.
What is also fuelling its growth is the increasing penetration of digitization of the rural areas of the country. It is widening prospects that is ably supported by cutting-edge technology. The rapid expansion of the Tier II and Tier III cities of the country means that more than 100 million new creators are expected to join the creator community further adding to the growth of the creator economy.
Conclusion
The rapidly growing creator economy is also facing obstacles and challenges. However, the constant technology evolution is quickly answering those challenges making the future look very promising. The creator economy of India is set to scale with people able to generate revenue doing what they love and connecting with their roots. It will be interesting to watch how the evolution shapes in the coming years.
FAQs
What is the Creator Economy and how is it transforming the way people earn a living?
A software-facilitated economy created on social media platforms that allows creators and influencers to earn revenue, transforming the way people earn by providing opportunities for self-employment and income from a direct audience.
Who are the key players in the Creator Economy and how do they generate revenue?
The key players in the Creator Economy are creators and influencers who generate revenue through sponsored content, merchandise sales, and direct audience support such as tips, subscriptions, or paid memberships.
What are some popular platforms that are driving the Creator Economy, and what kind of content is most successful?
Popular platforms driving the Creator Economy include YouTube, TikTok, Instagram, and Patreon. Successful content includes video content, tutorials, lifestyle, and entertainment.
After 75 years of independence from the British Raj, India has emerged as the fastest-growing and fifth-largest economy in the world. By the year 2020-2021, India’s per capita income has increased to INR 1.28 lakh. By August 2022, the country’s Foreign Exchange Reserves amounted to USD 572.97 billion and its GDP (Gross Domestic Product) rose to USD 3.5 trillion. India aspires to reach a USD 5 trillion economy by the year 2024-2025.
At the end of the 1st millennium BC, India was one of the largest economies around the globe which ended around the beginning of British rule. Under British rule, India experienced decentralization as well as the cessation of various craft industries. This coupled with accelerated economic and population growth in the west led to a steep decline in India’s share and by independence, the country’s GDP had been reduced to a mere 4.2%. India’s global industrial output also reduced from a towering 25% in the 1700s to a mere 2% in just a little over 200 years. The British left India in dire straits, dealing with a collapsing economy, poverty, high inflation, and an utter state of confusion.
Post-independence, India adopted five-year plans concentrating on centralized economic and social growth programs. The first five-year plan focused on agriculture and irrigation and aimed to boost farm output and the second, launched in 1956 advocated rapid industrialization with a focus on heavy industries and capital goods. However, this caused the funds to be taken away from the agricultural sector leading to food shortages and inflation. In the 1960s Indian economy was worsened by the wars with China and Pakistan and the political instability within the country. This led to the devaluation of the Indian Rupee. Then, a little over two decades later came the oil crisis in 1991 resulting in a balance-of-payment crisis for the country. The global economic crisis of 2008 left the Indian economy deeply scathed and the country’s fiscal deficit rose to 6.4% of its GDP in 2009-2010.
However, two economic events that have assured a place in history were the demonetization of 2016 and the implementation of the Goods & Services Tax (GST) in 2017. Demonetization was aimed at flushing out black money and striking out corruption and the introduction of GST introduced a uniform tax rate across all states paving the way for easier compliance.
Current Economic Status
Since the beginning of the 21st century, India’s annual average GDP growth has been around 6% to 7%. Between the years 2013 and 2018, India surpassed China and became the world’s fastest-growing economy. The country is the third largest unicorn base globally, being home to 100 unicorns that are collectively worth USD 335 billion. The country is also the third largest by PPP (Purchasing Power Parity) with an estimated USD 11.75 trillion.
The country currently has strong economic fundamentals and is well on the road to becoming a USD 5 trillion economy. Various factors are working in favor of the country. These factors are –
Diversified Economy
India enjoys strong trade relations with many other countries. Its economy is well-diversified with healthy roots.
New Technology Adoption
In the past few years, India has quickly adopted newer technologies, especially in the manufacturing and financial sectors. This has led to higher quality and reduced production costs driving profitability. It has also led to increased investment in innovation.
India’s Gross Domestic Production
Increasing Off-Shore Opportunities
As devastating as the effects of the covid-19 pandemic were, it has favored India, as the working culture shifted to remote teams. This led to developed nations finding it more cost-effective to work with people living in India.
Young Average Age Population
India’s youth population is the largest globally at approximately 356 million. This represents a high 64% working population that contributes to the country’s growth in GDP and per capita income. It also presents a high consumer base for companies to thrive and grow.
Shift to Renewable Energy
India’s dependency on energy imports has lessened considerably with almost 40% of the country’s installed electricity capacity coming from non-fossil fuel sources. This has reduced operational costs for businesses and individuals.
How India Will Take Over the World Economy In 10 Years
Challenges & Obstacles
India’s fast growth has persisted even in the face of the globally crippling pandemic coronavirus. The country, however, is facing several challenges on the path to becoming a USD 5 trillion economy.
Supply Chain Bottlenecks
Developed economies resorted to distributing cash to households to combat the debilitating effects of the pandemic. The supply-chain bottlenecks resulting from the pandemic have also not eased. These have led to soaring inflation across the world, which is exacerbated by the ongoing Russia-Ukraine war.
Interest Rate Increase by the Federal Reserve
The Federal Reserve has increased the interest rates to combat rising inflation. However, these threaten economic growth and may cause ripple effects within India.
The ongoing war between Russia and Ukraine has led to a severe energy crisis in the European Union. This acts as a growth inhibitor.
China’s Covid Policy
At one time, leading the global economic growth, China has continued to announce restrictions due to its zero-covid policy making international trade difficult.
Conclusion
India’s growth is unprecedented and its march is strong and sure. However, challenges like generating employment, curbing inflation, increasing foreign direct investment into the country, and maintaining macroeconomic stability must be successfully dealt with to make a USD 5 trillion economy a reality.
FAQs
How does the Indian economy compare to other economies in the world?
India is the world’s fifth-largest economy by nominal GDP and the third-largest by PPP(Purchasing Power Parity).
What are the key policies and initiatives taken by the Indian government to boost economic growth?
