WORLD ECONOMIC FORUM(WEF)History:

The World Economic Forum (WEF) established in 1971 is a Swiss nonprofit foundation, based in Cologny, Geneva, Switzerland. Recognized by the Swiss authorities as an international body, its mission is cited as "committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas".

The Forum is best known for its annual meeting at the end of January in Davos, a mountain resort in the eastern Alps region of Switzerland. The meeting brings together some 2,500 top business leaders, international political leaders, economists and journalists for up to four days to discuss the most pressing issues facing the world. Often this location alone is used to identify meetings, participation, and participants with such phrases as, "a Davos panel" and "a Davos Man".

The organization also convenes some six to eight regional meetings each year in locations across Africa, East Asia, and Latin America, and holds two further annual meetings in China, India and the United Arab Emirates. Beside meetings, the foundation produces a series of research reports and engages its members in sector-specific initiatives

The institution carefully blends and balances the best of many kinds of organizations, from both the public and private sectors, international organizations and academic institutions. WEF believes that progress happens by bringing together people from all walks of life who have the drive and the influence to make positive change.

The story of four decades of the World Economic Forum, as seen through the eyes of its members, leaders and the outside world.

While many global institutions are notable for the breadth of nations or the powerful political leaders attending their gatherings, the World Economic Forum Annual Meeting and indeed all the activities and initiatives of the Forum around the world are distinguished by the active participation of government, business and civil society figures. The Forum engages the most experienced and the most promising, all working together in the collaborative and collegial ‘Spirit of Davos’.

Professor Klaus Schwab founded what was originally called the European Management Forum, as a non-profit foundation based in Geneva, Switzerland. It drew business leaders from Europe, and beyond, to Davos for an Annual Meeting each January.

Initially, Professor Schwab focused the meetings on how European firms could catch up with US management practices. He also developed and promoted the ‘stakeholder’ management approach, which based corporate success on managers taking account of all interests: not merely shareholders, clients and customers, but employees and the communities within which they operate, including government.

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Professor Schwab’s vision for what would become the World Economic Forum grew steadily as a result of achieving ‘milestones’. Events in 1973, namely the collapse of the Bretton Woods fixed exchange rate mechanism and the Arab-Israeli War, saw the Annual Meeting expand its focus from management to economic and social issues. Political leaders were invited for the first time to Davos in January 1974.

Two years later, the organization introduced a system of membership for ‘the 1,000 leading companies of the world’. The European Management Forum was the first non-governmental institution to initiate a partnership with China’s economic development commissions, spurring economic reform policies in China. Regional meetings around the globe were also added to the year’s activities, while the publication of the Global Competitiveness Report in 1979 saw the organization expand to become a knowledge hub as well.

In 1987, the European Management Forum became the World Economic Forum and sought to broaden its vision to include providing a platform for dialogue. World Economic Forum Annual Meeting milestones during this time include the Davos Declaration signed in 1988 by Greece and Turkey, which saw them turn back from the brink of war, while in 1989, North and South Korea held their first ministerial-level meetings in Davos. At the same Meeting, East German Prime Minister Hans Modrow and German Chancellor Helmut Kohl met to discuss German reunification. In 1992, South African President de Klerk met Nelson Mandela and Chief Mangosuthu Buthelezi at the Annual Meeting, their first joint appearance outside South Africa and a milestone in the country’s political transition.

In 2015, the Forum was formally recognized as an international organization. It is now on the next phase of its journey as the global platform for public-private cooperation.

The Forum is chaired by Founder and Executive Chairman Professor Klaus Schwab. It's guided by a Board of Trustees, exceptional individuals who act as guardians of its mission and values, and oversee the Forum’s work in promoting true global citizenship.

WEF MEETING 2018The 48th World Economic Forum Annual Meeting has taken place on 23-26 January in Davos-Klosters, Switzerland

The theme, “Creating a Shared Future in a Fractured World” will make a case for renewed commitment to international collaboration as a way of solving critical global challenges. More than 2,500 participants from over 100 countries have participated in over 400 sessions.

Highlights of Hon’ble Prime Minister’s Keynote Speech at Plenary Session on 23.01.2018

The theme of this year’s World Economic Forum is very relevant. It places the spotlight on the challenges facing the humanity. The sound and meaning of the word ‘Fracture’ is such that it frightens. And the global situation is actually frightening.

