It was a happening week for the economy with both good and bad news. While GST collection recorded its best ever, core sector growth remained low for third consecutive month, a fact echoed by RBI in its monetary policy statement. Not only India but economies across the global are facing the prospect of slowing growth.

In a boost to government’s finances, GST collection during the month of March’19 rose to Rs 1.06 lakh crore against Rs 97,000 crore during February. The collection is also the highest monthly collection since the introduction of GST 21 months ago and 16% higher over March’18 collection. Monthly GST collection has emerged as an important economic barometer as the collection is directly related to the economic activity. Further, the transition to GST is fraught with significant risks and needs close monitoring. There have been instances of countries across the world going back to earlier system because of their inability to effectively implement the system, manage revenue flow etc. The rising revenue despite substantial reduction in tax rates also validates the hypothesis of lower rates leading to better compliance.

However, all does not seem to be well with the economy. Growth of eight core sectors fell down to 2.1% in Febraury’19 from over 5% in the same month, last year. This is the third month of growth being around 2% mark and appears a trend rather than aberration. Growth of core sectors (comprising of crude oil, steel, cement, coal, fertilizers, electricity and refinery products) is even more important as these sectors act as catalyst for growth of other sectors.

To give a boost to the economy, the monetary policy committee cut repo rate by 25 basis points on top of a similar rate cut in its Feb meeting. A benign interest rate environment helps improves investment as well as consumption sentiments thereby, giving a fillip to the economy. (Please read the previous article to know more on this).

In a landmark judgment, the Supreme Court declared RBI’s 12th Feb’18 circular as ultra vires (beyond its legal power). The circular directed all banks to compulsorily file insolvency case against a borrower if he defaults on his loan repayment beyond 180 days. The circular probably also goes against the spirit of the insolvency & bankruptcy code (IBC) which gives banks the power but not an obligation to drag a company to insolvency court. While RBI also has the power to direct banks, on authorization from the government, it cannot issue a blanket direction as per the Court’s ruling. The judgment allows banks to take more practical approach in resolving default while preserving the value of a functioning company. (Read more on this –

In a financial and operational strategic move, RIL has hived off its mobile tower and fibre network assets to separate investment companies. This would shift the debt burden of these assets from RIL to the investment companies. Stake in the investment companies would be sold off to private investment firms and reduce company’s debt burden. Simultaneously, hiving off would also help company generate revenue by renting these assets to other companies. Transactions like these are not uncommon as in the initial period; assets can be built only on the strength of the balance sheet of the parent company. On successful build up of assets, these are separated as independent entity which can tap the market for revenue generation as well as stake sale and returning cash back to the parent company.

Global growth is facing the prospect of lower growth in 2019 with World Trade Organization (WTO) also revising downwards the expected growth in global trade from 3.7% to 2.6%. The sharp downward revision, which would affect India’s exports also, was among the factors cited by the RBI in its monetary policy statement. The decline is attributed not just to ‘trade tensions’ but also to lower GDP growth across global economies. The decline in trade prospect is also, in a way, corollary to declining growth prospects of US economy which accounts for 15% of global GDP.

(Image courtesy of ddpavumba at

Leave a Reply

Your email address will not be published. Required fields are marked *

error: Content is protected !!