The Indian government has implemented policies such as Make in India, Atmanirbhar Bharat, Digital India, Start-up India, GST, FDI liberalization, Pradhan Mantri Jan Dhan Yojana, and Swachh Bharat Abhiyan to boost economic growth and development.
What is the role of foreign investment in India’s economic development?
Foreign investment has significantly contributed to India’s economic growth by providing capital and technology, improving productivity, and creating jobs. The Indian government has implemented policies to attract foreign investment, which has increased exports and skills in various sectors.
What are the main sectors driving economic growth in India?
The main sectors driving economic growth in India are services, agriculture, and manufacturing.
Money has always been the prime driving factor of any economy since human settlements started to be sophisticated. From the barter system to the current complicated transactions, the value of services and objects has always been a determining factor. And this value is satisfied today largely through the use of money.
As our economy goes through its highs and lows, it is inevitable that people get confused as to whether they should spend money or save money. This is also because of the fact that there is an unending cycle caused due to the necessity to save money to buy services and to spend money to buy services.
We have always been taught to save money as much as we can. The more we save and the less we spend, the better will be the financial security and stability of our economy. This is something that is constantly fed on to us.
However, Economists across the world have a different opinion in this regard. They say that consumers should strike a balance between spending and saving. It will be harmful either for the individual or the economy if this balance goes off.
Why you should spend money to Support the Economy?
GDP of India
As far as the economy is concerned, consumer spending is a very important thing to keep it stable and better. Had the rich people of the past and present decided to save their money in their closet without spending it, there would have been absolutely no progress in the economy.
The national economy improves only when there is a healthy flow of money through all units of transactions. This is because when you make any kind of large purchase like a house, car or shop; it creates a ripple effect in the economy. It will start to benefit the people associated with the industry and the other local businesses. This is due to the circular flow of money in the economy. Your spending will become another person’s income and vice versa.
Lack of consumer spending can even lead to an economic slowdown. This happens because of the before-mentioned ripple effect. When money doesn’t flow, companies will be unable to reach their profit margins, there will be losses, it will in turn affect the incentives and salaries of the employees which will further affect the people who are dependent on them. Like drivers, house helpers, street vendors etc.
When that happens, the purchasing power of people is affected which will adversely impact the supply-demand nuances of an economy. It can even lead to a recession when left unchecked.
Spending also does not mean that you should use up all your money. It should be in ways that will benefit you immediately or in the longer run. It should first satisfy all your needs. When it comes to wants, you need to analyse what all you actually have to spend for and take a decision that best suits your conscience.
Things to know before you spend to Support the Economy
Check your surroundings
The fact that you should spend money does not mean that you should do it blindly. There are a lot of things that you need to consider before that. The spending capacity of every person varies, and it is based on this capacity that one should control their spending.
Career and Spending
The first thing that one needs to look for is the general employment condition. Analyse if the job you are in at the moment is stable, is it in demand, are there any chances of layoffs etc. Apart from that, analyse the growth of your company as well. If it is expanding over the years, then it is a positive sign.
You need to have a backup plan if there are any chances for unprecedented repercussions. For example, uncertainty is more if your company depends on something external for their expansion like weather, any particular raw material etc.
Family Planning
Your spending should also depend on the nature of your family. Have a thorough analysis of the future plans of your family, your health conditions and also your parent’s plans. Your spending pattern will vary depending on whether you and your partner are planning to have any children, expecting any large repairs on your assets, potential health issues, or retirement plans of your parents, among other things.
Why you should save and invest money to Support the Economy?
While we talk about the importance of spending to boost the economy. Let’s not forget that all kinds of spending are not the same. It should have a long-term reciprocal benefit as well. A logical analysis of the economy shows that the route to improved productivity of a nation lies in the improvement of capital goods.
This can be done only when you save your money and invest it in productive activities. However, be mindful that saving is totally different from hoarding. This is the reason why it was said earlier that one needs to strike a balance between spending and saving.
Saving does not mean dormancy of your money. It simply means that it is entrusted with productive activities that will subsequently improve the economy, unlike hoarding.
Things to Know about Savings
People tend to inherently have an attitude to save money due to the constant reinforcement we have had about financial management. However, everybody needs to know about certain nuances and advantages of savings and how they will impact the economy.
Safe haven
If you have good savings means you are better protected against debt. You can cover your unexpected expenses without taking a loan. It is indeed a great relief considering the repercussions that a thoughtless loan can have. Along the same line, it will help you control your living expenses and thereby finish your loans as soon as possible. This means that your ability to recover during an economic hardship is higher and that will further improve the chances of recovery of the economy. It also means that you are better protected when you are living on your own means.
Savings are not without any risks. Depending on the condition of your nation’s economy the value of your savings can increase, remain constant or depreciate. People who save and invest will have to pay a huge price if the economy goes through a recession. So brace yourselves for uncertainties and losses while you save as well.
Knowing the Difference
The balance that we need to have between spending and saving is the most important discipline that we need to follow to support the economy. To spend does not mean that you should use your money to buy all the things you want.
Neither does that mean that you should donate everything you get. You should be able to analyse your needs and wants. Have a critical approach to decide on which all of your ‘wants’ should you address after satisfying your needs.
This critical approach goes for saving as well. Saving all your money in your drawer does not help you or the economy. For your savings to improve, you need to channelise them in the right direction. Make sure that they are productive activities and will positively influence your savings. It is also important to remember that savings do not equate with hoarding.
Conclusion
As responsible citizens, we need to be mindful of the options we have with regard to supporting our economy. At the end of the day, a healthy and expanding economy will be beneficial to each one of us. When you spend, make sure to do it in a way that is most useful to most people around you. And while saving too, make sure that it improves over time. Let’s all do our part to help our nation prosper.
FAQs
How does spending increase economic growth?
Higher government spending will also have an impact on the supply-side of the economy – depending on which area of government spending is increased.
How do you build a strong economy?
Keeping Manufacturing Units in the Country and reducing the cost of borrowing and increasing consumer spending and investment can help in building a strong economy.
Is saving bad for economy?
A rising personal saving rate can temporarily slow economic activity, assuming no other changes to income.
“Inflation”, you might have read or heard this word often in the Economic section of a newspaper or a news channel.
Inflation is one of the metrics to measure a country’s economy. It is a measure of the rate of increase in the pricing of goods and services.