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This fracture can be seen at various levels in various facets. However, in the present context, I would list only a few:

1. Fracture in human relationships at the level of individuals: To my mind this is the most dangerous. It all starts in human mind. All other problems arise from here.In today’s time, in the first instance, it appears that media; especially the social media is connecting us. However, it’s just connecting; not integrating. We are mostly talking. Not listening! We share news and views but we don’t share the vision.

2. Second is the fracture within the Nations: Lack of understanding among interest groups and communities. There are obvious inequalities in incomes and opportunities. There are disparities and divides in distribution of assets and resources. But patience has given way to passion. Everyone is trying to outdo and overpower the other while staking claim to amenities and entitlements.

3. Third is the fracture at the International level. To my mind, presently it has acquired very serious dimension. There is also a fracture between the present and future. There is a divide between the requirements of today and the needs of conservation for future.In short, the challenges are multi-faceted and they are all around us. However, the only hope is that we all want to tackle them. We want to see a co-operative, harmonious, sharing and caring world. In fact, this is where the hope lies.

But, unfortunate part of human life is that we allow things to be broken. Then we start retro-fitting. We first tear it; then put the stitch. By that time, many times, it is too late. In international arena, there are many such situations today where we don’t know now what to do. The real strategy would be not to let the fracture happen to the extent it does. 

Addressing the fracture at the individual level is most critical and most difficult. The fracture or rupture first happens at the level of human mind and heart. I can say with full responsibility that India has learnt to work on the level of mind. In our culture, it is accepted that, "जहाँ सुमति हँ संपति नाना। जहाँ कुमति हँ ति�पति तिनदाना।।". This, in short, means that good thoughts produce good results; bad thoughts give bad results. Hence, India is the land which has the solution for this all-pervasive problem of fracture.  We have always believed that victory over oneself is the biggest victory. The first and foremost in this it is the victory over mind; control over mind. This is our soft power; in fact, our real power. Now, the whole world has started recognizing it.In fact, India has also believed in Samagrata or Purnata which is wholeness (ॐ पूर्ण�मदः पूर्ण�मिमदं पूर्णा�त्पुर्ण�मुदच्ये पूर्ण�स्य पूर्ण�मादाय पूर्ण�मेवावशि�ष्ये ). It means that the universe and all its creation and beings are always complete in themselves. Because they represent the almighty who is always complete.For us the reality is one; only its descriptions are numerous. In terms of physical world also, ages ago, we echoed the same thing by saying "Vasudhaiv Kutumbkam”. Though there were hardly any means of reaching from one part of the world to another; still the feeling of oneness existed. This is because the spirit of co-existence was strong enough to overcome any barriers of knowledge or distance. The search for peace in the universe was paramount. This is the reason that our sacred prayers always end with a prayer for peace. Not only that a meaningful prayer always starts with a prayer for wellbeing of all. Fracture or Violence; fear or force is far away from our ethos. We do not venture or advocate violence even through words or mind leave alone deliberate action. And in fact, violence or damage is not thought even towards the nature,

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including trees and animals. That is why, India has always seen the domestic and the global as mutually reinforcing and inseparable parts of the same organic arrangement. We rush to help people in need whether in neighborhood or far away locations. We have fought wars when no strategic interests of our own were involved. We believe that there is a higher cause and there is a higher duty than what we do in normal times. I will give some more specific examples: 

Forces of protectionism are raising their heads against globalization. They want to reverse its flow PM said.

Since generations, we have believed that all resources and all wealth belong to the Nature and the Almighty. We all including the Presidents, and Prime Ministers; Kings and Queens are just the trustees or managers of this wealth. The biggest recent advocate of this trusteeship philosophy was Mahatma Gandhi;

Gandhi Ji also used to say there is enough in Nature for your Need; but not for your greed; Due to this belief, we have learnt to live in a way that is conducive to existence of man vis a

vis man as well as Nature; which is conducive to the needs of today as well as next generations;

There are teachings, techniques and teachers to guide and guard us so that a false sense of ownership does come in our mind. This only eventually leads to greed, pride and ego (lessons on Gyan and Vairagya);

And if such evils do crop in into our minds, there are ways and processes to get rid of them and purify the human mind and soul;

