Global economic overview
The global economy grew an estimated 5.9% in 2021 compared to a de-growth of 3.3% in
2020. This improvement was largely due to increased vaccination rollout the world over and
a revival in economic activity based on catch-up consumption.
The global economic recovery is attributed to accelerated vaccine rollout across 4.4
billion people, around 56% of the global population (single dose). The spot price of Brent
crude oil increased 53.34% from USD 50.37 per barrel at the beginning of 2021 to USD 77.24
per barrel at the end of the calendar year, strengthening the performance of oil exporting
countries and moderating growth in importing nations. Global FDI reported an increase from
USD 929 billion in 2020 to an estimated USD 1.65 trillion in 2021.
The global economy was affected by prohibitive shipping freight rates, a shortage of
shipping containers and semiconductor chips in 2021, affecting global economic recovery.
Inflation was at its highest since 2011, especially in the advanced economies, catalysed
by a run up in commodity prices. Some emerging and developing economies were positioned to
withdraw policy support to contain inflation even as the economic recovery was still
incomplete.
As economies across the world were determined to bounce back to normaley post the
two-year COVID-19 slump, the growth trajectory was halted again due to the Russia Ukraine
conflict. While this conflict had serious humanitarian implications, it was tough on the
global economy with supply-chain disruptions, rising commodity and crude oil prices. This
was further hit by Chinas restrictions given their zero-COVID policy with frequent and
wide-ranging lockdowns in key manufacturing hubs and shutting of port activity. As a
result, the global economy is projected to grow at a modest 2.6% in 2022. A higher
interest rate environment could affect emerging markets and developing economies with
large foreign currency borrowings and external financing needs in 2022.
| Regional growth (%) |
2021 |
2020 |
| World output |
5.9 |
(3.3) |
| Advanced economies |
5.0 |
(4.9) |
| Emerging and developing economies |
6.3 |
(2.4) |
(Source: IMF, World Bank, UNCTAD)
Performance of major economies
United States: The country reported GDP growth of 5.7% in 2021 compared to a
de-growth of 3.4% in 2020, following the governments investment of trillions of dollars
in COVID relief.
China: The countrys GDP grew 8.1% in 2021 compared to 2.3% in 2020 despite it
being the novel coronavirus epicenter
United Kingdom: The countrys GDP grew 7.5% in 2021 compared to a 9.9% de-growth in
2020.
Japan: The country reported growth of 1.7% in 2021 following a contraction in the
previous year.
Germany: The country reported a GDP growth of 2.9% in 2021 compared to a decline of
4.9% in 2020.
(Source: World Bank, IMF, Business Standard, Times of India)
Most of the economies across the world are estimated to slow down in 2022 due to policy
support withdrawal, rising inflation and supply-chain related disruptions. Political
turmoil coupled with inflationary pressure sourced by a rise in interest rates have
dampened the future in the short term.
Indian economic review
According to Economic Survey 2021-22, the Indian Governments thrust on capital
expenditure and conducive policies to lift the economy from the COVID-19 pandemic is
expected to result in 8.7% real GDP growth in 2021-22 as against a contraction of 7.3% in
2020-21. The trinity of high foreign exchange reserves, continuous foreign investments and
rising exports will shield the economy from the possible global liquidity tapering in
2022-23.By the close of 2021-22, India was among the six largest global economies, its
economic growth rate was the fastest among major economies (save China), its population at
around 1.40 billion is the second most populous in the world and its rural under-consumed
population arguably the largest in the world.
Y-o-Y growth of the Indian economy
|
FY19 |
FY20 |
FY21 |
FY22 |
| Real GDP growth (%) |
6.1 |
4.2 |
(7.3) |
8.7 |
Growth of the Indian economy, 2021-22
|
Q1, FY22 |
Q2, FY22 |
Q3, FY22 |
Q4, FY22 |
| Real GDP growth (%) |
20.1 |
8.4 |
5.4 |
4.1 |
The Indian economy was affected by the second wave of the pandemic that affected
economic growth towards the fag end of the previous financial year and across the first
quarter of the financial year under review. The result is that after a growth of 1.6% in
the last quarter of 2020-21, the Indian economy grew 20.1% in the first quarter of FY
2021-22 due to the relatively small economic base during the corresponding period of the
previous year.