Let’s say, in 2021, a kg of Apple was ₹100. In 2022, the price went up to ₹120. So, that would mean inflation of 20%.
In calculating a country’s inflation, many products and services such as housing, food, transportation, clothing, medical, and others are taken into consideration. Next, the prices of these products and services are taken into a group and the rate is calculated in percentage, keeping that year as a base year.
As the inflation rate increases, the cost of living will also increase. However, the average income remains constant.
This way, the majority of the country’s citizens may find it hard to balance the cost of living leading to a financial crisis.
So, what can be the possible causes of inflation? This article lists various causes of inflation and the consequences of worst-hit inflation.
Inflation can be caused because of various reasons with demand-pull and cost-push inflation being the most common. Besides this, a country’s economy can also be shocked due to various factors as discussed below:
As the name suggests, this effect is associated with the growing demand for goods and services. demand-pull inflation may occur when the demand is higher than the economy’s ability to meet those demands.
With increasing demand, the prices may rise and the consumers will have to purchase at those prices causing disbalance in the economy.
Take an example of a music concert. If the number of seats is less and the demand is high, the ticket prices would eventually be increased and sold to the ones who can pay for them.
Demand-pull inflation usually happens in a growing economy and is not always a negative sign. In fact, the Federal Reserve suggests that inflation of 2%-3% is considered healthy for the economy.
2. Cost-Push Inflation
This is one of the most common reasons for inflation and increasing prices. When the cost of manufacturing or raw materials increases, the companies will increase the product prices to meet the profits. This increases the burden on the consumers as the prices are controlled by the companies or the industry.
Cost-push inflation may happen if the government has increased the taxes on certain materials or the new laws have made imports or exports expensive.
The other possible reason could be the increase in taxes. If the government has hiked certain taxes that may affect the corporations, they are likely going to increase the pricing to meet the production costs.
Inflation Rate in India
3. Devaluation of Currency
Devaluation is defined as the lowering of a currency’s value, which then reduces the currency exchange rates. Devaluation affects inflation indirectly.
When the currency value lowers, the export rate becomes cheaper resulting in increasing exports to the foreign countries. Further, the import rate increases and the devalued country results in increased imported products.
As a result, the citizens turn toward domestic products, increasing the demand. When the demand surpasses the production, the cost increases, resulting in the demand-pull effect.
The recent economic crisis in Sri Lanka with an inflation rate of 17.5% is attributed to the devaluation of its currency.
An increase in the circulation of currency can be one of the major causes of inflation. Printing or circulating excessive money is never a solution to support the falling economy.
Printing more notes, cash, or coins that country’s economic growth is only going to devalue the currency and bring it down.
The lower the costs of export, the higher will be the dollars and foreign buyers.
Again, this results in demand-pull inflation increasing the costs of production. This, in turn, puts financial pressure on the citizens of the country resulting in higher prices and increased inflation.
One such example is Zimbabwe’s increased money supply in 2008. The country was already in debt when its government decided to increase the money supply.
Due to the increased circulation of currency, the demand skyrocketed resulting in a shortage of supplies. As a result, the cost of production increased and the suppliers had to raise the prices.
The government then tried to control the prices of basic goods, but this cost was much lower than the cost of production. And, the supplier wasn’t left with many production units.
In 2008, the country’s inflation rate reached a shocking 231,150,888.87% causing hyperinflation.
5. Wage Push Inflation
An increase in the average wages of the workers or employees can be a contributing factor to inflation.
Higher wages and the increased cost of production are tied in a circular loop. If the rise in wages is high, the companies will have to increase the costs of production or adjust to the lower profitability. This is a case of cost-push inflation. Now, if the wages are increased, the companies may cut off the employees and this will only increase unemployment.
That said, the general rise of wages to keep up with the increasing inflation will have put less pressure on the economy.
What are the consequences of Inflation?
As inflation continues to grow, it may affect your cost of living, investments as well as future retirement plans.
The increasing prices may reduce the consumer’s purchasing power cutting off the costs of living. In worst-hit inflation, the citizens may even fail to meet the basic necessities.
This would result in lower profits, higher layoffs, and an increased rate of unemployment. To combat this, the countries may seek loans from the World Bank, IMF, and other financial organizations.
Further, the growing economies may lend loans to the countries facing hyperinflation with higher interest rates. This may lead to higher debts and worsened inflation.
Conclusion
Inflation can make or break a country’s economic growth. Optimal inflation of 2%-3% is considered positive whereas the inflation rate of 50% or above in a month can result in hyperinflation.
The above-mentioned causes of inflation should be regularly checked by the government and the financial institutions in the nation. The balance between demand-pull and cost-push would bring stability to inflation.
FAQs
What are the 5 causes of inflation?
Demand-Pull Effect, Cost-Push Inflation, Devaluation of Currency, Increase in Money Supply, and Wage Push Inflation are the 5 causes of inflation.
What are the main causes of inflation in developing countries?
Government spending, money supply growth, world oil prices, and the nominal effective exchange rate are the main causes of inflation in developing countries.
Starting a travel agency will be so much fun, fulfilling, and most profitable career. The start-up costs are relatively low and there are plenty of opportunities for someone with a passion to sell travel. Starting any business is not easy, but it certainly helps you if you have someone to advise you and give out a path. In the travel industry, there is a huge option to earn also the travel and tourism industry plays a major role in the country’s economic development. This is because people always want or need to go to places.
There are several resources available today, anyone with a passion for travelling can easily start a travel agency. In this article, we will talk about how you can start a travel agency by following some important steps. So without any further ado, let’s get started.
A niche is your friend. When you start a travel agency a niche will help you establish your brand, create your travel agency name, and navigate the world when you get to that point. Starting a travel agency without a niche is like travelling without a smartphone.
If you can confidently say that you have found a travel niche that you are passionate and knowledgeable about, then you have made a first step on the road to setting up a successful travel agency. You finding your business idea is one of the most important steps in starting a business.
Total contribution of the Indian tourism industry in billion US dollars
Choose Your Travel Agency’s Name
Choosing a company name for any kind of business is a difficult and tricky task, so you need to take some time to do some research to come up with a creative and effective name. The company name ideas that you select for your travel agency should not only be functional, but they should be catchy and noteworthy too.