The techniques of Ashtang yog and Meditation are important enablers in that direction.Now, I will come to the second level which fracture within the territories of nations. Our belief system also gives rise to the principles and practices which are necessary for a happy and harmonious human existence. I am proud to say that India’s democratic traditions and modern-day institutions are just an offshoot of this belief system. Today, India is the largest democracy on the planet earth. At the same time, the people of India, in recent months, have also shown that though it is a democratic and federal polity; a vast geography and a diverse society, it is a very dynamic and decisive democracy.You might have seen in the recent past that more than 1.25 billion Indians accepted in one voice and moved towards a less cash society and a unified tax system in the form of GST. These two historic decisions happened one after the other and in less than a year’s time. We are now a financial system which is fully prepared and integrated for digital transactions. All this has fulfilled our dream and your desire of India as one nation, one tax. It has also started a fresh journey towards a modern tax regime that is transparent, stable and predictable. it is a matter of great satisfaction for us that the:

Largest Democracy on earth is also the fastest growing major economy; The most diverse society is also a very decisive polity. Thus, one sixth of global community which lives in India and which is a very diverse

society has a common vision; for a shared future. This is our real strength. We are trying to harness it and strengthen it further.

Unity in diversity is our old order; Sabka saath sabka vikas is our present practice. With this, I can say with confidence that Democracies can, will and must work in the

years and decades to come.

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Let me now come at the international level where the fractures and fault lines are really frightening.The biggest reasons for fracture at the international level are: Control of Territories: Both Direct and Indirect; and Control of Transactions: including cross border trade and movement of people;The first concerns us- the politicians and the other concerns the business community. But both affect the common man and woman. And both are just for acquiring more and more power as well as resources. All this arises out of ego or greed. All this was still understandable and has been happening throughout the modern human history. But today, the ego and greed are being wrapped into a nice wrapper of so called principles of faith or creed. However, for us in India, our same belief system of co-existence is reflected in our approach towards many of the Global issues. I would like to mention two most pressing issues which have the capacity not only to fracture but also to frustrate many good things which human race has achieved. 

The first is Terrorism. Because of our belief in co-existence of races and religions; and because of our belief in non-violence, we have always opposed terrorism. I say with full conviction that terrorism is bad in all its forms and facets. It is bad irrespective of its territory of origin or target of operation. We all must unite in fight against terrorism. India stands firmly with all such forces. I must also take the opportunity to appeal to all of you to see that such groups do not get money, arms and ammunition. It cannot be a good business to do business with such elements. We all know that, without peace, progress and prosperity is not possible.

The second global challenge is the problem of climate change. In our culture, we treat the Nature as mother. We also believe that man only has the right to milk it; not to destroy it. That is why, through Paris Agreement, we have assured the global community that our development process would be entirely in line with our cultural ethos towards environmental safeguards. In fact, we are not only aware of our responsibilities towards climate change; we are willing to take lead in mitigating its effects. To demonstrate sustainability of our development process, we have made major commitments and achievements in renewable energy. We have planned to draw 175 GW of energy from renewables by 2022. This includes 100 GW from Solar Energy and another 75 GW from Wind and other sources. We have added more than 14 GW to solar energy generation which was just about 3 GW three years back. With this, we are already the fifth largest producer of solar energy in the world. Not only this, we are also the sixth largest producer of renewable energy. 

I am also happy with the fact that with our efforts, an international treaty-based organization, called the International Solar Alliance has taken shape. The ISA has been conceived as a coalition of countries which are rich in solar radiation. The effort is to make them engage with each other to mitigate the hurdles and promote the enablers in solar energy. At present, 121 countries are its members. 48 countries have now signed and 19 have ratified the framework agreement. Thus, it has already come into force.

If we are really serious about strengthening co-operation and satisfaction in the global community; we particularly need to address the issues facing the youth. The rapid rise and spread of radicalism among youth in different societies is endangering the security and stability of many regions. People sitting here can help a lot in this direction. You can create and facilitate gainful employment and engagement for the youth. We must demonstrate by action that new technology will not take away jobs. Rather, it will create new jobs in newer areas and manners. 

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We need to create a caring and concerned society. We have to think of the ways where the commercial set up can be used to create a considerate civilization not just competitive corporate. Corporate social responsibility is an old word. But try to give a new meaning to it; try to give new message through it. I will repeat what I have been saying since long. You cannot continue to sell unless you enhance purchasing power of the common people . We cannot keep producing goods; without producing good income.

