Economy & Market

Global financial contagion: Is India insulated as an economy?

Published

5 years ago

January 4, 2020

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A financial contagion is the negative spillover effects of a financial crisis that is initiated in one part of the country or the world which spreads over to the entire country or various parts of the world (global contagion); there could be positive effects as well, when there is a boom associated with certain markets and the spillover effects drive co-movement of prices across several countries. We have seen a negative contagion happening during the 2008 crisis when the housing crisis in the US found spillover effects in many parts of the world and it worsened in form of a full-fledged financial meltdown when credit markets almost fell off the cliff across large parts of Americas and Europe, impacting business growth severely .

Thankfully the financial contagion that initiated in the housing markets of the US in 2008 did not cross over to India and virtually India was left unaffected in every possible way. In fact when the GDP of the rest of the developed world went through a drop of 2 to 3 per cent, India showed resilience to grow at 7 per cent plus in 2009-2014.

It was a rare event, to find India completely insulated from a global financial contagion; some of the reasons (some could be for the wrong reasons) why this could be explained is that India did not have a large inter-connected financial sector with sophistication and also the dependence on global trade was lower in initiating economic growth; the total size of the Indian banking sector is very low, even now it is $270 billion in assets which is equal to the net income of the banking sector in the US with assets of $17 trillion. The lending standards in 2008 were good, with prudential norms and bank NPAs were far too low even by global standards. The housing sector was also mildly expansionary and chances of toxic assets either in the banks or in the rest of the shadow banking system was low. The growth rates were actually quite high and a drop even up to 2 per cent could have been absorbed by the economy.

If we look at the global contagion driven by the Covid-19 meltdown now, it may not be the same resilient economic system in India that we are standing on. First of all the growth rate itself is closer to 4 than 5 percent, which by Indian standards could be really low to weather any impact of drop in trade, exchange rate, demand and most importantly supply disruption, where alternate supply chains would take years to be developed. The bank balance sheets still need a clean up as NPAs are way too high even after RBI actions, leaving a lot to be desired on credit growth. The biggest issue is that India is already suffering from the low demand that came from a consumption slump it has not seen in many decades.

The other more crucial factor is that the ability of the RBI to lower interest rate is stunted now due to already prevailing inflationary forces that drive agricultural commodity prices to still stay higher than expected.

All these factors limit India’s ability to face a financial contagion now as the need of the hour is to have massive stimulus from fiscal actions which tends to crowd out private investment as it further raises the cost of borrowing for the rest of the financial system.

But India will do what needs to be done, drive infrastructure, manufacturing and agriculture as three fundamental pillars of growth. All this would bode well with the current underlying conditions of global supply chains, which must reconfigure, re-orient from complete end to end chains to a more balanced clustered chains that are bound with enough checks and balances both horizontally and vertically.

ABOUT THE AUTHOR:
Procyon Mukherjee works as Chief Procurement Officer at LafargeHolcim India. The ideas presented are his personal and have no connection to the beliefs of the company where he works.

Concrete

15th Cement EXPO: A Step Forward in Cement Innovation

Published

3 weeks ago

January 17, 2025

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Mumbai

Following the immense success of the 14th Cement EXPO, held on December 14-15, 2023, at the Manekshaw Centre, New Delhi, the next edition of this premier event is set to take place in March 2025. The 15th Cement EXPO will be hosted at Yashobhoomi, Delhi, on 12th and 13th November 2025.

Meanwhile, the Cement Expo Forum 2025 is scheduled for 5th and 6th March 2025 at Taj Krishna in Hyderabad. This exciting 3-in-1 event, organised by FIRST Construction Council (FCC) and Indian Cement Review (ICR), will bring together industry leaders, innovators, and stakeholders to discuss the future of the cement sector.

Building on the Success of the 14th Cement EXPO

The 14th Cement EXPO was widely praised for its strong participation, attracting over 1,500 senior managers and decision-makers from across the cement industry. The event was inaugurated by Dr. Vibha Dhawan, Director General of TERI, and Ali Emir Adiguzel, Founder and Director of the World Cement Association, alongside Pratap Padode, Founder of FIRST Construction Council (FCC). The two-tiered exhibition space featured cutting-edge products and innovations from top companies within the cement industry’s supply chain.