When naming your agency, you will want to sit down and give some time to think about your business’s niche; how will you make your travel agency different and how can you set yourself apart? Before you start using the name that you have selected for your travel agency, make sure that it is still available and not already in use by some other company or business.
Choose a Business Structure
A base step in your travel agency business is to create a business structure. Let’s start from the ground up. You need to decide what type of business are going to have. Your options include:
Sole proprietor – Starting a sole proprietorship is easy. You can use your name and Social Security number to get started. You can use this information to get the permits and licenses that you need to start your business. When you are a sole proprietor, you can decide how you want to run your business. You can choose the job that you want to take. When you are a sole proprietor, you get all of the income that you make.
Corporation – As soon as your business becomes a corporation, you gain credibility. People are more likely to work with businesses that are a corporation than those that are not. If you are going to need help financing your business, you may need to start a corporation. When you start a corporation, you can have silent partners, who will help with financing. Corporations can offer benefits for their employees, such as health insurance.
Partnership – It is easy to set up a partnership because it is formed with an agreement between the partners. Just like it is easy to get started, it is easy to dissolve a partnership. As long as one partner is ready to stop, the partnership can change or dissolve depending on what everyone wants.
Limited Liability Company(LLC) – It is much cheaper to start an LLC than a corporation and it still gives you plenty of the same benefits. If you have a business that has plenty of risks, you may start San LLC to protect your assets. You can control your business, the way you want. Many believe that having an LLC behind your business name can make your business more official. People are more likely to work with you because your business looks more serious.
Find Some Great Partners
It makes a great value add for the customer making the booking, and the business involved gets their product in front of a large market. As travels fast in the industry, your travel partners will refer clients to your business once you have earned their trust. In return, you will do the same for them. You need to realise what type of tourism business you want to operate and what your objectives are for setting up the right partnership.
Your travel partner network needs to be a good fit for your business, and have values that align with your own. For the active participation of all parties within your travel partner network to continue, each must see some direct benefits from the relationship. You never want to end up in a situation where one is doing all the work and another enjoys the benefits.
Build Your Marketplace
Nowadays people travel a lot around this world to see the unseen and to know the unknown. As a marketplace owner, you work as a middleman and your marketplace brings lower costs to the customers by letting them purchase directly from the sellers. Travel and tourism startups can only function if they are aware of their marketplace. It is natural to think that the marketplace can get thousands of users. It is the main task of a successful marketplace to facilitate communication between the suppliers and the customers. Understanding the trends that are out there, can allow marketplace owners to decide the best tools and tactics to use for that the company’s objectives.
Adapt to Your Target Market
To develop a successful marketing technique you need to define your target audience. This is important for new businesses looking to establish their presence within the market. Analyzing the market is also about researching competitors to-be. Look out for other travel agencies, who their audience are and how they are managing them. Different regions and different suppliers may have varying profit margins. First, you have to know the situation on the market, what deals are presented, and how you are being ranked compared to your competitor travel agencies.
Travellers of all age groups are using social media networks where they talk about travel products, share experiences, or express their preferences. Use images, videos, questions, or statuses to promote and motivate potential clients to follow you.
Suggesting additional products on top of a standard package is the most straightforward method of increasing your revenue per customer. Explore and test to find out what your customers want, and use travel agency software to easily track and manage special offers and complementary products.
Combine different products into a unique travel experience. Create a package and try to offer a better price by setting a hotel, flight, and activity together.
One way to be a successful travel company is to establish your business in a niche market. The travel niche doesn’t need to be complicated or rare – but the more unique it is, the better. Niche travel means you are selling something that no one else sells, and that your product is different in some way.
The internet has changed every aspect of life and it has also affected how travellers book trips and how agencies can sell packages. Your customers can book 24/7 because the system receives and processes the reservations automatically.
A good way to stay ahead of your competitors is by offering the best possible prices on a worldwide range of high-quality travel plans.
Promote your business in Social media, when it comes to travelling, social media is the best option. Apart from that digital marketing strategies can also help you in achieving your goal.
Conclusion
While starting your travelling agency, you need to understand what can set your business apart from other travel agencies, and what you can offer that others cannot offer to the clients. If you are still in the planning stage of starting your travel agency, you need to keep in mind and follow all these steps. As everything is opening up once again after a big break because of Covid-19, the travel industry is once again back in action.
FAQs
Is tourism a big industry in India?
Travel and tourism is one of the biggest industries in India.
How much does the travel industry contribute to the Indian economy?
The tourism industry contributes over $247 billion to the Indian economy.
Which are the most popular travel agencies in India?
There are over a billion cricket fans in the world and 90% are Indians. Whoa!
With that kind of following, one can’t complain that cricket is called a religion by millions in India. But guess what, there’s a bigger religion with the biggest fan following in the world – money, moolah or currency!
Apparently, BCCI (the richest cricket body in the world) fancied this in time, founded the commercial format of the game in the form of Indian Premier League (IPL) in 2007 and IPL became cricket’s most glitzy, glamorous festival. Add to that, its association with the entertainment business and corporates is something that added more fuel to the cricketing carnival. Today, this sporting event moves and shakes the economy beyond words.
We are a religious nation but also a secular one. So, while some of you will devote yourselves to your favorite deity (player/team), the not-so-religious ones can keep up their excitement by following IPL’s money trail, or in other words, the direct/indirect impact IPL has on our economy. It is no less interesting than the matches themselves. Follow through the end to know-how.
A little flashback first – The Indian Premier League aka IPL cricket championship began in 2008. It has a ’20-over’ format, hence called Twenty20 (T20) tournament. Currently, it has already passed the 14th season in 2021, which concluded with Chennai Super Kings, who took the 14th IPL winner award, as the 4th title home. The IPL tournament constitutes eight teams, where each team is set to play two games with each of the other competing teams, totaling 60 matches over a month and a half.
Basically, this professional sports league has been conceptualised on the lines of the famous UK/American leagues such as the English Premier League, NBA, MLB, NFL et al. The frenzy behind is no less.
Now let’s talk numbers because what is cricket without it. Hang on, we are not going to discuss cricket scores or static stats like run rates, most centuries, or ducks that are overdone anyhow, but instead lay out some dynamic economic data.