Indias monsoon was abundant in 2021 as the country received 99.32% of a normal
monsoon, lower though than in the previous year. The estimated production of rice and
pulses recorded volumes of 127.93 million tonnes and 26.96 million tonnes respectively.
The total oilseeds production of the country recorded a volume of 371.47 million tonnes.
Moreover, based on the spatial and temporal distribution of the 2021 monsoon rainfall, the
agricultural gross value added (GVA) growth in FY22 is anticipated to be 3-3.5%. The
countrys manufacturing sector grew an estimated 12.5%, the agriculture sector grew 3.9%,
mining and quarrying grew by 14.3%, construction grew by 10.7% and electricity, gas and
water supply grew by 8.5% in FY 2021-22.
There were positive features of the Indian economy during the year under review. India
gets the highest annual FDI inflow of USD 83.57 billion in FY 2021-22, a validation of
global investing confidence in Indias growth story. The government approved 100% FDI for
insurance intermediaries and increased FDI limit in the insurance sector from 49% to 74%
in Union Budget 2021-22.
India surpassed Rs 88,000 cr target set for asset monetisation in 2021-22, raising over
H97,000 cr with roads, power, coal, mining and minerals accounting for a large chunk of
the transactions. The Indian government launched a four-year Rs 6 Lakh cr asset
monetisation plan (roads and highways, pipelines, power transmission lines, telecom
towers, railways station re-development, private trains, tracks, goods sheds, dedicated
freight corridor, railways stadiums, airports, projects in major ports, coal mining
projects, mineral mining blocks, national stadia, redevelopment of colonies and
hospitality assets).
In 2021, India was the largest recipient of global remittances. The country received
USD 87 billion during 2021, with the US being the largest source (20%). Indias foreign
exchange reserves stood at an all-time high of USD 642.45 billion as on September 3, 2021,
crossing USD 600 billion in FOREX reserves for the first time. Indias currency weakened
3.59% from Rs 73.28 to H75.91 to a US dollar through FY 2021-22. The consumer price index
(CPI) of India stood at an estimated 5.3% in FY 2021-22. India reported improving Goods
and Services Tax (GST) collections month-on-month in the second half of 2021-22 following
the relaxation of the lockdown, validating the consumption-driven improvement in the
economy. The country recorded its all-time highest GST collections in March 2022 standing
at Rs 1.42 Lakh cr, which is 15% higher than the corresponding period in 2021.
India ranked 62 in the 2020 World Banks Ease of Doing Business ranking. The country
received positive FPIs worth Rs 51,000 cr in 2021 as the country ranked fifth among the
worlds top leading stock markets with a market capitalisation of USD 3.21 trillion in
March 2022.
The fiscal deficit was estimated at Rs15.91 trillion for the year ending March 31, 2022
on account of higher government expenditure during the year under review. Indias per
capita income was estimated to have increased 16.28% from Rs 1.29 Lakh in 2020-21 to Rs
1.50 Lakh in 2021-22 following a relaxation in lockdowns and increased vaccine rollout.
Indias tax collections increased to a record rs 27.07 Lakh cr in FY 2021-22 compared
with a budget estimate of rs 22.17 Lakh cr. While direct taxes increased 49%, indirect tax
collections increased 30%. The tax-to-GDP ratio jumped from 10.3% in FY21 to 11.7% in
FY22, the highest since 1999.
Retail inflation in March at 6.95% was above the RBIs tolerance level of 6% but fuel
prices played no part in this surge. Retail inflation spiked to a 17-month high in March
2022, above the upper limit of the RBIs tolerance band for the third straight month.
(Source: Economic Times, IMF, World Bank, EIU, Business Standard, McKinsey, SANDRP,
Times of India, Livemint, InvestIndia.org, Indian Express, NDTV, Asian Development Bank)
Indian economic reforms and Budget 2022-23 provisions
The Budget 2022-23 seeks to lay the foundation of the Indian economy over the
‘Amrit Kaal period of the next 25 years leading to 100 years of independence in
2047. The government is emphasising the role of PM Gati Shakti, inclusive development,
productivity enhancement & investment, sunrise opportunities, energy transition and
climate action, as well as financing of investments.