I am sure you already know a lot about us. There are enough reasons for India to be known globally. The most important reason is that it is an Attractive Business Destination along with its Vast Market and strong and stable fundamentals. I would therefore take a few minutes to talk only what we are doing currently. In recent years, we have tried to strengthen and build upon India’s basics further. Our present development agenda is based on FIVE PILLARS. 

First and foremost, we do understand that our systems need to change. Hence, we are persisting with far reaching structural reforms. Thus, our first pillar is our mantra of reform, perform and transform. Our reforms have touched almost all sectors. This specially includes: formalizing the informal economy through demonetization and digital transactions, direct tax reforms and expansion of the tax base, banking reforms, DBT through UID and Bank accounts, minimizing discretion, combating corruption and controlling inflation. Also, we have consistently reduced fiscal deficit and current account deficit. 

Over the last three years, we have particularly resolved a number of regulatory and policy issues facing businesses, investors and companies. Another good element of this reform process is that the States are also forthcoming. They have started competing for doing better and better. We call this process "competitive federalism.”

In this direction, we have also undertaken bold FDI reforms. More than 90% of the FDI approvals have been put on the automatic approval route. As a result of these changes, there has been a sharp rise in FDI in the past three years–from 36 billion US Dollars in 2013-14 to 60 billion US Dollars in 2016-17. 

Second, we are using Technology to transform governance and deliver public entitlements and services. I have been saying that e-governance is easy and effective governance. I am happy that increasing number of Departments and State Governments are deploying technology and ensuring time-bound decision and delivery. We are promoting an eco-system of creativity and innovation in every field. At the same time, we are keen to maintain speed and scale of things being implemented.

Third, is significant upgrading of the physical infrastructure including roads, railways, air and sea ports. The scale and scope of this task is immense. To mention a few, our Sagarmala project seeks to connect our long coastline and ports to the hinterland. Similar is our focus on development of regional airports. Our objective is to reduce the logistics cost transaction time for various activities. Also, improvement in infrastructure have already enthused people as they are beginning to see a qualitative change in their lives. 

Fourth, we are also aware of the urgent need to upscale and improve the rules governing economic activity. We need to be fully integrated with the world in major policy areas. Maybe it

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is the regime of entry and exit of businesses, for IPRs, or arbitration and commercial adjudication, we have moved very decisively to brush up the framework to bring them in line with global best practices.

The fifth pillar is inclusive economic development. As I said, the biggest reason for fracture within the countries is inequality and disparity leading to divide and dis-trust. But we believe in"ॐ सव भवन्ु सुखि$नः । सव सन्ु तिनरामयाः । सव भद्राणिर्ण पश्यन्ु । मा कणि)द्दःु$भाग्भवे् ।"

Personally, I have always said that development process should be inclusive and encompassing. We have tried in our own way to bridge the income and opportunity divide. For example:

When we facilitate Industry and services by creating ease of business; it is for job creation for millions of our youth;

When we announce and work on Make in India and aim at making India a global manufacturing hub; it is to create job opportunities for millions of workers;

When we implement Digital India programme; it is to bridge the digital divide which has become an important consideration in this age;

When we work on the skill India programme; it is to give skill set to the unskilled and semi-skilled work force which is a source of divide in the society;

If we unleash a wave of start-ups; it is to create employers along with employment; If we open bank accounts of 310 million (31 crore) unbanked people; it is to bring them

into financial mainstream; If we deploy technology for targeting of beneficiaries and direct benefit transfer; it is to

eliminate middlemen from the system of government subsidies; If we appeal to the well to do people to surrender subsidized cooking gas; it is to support

those who do not have cooking gas connections; If we decide to electrify all remaining villages and households: it is to see that quality of

their life changes for ever.

To bridge the imbalance and divide, we have to do a lot and have to do it fast. To give you a few examples:

We have to build 50 million houses for the poor and houseless; We have to build metro rail systems in more than fifty cities to promote public transport. The range of our requirements is very big. We have to go horizontal as well as vertical. From distribution of LED bulbs to laying down heavy transmission lines; From cooking gas in every kitchen to National gas grid and LNG terminals; From Water tap in households to waterways and pipelines; From roads in villages to Bharatmala road network garlanding the borders of the country; From laying and electrifying railways to building modern townships over 400 stations. The needs of our fast track development process are lifetime opportunities for the

companies in various fields. India’s steel consumption is 60 kg per person, against a global average of 218 kg per

person. India’s per capita electricity consumption at 1100 kWh is the lowest among BRICS

nations and is just 1/3rd of the world average.