● IPL brand value: $4.7 billion, which has noted a 7% rise, as per the February 2022 reports.
● The highest source of income: Media rights, which make up for 60% of its revenues.
● Team with the highest brand value: Mumbai Indians (MI), the value of which has increased by 13% to become $79.5 million.
The real game
Can you guess how many Pani-puris or Pizzas are sold during a match? No idea? Okay, what kind of creative lies do men invent to skip how many productive work hours to watch a match? Can’t say? Fine, at least how many memes, jokes and posts are created during IPL? Duh! Are you even serious?
Alright, the cricket craze hasn’t stumped us that bad. We were only checking your entertainment quotient. After all, it’s the fun persona of cricket branded as IPL, that we will talk about.
Yeah, so let’s show you some real economic figures. From 100s of crores poured in annual auction of players or million and billion dollar deals signed amongst BCCI, sponsors, global media houses, advertisers, etc., not to mention the heavy business activities that take place during and around an IPL championship. Money just flows across various sectors for this Kumbh of cricket. This results in a solid boost in the finances of not only the players, the BCCI, the mammoth size corporations, but also of the government as well as the nation.
(Well, we won’t disappoint you in any way, so check out the best few memes/ jokes/ tweets on IPL towards the end)
We like the American yardstick a bit too much. So, here’s a comparison of the salaries of our players with top US league players.
Average annual player salary in the sports industry
Wow! IPL is second on the list, right under NBA (National Basketball Association). However, we already knew that our cricket/IPL players are awarded pretty handsomely.
Although cricket falls too low in popularity among other global sports like football, basketball, baseball, hockey, etc, but hey, as promised we are only talking about the economics of the game and there we don’t fall too behind.
BCCI, franchises or players – the bigger beneficiary?
BCCI earned INR 4,000 crores from IPL 2020, according to its treasurer. This means every cricket fan contributed 40 rupees. Actually! So, be proud, because you’re not just a passive viewer but an active participant in the economy. Need further proof? Well, the TV and media rights of IPL has been sold for a massive 2.3 billion dollars approximately (INR 16k+ crores) to Star Network.
Here are a few more fantastic figures vis-a-vis IPLs that you can use to tickle your imagination or just revel in delight while you enjoy a match.
● Title sponsorship – Tata Group has replaced the Chinese phone maker Vivo as title sponsors for the 2022 and 2023 seasons of the cricketing phenomenon. Vivo was reportedly booked earlier as title sponsors for the period of 2021-2023, which is why Tata will remain the main sponsor with Vivo next in line, with 2 remaining years of contract with them still.
● Media rights – While we have seen BCCI selling the media rights to Star Sports for INR 16,347.5 crore for the global broadcasting rights i.e. TV & digital for 5 yrs (2018-2022), the cricketing body is now mulling over the expansion of broadcasters where the others will also share the rights in 2022. The deal value for the media rights in the previous installment of IPL is 1.5X from that of the year before. Well, this leap of faith is backed by guaranteed advertising revenues these media giants get. By the way, IPL 2021 ad revenue was calculated at INR 2,950 crores, only in TV advertising.
● Ticket sales – Nil for 2020 as well as 2021 as both seasons were held behind closed doors due to COVID19. Nonetheless, on-air sponsors have multiplied every year and thus the money came pouring from them. Over 10 sponsors, big and small, strike multi-crore deals with each franchise. The rising digital viewership is certainly set to more than offset that loss. However, the IPL 2022 matches are estimated to have a seating capacity of 25%, and the ticket sales have already started going live from 12 pm on March 23, 2022.
● Sports/cricket tourism – 100% loss again! This is one sector that has suffered immensely and globally since the onset of the coronavirus pandemic. So, one can’t really factor it in here. However, with growing relaxation of the pandemic-induced rules, we might see some tourism in 2022.
No one said that religion was just about finding God? It is also about deity worship, rituals, festivals, and much more. Take a hint from it and admit that cricket too isn’t just about fitness and health anymore. It is also about entertainment, business & fun. The government of the day realised it and brought IPL’s income under the tax net.
Income means taxes and taxes mean revenue for the govt. Did you know BCCI was considered a charitable organisation under the IT act, thus, paid zero taxes? Govt took away that privilege in 2012 from BCCI & declared IPL as a commercial activity hence taxable. Although BCCI hasn’t accepted it to date.
Whilst fist-fighting with the Govt on this issue in the background, BCCI has paid little over INR 460 cr to settle tax dues (of an earlier assessment year) in September 2019. However, with 400 million viewers and 400 billion viewing minutes recorded last season, perhaps it’ll have to pay up the balance dues which is close to INR 1300 cr. After all, taxes are a necessary evil.
Okay, but how does IPL affect your and my economy
Good question but a little premature. Happy to explain because that’ll affect my bank balance or say the economy positively. See! That’s how the economy in essence works. There are no free lunches. Likewise, when those big brands like Royal Stag, Flipkart, Vivo, Jio appear on your screen in the middle of an exciting match, you may not like it much but the brands have knowingly or unknowingly made an impression on your mind. With repeated such displays, you tend to remember the brand name for a long. That’s how they increase their customer base. Boom! The brand sales might hit the roof and you may think that you just bought one beer to cheer.
What about the sponsors whose names show on your fav player’s (deity) jersey/cap/bat or placed on the field and other conspicuous places? They get the desired visibility and attention for their brand.
It is not just these purchases and just the sponsor companies that benefit from the IPL excitement. Other businesses and sectors also gain from the festive mood revolving around the religious sport of India, cricket, and cheer too. This is because economic activities always have a ripple effect. For instance, if you are a YouTuber, create content around cricket/IPL & cash it on. If you are an SM marketer, an influencer creates that perfect meme that goes viral faster than any known virus to mankind.
Religion isn’t just about finding God; it is about deity worship, rituals, festivals and so much more. Take a hint from it and admit that cricket too isn’t just about fitness and health. It is also about entertainment, business, and fun.
Let’s dig a little deeper. Sometimes religion pushes its followers into fanaticism and fascism. Cricket too has its dark side. Nah, not talking about betting rackets here. Check out this tweet.
This is just to leave you with an afterthought.
