Trends in 2019 that affected the Indian economy

Economic trends not only impact the macro economy but also have a far-reaching impact at micro levels.

Here are such economic trends of 2019 that contributed to the present state of Indian Economy:

• The sluggish auto sector claimed various jobs
• Indian Railway Catering and Tourism Corporation (IRCTC) issued IPO and propelled the IPO market
• SC favoured DoT’s definition of AGR due to which telecom’s faced heavy fines
• Reliance Industries Ltd.’s stock surged 40% in 2019 and its market capitalisation crossed Rs. 10 lakh crore
• NBFCs contribution to credit availability reduced, which had a severe impact on the economy’s growth
• 10 PSU banks merged into 4 to achieve efficiencies of scale
• Onion’s soaring prices made the country cry
• Corporate tax rate cut, a double-edged sword, put companies in dilemma
• Karvy’s allegation of misusing and misappropriating clients stock prompted SEBI to step in
• Moody’s downgrades India outlook citing economic slowdown

The sluggish auto sector claimed various jobs

Automotive industry, one of the biggest in the Indian economy, faced a serious breakdown this year as growth plunged to 5% and car sales slumped by 41% in August — the sharpest in 2 decades. The sector that generated ~35 million people and contributed over 7% to the GDP.

However, the slowdown during the year has claimed ~1,00,000 jobs.

Engulfed by the slowdown were 5 sectors of the industry: two-wheelers, commercial vehicles, passenger cars, construction equipment, and tractors. This had cascading effects including inventory pile-up, production cuts, and lack of investment. Government’s push for electric mobility and banking crisis further dampened auto demand and aggravated the situation.

Indian Railway Catering and Tourism Corporation (IRCTC) issued IPO and propelled the IPO market

IRCTC, the only entity that offers catering, packaged drinking water, and online ticket booking services to users of Indian Railways made the biggest stock market debut in ~2 yrs. The Rs. 645 cr-IPO subscription was open between 30th Sep and 4th Oct at a price band of Rs. 315 to Rs. 320 and was subscribed a whopping 112 times. IRCTC is a monopoly and simply collects ticket revenues but doesn’t run the railways. This results in high revenue on top of which the entity has cash balances greater than its net-worth. Now you know why such a high subscription number!

SC favoured DoT’s definition of AGR due to which telecom’s faced heavy fines

The 14-yr old battle between the Department of Telecom (DoT) and telecom operators of defining the Adjusted Gross Revenue (AGR) ended on 24th Oct when the supreme court favoured the former. This move caused a major blow to telecoms as they had to pay high charges, amidst debt pressure and decreasing revenues.

Alone Bharti Airtel and Vodafone Idea had to pay fines equal to Rs.50,000 of the AGR post SC’s declaration.

DoT calculates the licence fee and spectrum usage charges payable by operators based on the AGR. While DoT defines AGR as both telecom and non-telecom services, operators stressed considering just the former. Though operators requested SC a leeway of at least 6 months to pay AGR dues, DoT demanded the fines be deposited within 3 months after making a self-assessment of the dues.

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