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Similarly, in India, vehicles per 1000 population is 25 against around 500 of European countries. (134th place in world and lowest in top 10 car making countries)

Think of the revolutionary effect which Industry will have if 1.25 billion people start consuming at par with or closer to the world average in some of these sectors.

Thus, India gives a great scope and opportunity to all kinds of ideas and concepts to flourish and investments to fructify.

Our Government agencies are finding innovative ways to create a business-friendly environment. We have now developed the digestive capacity for various technologies. Our young people have already distinguished themselves in the realm of technology, innovation and entrepreneurship. And we are benefitting from their experience at home also.

India is an investment in future. You will agree with me if I say that:  We are a vibrant and youthful society moving towards a knowledge-based economy;

India houses a large number of Tech manpower, Institutions and R&D centers; We are moving towards becoming a five trillion US dollars economy by 2025; We will become 3rd largest consumer market in the World by 2025; According to the World Bank and IMF our growth rate is going to be steady and high; India ranked 3rd in WEF’s list of most trusted governments in 2017; We are a deep-rooted Democracy; openness, predictability of policies and rule of law is

ensured; Many International agencies and consultancies have recognized this stability; Global rating agency Moody’s has upgraded India’s rating on account of its economic

reforms; These are a few examples I narrated just to show the direction of our society, polity and

economy. We are building a NEW INDIA where one sixty of humanity is combined and committed to get good administration and better amenities for a better quality of life. This is not a co-incidence. But an outcome of persistence of the people of India to get what they actually deserve. And we will get that sooner than anticipated.

Investing in India, travelling to India and manufacturing in India has become much easier, the Prime Minister said, listing his government's policies, and adding, "We have pledged to end license raj, we are removing red tape and laying out the red carpet."

Hold on. One more thing! India’s Family system and our Guru-Shishya traditions are the biggest examples of a wholeness and completeness. They are sustaining our culture of shared vision, healing hearts and caring community.It is India where our oldest scriptures say and we follow: "ॐ सह नाववु । सह नौ भुनकु्त । सह वीय1 करवावहै । ेजस्विस्वना वधीमस्ु मा तिवति5षावहै ।" This means: May we all be protected. May we all be nourished. May we work together with great energy. May our intellect be sharpened. Thus, India offers you everything that you seek from and for your life. 

Therefore, my advice to you is that: 

If you want wealth with wellness, work in India; If you want Peace with Prosperity, live in India;

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If you want Health with whole life, be in India.And our promise is that your agenda will be part of our destiny. We both will have a shared and successful future.

Thank You!

IMF FORECAST FOR INDIA’S ECONOMY

On the eve of Prime Minister Narendra Modi's keynote address at the World Economic Forum (WEF) in Davos, the International Monetary Fund (IMF) said India's growth will pick up in FY2019. That will see the country regain the tag of fastest-growing major economy, backing the government's revival theme. The IMF also said 2017 saw the best global growth in seven years. 

India is forecast to grow 7.4% in FY19 against 6.7% this year, gaining pace to 7.8% in FY20. The global economy is expected to grow 3.9% this year, faster than 3.7% forecast earlier in October. India's growth remains unchanged from the October forecast. "Some 120 economies, accounting for three quarters of world GDP, have seen a pickup in growth in year-on-year terms in 2017, the broadest synchronized global growth upsurge since 2010," 

In the current year, China will grow 6.8%, just ahead of India but will slip to 6.6% next year. The US is forecast to grow 2.7% and 2.5% in 2018 and 2019, respectively, higher by 0.4 and 0.6 percentage point than earlier estimates. According to India's official estimates, the economy will grow 6.5% in the current fiscal with the second half clocking 7% growth. Early corporate results for the October-December quarter have shown a pickup in earnings, providing

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more evidence of a recovery. 

INDIA’S ECONOMIC SURVEY 2018-19

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Economic Survey is an annual document of the Ministry of Finance, Government of India, and reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programs, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.

The Economic Survey report 2017-18 was tabled in both houses of the Parliament by Finance Minister on 29.01.2018 ahead of the Union Budget 2018, in which it was projected that the economic growth for the fiscal year 2018-19 will be between 7% and 7.5%, while it also flagged concerns over rising crude oil price. The Economic Survey report 2017-18 also said that private investment is poised to rebound in the fiscal year 2019 and employment, education and agriculture will remain the focus in the medium term.