Lets team up this season – on and off the field
Cricket is inherently a sport. And a sport is packed with emotions. So without the energy of a live audience cheering for the teams…emotions run dry. We can’t be emotionally stuck in the pre-COVID era either or reject changing realities of our times. So how do we keep up the enthusiasm? By consuming some great content, like this one? Let us know what you think! Because we passionately & constantly work to score more & more points from our readers.
Conclusion
To end on a lighter note – ‘Stay home, stay safe’ was and is the mantra of the pandemic age, and if you choose otherwise, then take adequate precautions while going out and remaining outdoors. ‘You could cheer for Dhoni or AB de Villiers, so long as you stay fit until next year!’ may be your mantra for IPL 2022, which is starting on March 26, 2022. So, let’s have a field day!
FAQs
Is IPL good for Indian economy?
The IPL teams earn revenue through their sponsors and the sale of merchandise of their kits and garbs. To sum it all up, IPL has an impact on the Indian economy as it produces numerous employment opportunities.
How much does IPL contribute to Indian economy?
The brand value of the IPL in 2019 was $6.7 billion, as per the Duff & Phelps report. According to BCCI, the 2015 IPL season contributed ₹11.5 billion (US$160 million) to the GDP of the Indian economy.
How much is IPL worth?
The brand value of the IPL, as per the reports dated February 2022, is $4.7 billion, which witnessed a 7% increase lately.
When is the IPL 2022 starting?
IPL 2022 is starting from March 26, 2022, as per the reports.
When will IPL 2022 end?
IPL 2022 will be ending on May 29, 2022, as per the reports.
A crisis is any event or period that will lead, or may lead, to an unstable and dangerous situation affecting an individual, group, or all of society. Crises are negative changes in human or environmental affairs, especially when they occur abruptly, with little or no warning. – Wikipedia
Ever since the inception of human life on the planet earth, or even before that time, We have faced Crisis. So much so that it is a part of life and we don’t deface the fact anymore. Crisis has taught us that we lack something, and we need to work more on the present systems to make things more liveable. Making us more decisive, it cures indecision. This is a kind of help in our constant journey of making things better. However, We humans are the dominant species in nature.
Why, you may ask ? Because we have hacked evolution !
Ours is the only species that has decided to actually become better or more efficient without waiting for the process of evolution to take place (that is always slow). So, we are the only animal who has hacked evolution. That makes us the most fast-paced living species than anyone. Does that mean we don’t have a crisis anymore? No, we get crises every now and then to showcase us that some things are just so fickle. A house of cards.
We all are terrestrial mammals, we live on earth, land. Build houses and earn a living. Housing or real estate is a super demanded domain in this world. As population boosts we will want more and more houses, dwellings to accommodate people. Amongst the constantly rising demands for land, it is very imperative for all of us to make sure that land is distributed justifiably. To provide for the need that is round-the-clock. Not to mention, being such a big sector, Housing sector or real estate sector is not oblivious to shockwaves, you know CRISIS. Whenever a wave hits this epicentre, human lives move. It moves to that extent of magnitude which we cannot even measure on a Richter scale.
China is the world’s most populous country on the globe. Most humans live there. Housing sector is as big as it gets. It has seen its share of crises in this magnanimous sector. A really big economy. It has seen his share of strides and waves of uncertainties on his pupils. Lets see an example for clarity.
Real estate in China is developed and managed by public, private, and state-owned red chip enterprises. In the years leading up to the 2008 financial crisis, the real estate sector in China was growing so rapidly that the government implemented a series of policies—including raising the required down payment for some property purchases, and five 2007 interest rate increases- due to concerns of overheating. But after the crisis hit, these policies were quickly eliminated, and in some cases tightened.
The Chinese property bubble (2005-2011) was a real estate bubble in residential and/or commercial real estate in China. The phenomenon has seen average housing prices in the country triple from 2005 to 2009. It deflated in 2013.
Massive doesn’t even begin to describe the situation with China’s property market, but that’s somewhat expected with a population of 1.4 billion people.
And as the chart below shows, the bubble keeps on getting bigger!
China Real Estate Bubble
Well we know that this thing is of the past. This was a crisis and China hopefully learned some things from it. That’s why storms come, to make us more stable. This article is not about the past but for the future. This point in time, we are gonna see another crisis. Maybe more tense than the past. Maybe a more lethal Than past. So, what is it this time ?
EverGrande Crisis in China
China’s second biggest real estate mogul EverGrande is facing a crisis. To be more precise the company is going through financial difficulties. It is having liquidity issues to pay back its lenders. To give you some context, China’s real estate market has been booming in the recent past and to capture the trend and grow, Evergrande had taken up so much debt that they are struggling to pay it off now. The magnitude of this upcoming crisis is such that, if it collapses, people will lose homes. Not only China’s economy but the global economy as a whole could be affected. Lets see what is the scene here,
The Evergrande Group or the Evergrande Real Estate Group (previously Hengda Group) is the second largest property developer in China by sales, having developed projects in over 170 cities in China. It is ranked 122nd on the Fortune Global 500. It was founded in 1996 by Xu Jiayin. It sells apartments mostly to upper and middle-income dwellers. In 2018, it became the most valuable real estate company in the world. Evergrande Group owns 565 million square metres of development land and real estate projects in 22 cities, including Guangzhou. The company and Alibaba own 50 percent each in Guangzhou Football Club and Evergrande football school is the biggest football school in the world. In the year 2009, the company filed for an IPO, An Initial Public Offering to get public
As of September 2021, the company is at risk of defaulting on its debt. An estimated 1,500,000 customers could lose deposits on Evergrande homes that have yet to be built.
“I think ultimately the Chinese authorities will step in to make sure at least the wider financial system doesn’t run into a crisis,”. “If you’re a property developer you’re facing a few bleak months ahead. The key distinction I think is policymakers will allow property developers to suffer considerable pain, but they’ll step in to make sure the banking system is okay.” – Mark Williams, chief Asia economist at Capital Economics.
Kotak tweeted, the threat over China’s second-largest real estate developer reminded him of Infrastructure Leasing & Financial Services (IL&FS). Last year in September, the infra leasing and financial services company wasn’t able to pay its debt due to shortage of funds. The financial services market felt the tremors, and led to a liquidity crisis. However, the government came to its rescue and hand-picked nominees to replace the board in October. It had extended Kotak’s term as non-executive chairman of the debt-ridden group by one year.