The capital expenditure target of the Indian government expanded by 35.4% from H5.54
Lakh cr to H7.50 Lakh cr. The effective capital expenditure for FY23 is seen at Rs 10.7
Lakh cr. An outlay of rs 5.25 Lakh cr was made to the Ministry of Defence, which is 13.31%
of the total budget outlay. A boost was provided to Indias electric vehicle policy
‘Scheme for Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle in
India. An announcement of nearly rs 20,000 cr was made for the PM Gati Shakti National
Master Plan to catalyse the infrastructure sector. An expansion of 25,000 km was initiated
for 2022-23 for the national highways network. To boost the agricultural sector, an
allocation of rs 2.37 Lakh cr was made towards the procurement of wheat and paddy under
MSP operations. An outlay of rs 1.97 Lakh cr was announced for the Production Linked
Incentive (PLI) schemes across 13 sectors.
Outlook
Indias medium-term optimism is derived from the fact that three down cycles –
long-term, medium-term and short-term – could well be reversing at the same time. The
long-term downtrend, as a result of nonperforming assets, scams and overcapacity could be
over; the medium-term downtrend that was caused by the ILFS crisis, select banks collapse
and weakening NBFCs could well be over; the short-term downtrend on account of the
pandemic has weakened following the acceleration of the vaccine rollout.
There is a possibility of each of these downtrends having played out, which could well
lead to a multi-year revival in capital investments. Some USD 500 billion worth of
investments are expected to be made in the wind and solar infrastructure, energy storage
and grid expansion.
The Indian economy is projected to grow by 8% in FY23 (World Bank estimate), buoyed by
tailwinds of consistent agricultural performance, flattening of the COVID-19 infection
curve, increase in government spending, favourable reforms and an efficient roll-out of
the vaccine leading to a revival in economic activity.
Across the next three years, capital expenditure in core sectors - cement, metal, oil
refining and power should be about Rs 5 trillion. Besides, the governments production
linked incentives (PLI)–led capex should generate an incremental Rs1.4 trillion in
sectors like consumer durables, pharmaceuticals and automobiles.
Global regulatory technology
The global RegTech market size is expected to grow USD 7.6 billion in 2021 to USD 19.5
billion in 2026, growing at a CAGR of 20.8% between 2021 and 2026. North America is
expected to retain its position as the largest RegTech market by revenue. This growth was
largely driven by the rise in fraudulent activities, increasing need for compliance
management, reducing compliance costs and need for consistency and transparency. RegTech
provides various technological solutions to meet the regulatory criteria of numerous
sectors.
Key drivers of the RegTech industry
The RegTech segment witnessed exponential growth owing to the emerging regulatory
scenario and sustained funding of other industries. Here are some other drivers:
The online shift: Businesses and compliance practices are getting increasingly
digitised. Therefore, RegTech industry is expected to grow as complex task and technology
will play an important role to meet compliance timelines and norms.
Business efficiency: Businesses are saving valuable time and significant costs by
automating compliance processes that could otherwise make them unviable. The other
benefits include better customer experience and faster growth. Industries like hospitality
and travel are expected to witness significant changes in this front.
Data regulations: Analysis of collected data by the regulator used to be a manual
process, restricting the potential to monitor completeness or accuracy. At present, with
the ubiquity of big data, financial products and growing regulatory requirements, the old
compliance processes are unmanageable. The right regtech investments would bridge this
gap.
Tech stacks: With the availability of myriad solutions, firms can create a fully
integrated technology stack optimised for their business rather than a one-size-fit all
approach that would not work due to the complexity of the regulations. (Source: Economic
Times)
Global Saas market review
The global Software as a Service (SaaS) market was pegged at USD 212.20 billion in 2021
and is expected to reach USD 374.48 billion by 2026. The cost-saving benefits of digital
technology is steering the demand for diverse kinds of software for various reasons.
Software as a Service (SaaS) preserves software programmes and vital data on a cloud
platform, eliminating the requirement to establish and maintain local infrastructure. The
requirement for manual data backup is eliminated by allowing for scheduled backups,
ensuring data integrity and security in an organisation. (Source: globenewswire.com)
Factors driving the progress of Indian SaaS companies
The Indian SaaS segment attracted around USD 4.5 billion of investment in 2021,
registering a record 170% growth compared to USD 1.7 billion in 2020. This growth is
fueled due to the following reasons:
Quality products: Indian software companies launched quality products as per global
standards.