Here are the key takeaways from the Economic Survey report 2017-18:

1. The GDP growth rate for the fiscal year 2017-2018 is pegged at 6.75% by the Economic Survey report. The government, in its advance GDP estimate, had estimated a growth of 6.5%.

2. In the fiscal year 2019, the survey said that the Indian economy is expected to grow between 7% and 7.5%. The International Monetary Fund (IMF) has also said that India could grow at 7.4% in the current year 2018, as against China’s 6.8%.

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3. On the implementation of the Goods and Service Tax (GST), the survey said that  there has been a 50% increase in number of indirect taxpayers; Large increase in voluntary registrations; distribution of GST base closely linked to size of economies; strong correlation between export performance and state’s standard of living and India’s formal sector was found to be substantially greater than currently believed, the economic survey said.4. The level of tax filers by November 2017 was 31% greater. The economic survey said that it translated roughly into about 1.8 million additional taxpayers due to demonetization-cum-GST, representing 3% of existing taxpayers.

5.  The Agriculture growth in FY18 likely to be at 2.1%, while the Industry growth for FY18 likely to be 4.4%.

6.  Services growth for FY18 likely to be at 8.3% and the country’s economy should witness improvement in next fiscal year.7. The IBC resolution process could prove a valuable technology for tackling this long-standing problem in the Indian corporate sector.

8. The apparel sector has immense potential to drive economic growth, increase employment, and empower women in India. This is especially true as China’s share of global apparel exports has come down in recent years. However, India has not, or not yet, capitalized on this opening.

9. In the last three fiscal years, India experienced a positive term of trade shock. But in the first three quarters of 2017-18, oil prices have been about 16 percent greater in dollar terms than in the previous year. It is estimated that a $10 per barrel increase in the price of oil reduces growth by 0.2-0.3 percentage points, increases WPI inflation by about 1.7 percentage points and worsens the CAD by about $9-10 billion dollars. Economic Survey calls for “policy vigilance” in coming year if high oil prices persist or stock prices correct sharply.

10. The Headline inflation has been below 4 per cent for twelve straight months, from November, 2016 to October, 2017 and CPI food inflation averaged around one per cent during April-December in the current financial year. The Survey observes that the economy has witnessed a gradual transition from a period of high and variable inflation to more stable prices in the last four years.

11. Current account deficit expected to average 1.5-2% of the GDP this fiscal, while export growth is pegged at 12.1%. 12. The survey said that India will need $4.5 trillion investment in infrastructure by 2040.

RBI- FINANCIAL STABILITY REPORT DECMBER 2017Global Economy:

According to the World Economic Outlook (October 2017 update), the global output is projected to expand by 3.6 per cent in 2017 and 3.7 per cent in 2018 on the back of a pick-up in investments, trade and industrial production. While falling energy prices in 2017:H1 boosted household demand, the global energy prices rebounding to their highest level in two years make the risk of reversal of household purchasing power significant. Nevertheless, improved global

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fundamentals with a broad-based growth outlook for both advanced and emerging economies provide a significant buffer to growth risk. In contrast, heightened geopolitical risks and still unclear contours of the US tax reform have the potential to adversely affect elevated market valuations and dampen the growth momentum

Looking at the advanced economies (AEs), the US real gross domestic product (GDP) increased at an annual rate of 3.3 per cent in 2017: Q3, due to higher personal consumption expenditure, non-residential fixed investments and the federal government’s spending. The US economy’s performance is comforting, notwithstanding its low productivity growth and a slowly ageing population. The Euro area also maintained its pace of expansion in 2017: Q3, growing at an annual rate of 2.6 per cent which makes it one of its best performances in a decade. Germany expanded by 2.8 per cent, while growth in Italy accelerated to 1.7 per cent, its best performance since 2010. Japan grew at a faster than-expected 2.5 per cent in 2017: Q3 on account of strong export growth overcoming weak domestic demand. Overall, there is a perceptible momentum in terms of the geographical spread of the growth, lending support to an above average global growth rate.