Lauding the government’s swift decision-making, the 62-year-old veteran banker said the Indian leaders provided calm to financial markets. “The government-appointed board estimates 61% recovery at IL&FS. Evergrande bonds in China trading, approximately 25 cents to a dollar,” he wrote.
The Lehman Brothers Financial Crisis
Lehman Brothers Holdings Inc. was a global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill), with about 25,000 employees worldwide. It was doing business in investment banking, equity and fixed-income sales and trading (especially U.S. Treasury securities), research, investment management, private equity, and private banking. Lehman was operational for 158 years from its founding in 1850 until 2008.
The bankruptcy of Lehman Brothers on September 15, 2008 was the climax of the subprime mortgage crisis. After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal Reserve summoned several banks to negotiate financing for its reorganisation. These discussions failed, and Lehman filed a Chapter 11 petition that remains the largest bankruptcy filing in U.S. history, involving more than US$600 billion in assets.
The bankruptcy triggered a 4.5% one-day drop in the Dow Jones Industrial Average, then the largest decline since the September 11, 2001 attacks. It singled out a limit to the government’s ability to manage the crisis and prompted a general financial panic. Money market mutual funds, a key source of credit, saw mass withdrawal demands to avoid losses, and the interbank lending market tightened, threatening banks with imminent failure. The government and the Federal Reserve system responded with several emergency measures to contain the panic.
Radhika Gupta (MD and CEO of Edelweiss) said in a public notice that the real estate sector is highly regulated, given the large role it plays in the Chinese economy. In synopsis, the fund managers(at Edelweiss) do not think that the sector is facing systematic risk(Risk inherent to the entire market). The government is prioritising this issue and rapid regulations are expected. She also advised that investors with a long term horizon should stay patient as fund managers at Edelweiss see a transitory volatility.
Tweeted as a part of a disclaimer, the Edelweiss Greater China Equity Offshore Fund was at its highest risk on the Riskometer.
Dear Shareholders, I am pleased to present the reports of China Evergrande Group (“Evergrande” or the “Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2020. The Group’s turnover and gross profit for the year amounted to RMB507.2 billion and RMB122.6 billion respectively. Net profit was RMB31.4 billion. Core business profit was RMB30.13 billion. In order to repay the trust and support of shareholders, the Board recommended the payment of a final dividend of RMB0.152 per share for the year 2020, which will be distributed upon approval at the general meeting of the group. – Prof Hui Ka Yan (Chairman of the Board of the Group, Chairman of the real estate group)
This is quoted from the annual report of 2020 of the company. It paid a dividend. The company was saying it out loud and clearly, that we are fine, Everything is fine, we are paying dividends, Take your profits share, shareholders. Well now we see the whole big picture, Loud and clear.
Evergrande founder and Chairman Hui Ka Yan continued his precipitous drop in Bloomberg’s wealth ranking as the company’s shares fell to their lowest in a decade. His fortune now stands at $7.3 billion, down from a peak of $42 billion in 2017.
Smothered by a $300 billion liabilities burden that has crushed its credit rating, share prices and reputation among a once-adoring public. Throughout last week, the concourse outside Evergrande’s mirrored offices in the southeastern city of Shenzhen was occupied by unpaid contractors, angry sales agents and investors scenes echoed across a country where prolonged protest is rarely tolerated.
Now, as default appears all but inevitable, fears are abounding of a contagion within the Chinese property market — and far beyond.
The month of September is typically when real estate companies in China record higher contract sales of properties. However, the ongoing negative media reports concerning the Group have dampened the confidence of potential property purchasers in the Group. The Company expects a significant continuing decline in contract sales in September, thereby resulting in the continuous deterioration of cash collection by the Group which would in turn place tremendous pressure on the Group’s cash flow and liquidity.
Here is a little excerpt of previous financial statement to back the downward trend in operations of the company.
Balance Sheet Excerpt of last year.
As disclosed in the Operating Statistics Announcements, the contract sales of properties of the Group in each of June, July and August 2021 amounted to RMB71.63 billion, RMB43.78 billion and RMB38.08 billion, respectively, which showed a decreasing trend.
Announcements and Notices by Evergrande (14 September,2021) The Real estate giant also mentioned in a recent public open notice that –
No material progress on sales of interests in members of the Group
The disposal of the Company’s office building in Hong Kong has not been completed within the expected timetable
The Problems:
The company has $300 Billion debt to bondholders
Property sales declining for months and will continue
Company owes $103 billion to construction companies and other business creditors
Banks are not ready to refinance
Company wants to repay debt in the form of property and parking spaces
China’s Government has imposed limits on the amount of real estate borrowings, which caused bondholders to withdraw their money
EverGrande now needs to pay interest of $83.5 Million on bonds now, with a grace period of 30 days
China stock markets and Global markets, mainly in the US is reacting negatively to the news.
Stock markets globally sank on Monday as investors weighed the risk of a spillover from Evergrande’s debt. Bitcoin dropped 5.4 percent this week to $45,025
China’s property market is majorly affected and we see the 2008 financial crisis all over again.
Evergrande bondholders might sell their other investments too to keep their money as cash at the moment. This might cause market correction
In an effort to flatten the crisis curve, China’s central bank boosted its gross injection of short-term cash into the financial system after concern over a debt crisis at China Evergrande Group roiled global markets. The People’s Bank of China pumped 120 billion yuan ($18.6 billion) into the banking system through reverse repurchase agreements, resulting in a net injection of 90 billion yuan.
Injecting funds to flatten curve.
China bails out the company indirectly by asking borrowers(state owned banks mainly) to take the property and parking spaces and waive off the debt.
Evergrande Crisis Effect on India
Sensex and Nifty are at great heights and thus are more volatile to corrections.
Short term corrections may happen
Over a medium term, India can benefit from the situation because the Chinese crisis cause increased money flow into the Indian markets
This crisis can put the rupee under pressure. If Evergrande is allowed to default, the market could see a massive sell-off with significant contagion risks for global financial markets – HDFC bank economist’s report.
