UPSC CSE – SYLLABUS: GENERAL STUDIES-3– Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Factors that will determine the recovery path for firms:
- Leverage, cost structure, governance, access to capital and adaptiveness determine the virtuosity of a firm.
- Firms with less leverage, good governance, and the ability to raise capital, cut costs, and innovate to adapt in the current situation will not only survive but also prosper.
- Economic recovery will be a function of top-down factors like fiscal and monetary stimulus as well as bottom-up entrepreneurial efforts.
Policy needed on:
- The monetary policy is accommodative but credit transmission needs to improve further.
- Policy rates are at lifetime low levels but the cost of borrowing needs to be lowered for below-AA rated borrowers.
- Fiscal stimulus has supported growth at the bottom of the pyramid but sectors like travel, tourism, hotel, retailing, aviation, infrastructure etc require more support.
- The path of fiscal prudence is important but it needs to be achieved by raising non-tax resources like proceeds from strategic divestment and monetisation of assets, unlocking capital stuck in gold lying in tijori etc.
- Ease of doing business has improved but rule of law needs to be improved.
- Despite good intentions, commercial disputes are getting addressed like the never-ending trial of the 1992 security scam rather than the quick, everyone-wins solution of Satyam.
- Our laws are being made for the lowest common denominator as crooks escape without adequate punishment.
- This increases the cost of compliance for the rest.
- Investment cannot pick up sustainably unless rule of law is experienced by investors.
- Big has become bigger in these challenging times, but eventually small and medium firms need to become competitive and prosper.
Stock market recovery:
- The stock market has responded enthusiastically with large cap indices trading a little below their pre-Covid highs.
- Flows and improving fundamentals have pulled the market to current levels. Undoubtedly, we are not out of the woods.
- Factors like the ongoing second wave in the US and Europe, the US election results etc will impact our markets, albeit on a temporary basis.
Market – way forward:
- The stock market will be driven by the long-term growth trajectory.
- Global capital in an era of abundant liquidity and ultra-low interest rates will chase returns (US junk bonds are trading at life-time low yields).
- For many investors, growth or Innovation will be a proxy for returns.
Source: ”Indian Express”.
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