Skilled talent: Indian domestic engineering colleges provide a large and increasing
pool of skilled talent to Indian SaaS companies.
Cost competitiveness: Indian SaaS companies operate within reduced cost structures
compared with peers from developed nations, marked by increased priority for prompt cash
management for sustained growth.
Service: Indian SaaS companies have adopted a decent service culture strengthened
by an existing culture of successful IT and Business Process Outsourcing (BPO) industries.
Category: Indian SaaS companies forayed into new categories with an increased focus
in excellent customer experience and innovation.
Sales effectiveness: Indian SaaS companies have strengthened their sales excellence
by learning from early achievements and through the launch of US headquarters
Enterprise product strategy: Indian SaaS companies created products to cater to the
complexities (scale deployments, migration, security and compliance) of their enterprise
clients.
Research-driven: Indian SaaS companies established large research and development
centres in India.
Positive developments in key markets
Europe
The European Securities and Market Authority (ESMA) introduced the Electronic Single
Electronic Format (ESEF) in which issuers on the EU regulated markets were expected to
prepare their annual financial reports in Inline XBRL. There are 4700 + Companies
including the UK companies who were needed to file in iXBRL from January 1, 2021 onwards.
However, due to the COVID pandemic the European Commission allowed certain relaxations. By
the end of the year 2022, all listed companies having IFRS consolidated statements in
Europe and UK would have filed once as per the ESMA ESEF mandate.
There is a significant momentum in Europe around ESG reporting in the medium term with
the European Commission coming out with the Corporate Sustainability Reporting Directive
(CSRD) in April 2021 and signalling the need to use electronic reporting standards like
the Inline XBRL. This directive is expected to cover more companies, over and above the
listed company universe.
Europe could soon see information for retail investors being reported in iXBRL. Both
the European Securities and Markets Authority (ESMA) and the European Insurance and
Occupational Pensions Authority (EIOPA) have recently provided advice to the European
Commission on improving the protection for retail investors.
US
The Securities and Exchange Commission (SEC) mandates listed companies to file
quarterly and annual reports in iXBRL format. SEC continues to collect in other data
formats but the Commission realising the advantage of the standard is gradually moving
several existing reporting requirements in iXBRL/XBRL while consistently looking at new
reporting requirements to be reported in iXBRL/XBRL. Several such announcements were made
last year, thus expanding the scope and opportunity. Environmental, Social and Governance
(ESG) reporting is coming into prominence in the US. The SEC is working towards an
implementation strategy where all public companies would be asked to adopt sustainability
standards and make these reports available in XBRL/iXBRL.
The Federal Energy Regulatory Commission (FERC) replaced its electronic filing format
for a list of select forms (first phase) with XBRL. The first phase went live as of
October 2021 requiring over 800 energy companies to file quarterly and annual submission
of select set of forms. In Phase 1, about 800 companies were impacted. FERC is keen to
adopt one single data standard across all its reporting requirements and is evaluating a
gradual and step by step shift. A phase 2 implementation plan for a second set of reports
is being put together.
In the USA, state agencies prepare and submit their Annual Comprehensive Financial
Report (ACFR) on an annual basis to their respective state financial controllers. There
are over 90,000 such state agencies in the country. Over 30,000 of them raise money for
their funding requirements from the municipal bond market and are governed by the
Municipal Securities Rulemaking Board (MSRB), which requires over 30,000 state agencies to
submit their audited ACFRs to the federal agency as well. Driven by the Data Act and
Financial Transparency Act, common data standard needs to be implemented in five years
which will cover not only ACFRs but also Single Audit. Led by Florida who have already
adopted XBRL for the state agencies to report, the final taxonomy is in its final stages
of testing. In the meantime, the
Governor of Michigan signed off on a bill announcing their mandate and a study which
will impact over 10,000 state agencies of various sizes. Several other states are actively
reviewing and putting together their strategy and mandate for the adoption of XBRL for
Annual Comprehensive Financial Report (ACFR). Inline XBRL sample documents for various
state agencies have been prepared using IRIS platform as part of pilot initiatives for
the state to evaluate and understand the benefits of XBRL adoption.
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