If one single company that owes $304 billion can develop financial exposure to hundreds of lenders, millions of investors in bonds and stocks, and hundreds of thousands of homebuyers, Then we cannot be sure of big corporations anymore in china.
Indian steel still sees a strong spine as evergrande goes to a cash crunch.
Improvement In indian steel sector
Shailendra Kumar, Chief Investment Officer at Narnolia Financial Advisors feels till now Evergrande issue looks localised and Chinese policymakers should be able to handle it using steps like restructuring. He believes the Indian economy and Indian equity market is set for exciting times ahead. “While the global trend of digitalization is a megatrend favouring the Indian economy, domestically, formalization is another megatrend adding further positivity to Indian equities,” he said.
So, what shall happen tomorrow, for sure we can’t predict it to a nice accuracy, But we can surely see that what we are facing is risk, Uncertainty or maybe the silence before a storm. Let’s call it a crisis.
FAQs
What is Evergrande crisis?
Evergrande is an enormous company embedded across China’s financial system and economy, that relies mainly on real estate.
What does Evergrande do?
Evergrande Group is an investment holding company in China. It is involved in real estate business. Evergrande group does development, investment, and management of real estate properties.
Who is the founder of Evergrande Group?
Xu Jiayin (Hui Ka Yan) has founded Evergrande Group, headquartered at Shenzhen, Guangdong, in 1996.
The economic crisis that jolted the Indian subcontinent in 1991 did not happen overnight. It was facilitated by a plethora of factors including poor economic policies, trade deficits that lead to the Balance of Payment crisis, inefficient public sector etc. The economic imprudence of the 1980s had started to set the tone for the impending crisis which was called a “policy-induced crisis par excellence” by Joshi and Little in their seminal work.
As the country’s fiscal policies were going loose at the behest of the country’s worst drought since independence and a global oil shock in 1979 caused by the Islamic revolution in Iran, the recommendations of the seventh Finance Commission was rather one-sided than concentrating on means to cater to both consumers and suppliers.
It recommended a significant increase in the revenue shares of states without easing the responsibilities of the central government, which caused the existing fiscal deficit of the government to sour.
The increasing political assertions of the marginal groups along with the decaying powers of political institutions also resulted in mere populist measures to address problems that were not only insufficient but also short-termed.
Along the same line, the country saw an increase in procurement prices with no corresponding increase in issue prices. Taxes were reduced and subsidies burgeoned ten times their value last year.
Import Liberalisation and its Ramifications
Deviating from its regular economic conservatism in 1976 the Indian government liberalised import which was expected to increase the supply of intermediate and capital goods. However, export growth could not keep up with it.
By 1985, imports swelled and India was facing twin deficits. One that of fiscal deficit and the other that of trade deficit. Average fiscal deficits moved up to 6.5% from 5% in the 1970s. The only factor that held everything together was the increasing remittances from employees in the Gulf region.
Political Instability and other indigenous and Exogenous Factors
The central government was going through a tumultuous time as the ruling party (Janata Party) split into two and collapsed. This political instability was accompanied by severe drought and the oil shock of 1979.
As agricultural productions nosedived by a sixth in terms of trade, oil prices and current account deficit soured. It was only the timely procurement of food grains over the year that saved the nation from famine.
The Deal With the IMF (International Monetary Fund)
In order to expand the energy sector, exports and savings, along with reviving the Indian economy the central government approached the IMF to fund its package in 1980. The IMF however, resorted to different financial measures which the country had to abide by.
Later, the Chandra Sekhar government failed to pass the budget and the poor ratings given by Moody made India ineligible for any short term loans. In this situation, the IMF also stopped their financial assistance which forced the government to mortgage the country’s gold for bailing out.
In May 1991, India had to airlift more than 20 tones of gold to raise $240 million. Although the desperate move was heavily criticized, it was inevitable.
Newspaper cutout of 1991
Balance of Payment Crisis
The 1980s also saw a BoP crisis as the current account deficit remained between 40% and 50% of the exports in the latter half of the 1980s. It resulted in the increase of external liabilities in the 1990s, 50% of which as owned by the public sector. India’s forex reserves started to deplete as imports increased.
By July 1991, India had only less than $1 billion in its foreign reserves which can last to fund three weeks of imports. The major cause of the Balance of Payment crisis was the inability of exports to catch up with imports, improper management of the investment savings which resulted in deficit and depending on non-concessional external borrowing to cater to that deficit.
The Gulf War in the 1990s was the tipping point for the already fragile Indian economy. The fuel prices skyrocketed which affected the prices of all goods in the country. The war also meant that a lot of Indians lost their jobs and had to come back. Thus, the remittances which held the economy together was not available anymore. India fell into a deep economic crisis where it was at a disadvantageous position from all sides.
The Revival of the Indian Economy
The Narsimha Rao government with Manmohan Singh as the Finance Minister, began its journey towards economic recovery. First, to reduce inflation and promote internal markets, export subsidies were cut.
The value of the rupee was first depreciated by RBI to 9% and then to 11%. Further, domestic supply constraints were cleared and doing business was made easier by reducing the complexity of procuring permits and licenses.
India: Gross domestic product (GDP) in current prices
The economy was liberalised, privatisation was promoted. Foreign Direct Investments were also largely encouraged. Industries were given better structural and operational freedom which helped them expand and develop. The budget of 1991-92 was more about continuing these economic reforms to sustain and strengthen the changes.
Conclusion
The efforts of the Narasimha Rao government was not in vain. Indian economy started to boom in the years that followed. At a time when the country is struggling with negative growth rates and shrinking GDP, the lessons learned from the 1991 financial crisis should be revisited and analysed so as to come up with efficient solutions. There is absolutely no doubt that there will be flaws.
Even the economic reforms of 1991 also had its own flaws and it still bears the grunt of the criticisms. However, it is important to come up with valuable reforms that can save the economy from an economic depression like in 1929.
FAQ
What caused the 1991 currency crisis in India?
The 1991 financial crisis was caused due to currency overvaluation.
Who was the finance minister of India in 1991?
Manmohan Singh was the finance minister of India in 1991.
Who was the prime minister in 1991 in India?
P. V. Narasimha Rao was the prime minister of India in 1991.
Nitin Konde