Domestic Macro-Financial Developments

India’s gross domestic product (GDP) growth rebounded to 6.3 per cent in 2017-18 :Q2 from 5.7 per cent since 2017-18:Q1 after the initial hiccups associated with the rollout of nationwide goods and services tax (GST), coming on the back of demonetization. Gross value added (GVA) also posted 6.1 per cent rise in 2017-18: Q2 from 5.6 per cent in previous quarter

The ongoing deleveraging in the heavily indebted parts of the corporate sector and muted credit growth in public sector banks (PSBs) pose a risk to growth. Subdued credit, which may also be a consequence of thin capital buffers of PSBs, leads to lower investments in the economy. Credit growth in major sectors as well as industries has witnessed a decline over the past two years. Personal loans remain a bright spot in an otherwise muted credit growth environment. It is expected that the recent recapitalization move for PSBs will give a significant fillip to credit growth.

Credit and Deposit growth

Credit growth of SCBs on a year on year basis increased from 4.4 per cent to 6.2 per cent between March and September 2017. The public-sector banks’ (PSBs) credit growth increased from 0.7 per cent to 2.2 per cent during the same period reversing the declining trend observed during past two years. On the other hand, deposit growth of SCBs, on a y-o-y basis, decelerated from 11.1 per cent to 7.8 per cent between March and September 2017. The decline in deposit growth is observed across all bank groups.

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Asset quality

The gross non-performing advances (GNPA) ratio of SCBs increased from 9.6 per cent to 10.2 per cent between March and September 2017, whereas, their restructured standard advances (RSA) ratio declined from 2.5 per cent to 2.0 per cent. The stressed advances (SA) ratio rose marginally from 12.1 per cent to 12.2 per cent during the same period. GNPA ratio of PSBs increased from 12.5 per cent to 13.5 per cent between March and September 2017. Stressed advances ratio of PSBs rose from 15.6 per cent to 16.2 per cent during the period.

The net non-performing advances (NNPA) as a percentage of total net advances increased from 5.5 per cent to 5.7 per cent between March and September 2017. PSBs recorded distinctly higher NNPA ratio of 7.9 per cent. The GNPAs of all SCBs increased by 18.5 per cent on a y-o-y basis in September 2017. PVBs registered a higher increase in GNPAs (40.8 per cent) as compared to their public-sector counterparts (17.0 per cent) (Chart 2.4a). NNPAs of all SCBs increased by 11.1 per cent on a y-o-y basis in September 2017 (Chart 2.4b).

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Among the major industry sub-sectors, mining and quarrying, food processing, engineering, construction and infrastructure registered increase in their stressed advances ratios between March and September 2017. The asset quality of sub-sectors such as textiles, rubber, cement, basic metals and vehicles, however, improved during the same period.

Credit Quality of Large Borrowers:

The share of large borrowers both in total SCBs’ loans as well as GNPAs declined between March and September 2017. The total stressed advances of large borrowers increased by 2.4 per cent between March and September 2017. Advances to large borrowers classified as special mention accounts-27 (SMA-2) also increased sharply by 56.5 per cent during the same period.

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Profitability

SCBs’ return on assets (RoA) remained unchanged at 0.4 per cent between March and September 2017 while their return on equity (RoE) declined from 4.3 per cent to 4.2 per cent. PSBs have continued to record negative profitability ratios since March 2016.

Banking Stability Indicator

The banking stability indicator (BSI) shows that the risks to the banking sector remain at an elevated level weighed down by further asset quality deterioration.

Macro stress test – Credit risk

The Indian banking system’s resilience to macroeconomic shocks was tested through a macro stress test for credit risk. The adverse scenarios were derived based on standard deviations in the historical values of the macroeconomic variables: up to 1 standard deviation (SD) for medium risk and 1.25 to 2 SD for severe risk (10-year historical data). The stress test indicated that under the baseline scenario, the GNPA ratio of all SCBs may increase from 10.2 per cent in September 2017 to 10.8 per cent by March 2018 and further to 11.1 per cent by September 2018. However, if the macroeconomic conditions deteriorate, the GNPA ratio may increase.

Under the assumed baseline macro scenario, six banks have CRAR below the minimum regulatory level of 9 per cent by September 2018. However, if the macro conditions deteriorate, CRAR of more banks in the stress test goes below the minimum regulatory requirements. Under the severe stress scenario, the system level CRAR declines from 13.5 per cent in September 2017 to 11.5 per cent by September 2018. The recent capitalization plan announced by the GoI for PSBs is expected to significantly augment capital buffers of affected banks as also the credit growth.

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