The event also garnered significant support from key government bodies, including the Ministry of Road Transport and Highways, Government e-Marketplace (GeM), and the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India (GoI).

Recognition and Excellence in the Cement Industry

The 7th Indian Cement Review Awards celebrated excellence by presenting awards to 11 companies in various categories, recognising their contributions to growth and innovation within the industry. Notably, Parth Jindal, Managing Director of JSW Cement, was honoured with the prestigious Indian Cement Review – Person of the Year Award 2023. Meanwhile, Vinita Singhania, Vice Chairman and Managing Director of JK Lakshmi Cement Ltd, received the Lifetime Achievement Award for her outstanding leadership and contributions to the sector.

A Vision for Sustainability

With the theme of “Driving Sustainability Through Technology,” the 9th Indian Cement Review Conference hosted thought-provoking discussions and presentations, highlighting the industry’s commitment to adopting innovative, sustainable practices. The conference served as a platform for dialogue on the latest technological advancements aimed at transforming the cement sector, addressing key challenges, and fostering growth.

What to Expect from Cement EXPO 2025

The 15th Cement EXPO, along with the 10th Indian Cement Review Conference and the 8th Indian Cement Review Awards, is set to be even bigger and more impactful than the 2023 edition. With an expanded exhibition space, greater participation, and more in-depth discussions, the 2025 event will continue to drive the industry forward. This 3-in-1 event promises to be a pivotal moment in the ongoing transformation of the cement sector.

As the industry evolves, the 15th Cement EXPO 2025 will serve as a crucial platform for showcasing innovations, discussing emerging trends, and forging new partnerships to shape the future of cement and construction.

For more details:

Cement Expo Forum 2025: https://cementexpo.in/forum

15^th Cement Expo 2025: https://cementexpo.in/

FOR CONFERENCE SPONSORSHIPS

Sheetal Talreja

Mob: +91 842 2874 030

Email: sheetal@IndianCementReview.com

FOR EXHIBITION/SPONSORSHIPS

Sujoy Gomes

Mob: +91 865 7795 881

Email: Sujoy.g@ASAPPinfoGlobal.com

FOR SPONSORSHIPS

Ratan Rajbhar

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Email: ratan.r@ASAPPinfoGlobal.com

Concrete

Construction sector growth slows to 8-10% for FY2025: ICRA

Published

3 weeks ago

January 15, 2025

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The revenue growth for construction companies in FY2025 is projected at 8-10 per cent, down from the earlier estimate of 12-15 per cent, according to ICRA. This marks the slowest growth in three years, driven by factors such as the Model Code of Conduct in Q1, prolonged monsoons, and milestone-based billing in Q2, particularly affecting road-focused players.
ICRA’s analysis of 19 companies with a combined turnover of Rs.1.28 trillion in FY2024 shows modest revenue growth of 1.5 per cent YoY in H1 FY2025. While execution is expected to improve in H2, FY2025 growth remains below the historical CAGR of ~15 per cent (FY2018-FY2024).
Order inflows in urban transport, water and sewage projects are healthy, but road-focused entities face challenges due to muted inflows and high competition. Operating margins are projected to remain range-bound at 10.5-11 per cent, with debt levels rising to manage working capital needs, though debt coverage metrics remain stable.

Concrete

SANY India expands Pune factory to boost production capacity

Published

3 weeks ago

January 15, 2025

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SANY India inaugurated a cutting-edge factory expansion at its 90-acre Pune facility, elevating its production capacity to over 14,000 units annually, alongside a robust fabrication capacity of 100,000 metric tonnes.

The advanced facility reinforces SANY’s commitment to ‘Make in India’ by enhancing localised manufacturing and supporting global exports. Chairman Xiang Wenbo highlighted the strategic importance of India as a global hub, while Vice Chairman Deepak Garg emphasised the expansion’s role in driving innovation and infrastructure development. This investment enhances efficiency, reduces timelines, and strengthens SANY’s leadership in the construction equipment sector.