The Pattern #19: Of rising costs, dropping values and storms before the calm

Mayank Jain   /    Head - Marketing and Content    /    2022-07-22


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    Hi everyone, 

    Before we all head into the weekend, here’s the latest edition of The Pattern, a weekly newsletter where I wrap up the rumblings from the financial and technology spheres in an easy-to-read digest. 

    I can’t start with anything apart from the rupee’s consistent freefall against the dollar. At the time of publishing, we stand at a concerning - and that’s putting it mildly - INR 79.90 to the dollar. This depreciation is bound to have a severe impact across the board while we await the promised $1 = INR 1 era that does the rounds on WhatsApp ever so often.

    First off, the price of imports will skyrocket. And India imports almost 80% of its crude oil - an ingredient used in most FMCG items. So be prepared to pay significantly more for shampoos, detergents, soaps…. i.e., most personal and home-care goods that we take for granted.

    Students heading abroad will feel the pinch - with the tuition fee for their dream universities going through the roof. But it’s not just the education loans that will face the brunt. Higher import prices equal inflation. Higher inflation equals a higher repo rate, and higher repo rates translate to higher interest rates. Simple economics that has a profound impact on the lives of most Indians.

    Experts say this isn’t the end - further decline is on the horizon. RBI will have to play the knight in shining armor yet again, and all we can do is wait and see (while our pockets get lighter and lighter).

    In other news, we at FinBox have gone blue in the face talking about the MSME credit gap - the reasons, challenges, and the solutions. So it’s definitely heartening to see that private banks have more than tripled their share in loans sanctioned to MSMEs.  

    Several factors contributed to this rise - one, of course, is the abating (somewhat) of the pandemic. In addition, more giant corporations, who have been the darlings of banks up until now, have paused on borrowing, instead focusing on repaying accumulated debt.

    It would be unfair to leave out the impact of government intervention - Emergency Credit Line Guarantee disbursals increased from Rs 22,426 crore in 2020-21 to Rs 24,636 crore in 2021-22, a reasonably impressive 10% increase. 

    (Side note: According to the RBI, private sector banks have been leveraging these schemes more than their public sector counterparts).

    The signs are encouraging; I can’t help but temper my excitement with a pinch of salt. This isn’t the time to be complacent, and both banks and FinTechs must continue to innovate - creating financial products that leverage the data MSMEs already possess to make lending a smoother ride. 


    We explored the possibilities of GST financing in this piece a while ago - specifically, how TReDS facilitates the financing/discounting of the trade receivables of MSMEs through multiple financiers.  Do give it a read.

    Shifting gears, it feels like we’re barely out of the frying pan and being pushed into the fire. COVID continues to linger, and now we’ve got reports of the third case of monkeypox in Kerala. We just can’t seem to catch a break - and neither can our healthcare system. 

    Hospitals were crushed under the burden of the second wave, and lakhs of Indians were pushed into abject poverty due to medical costs. Now, the 47th GST council has recommended that common biomedical waste treatment facilities for treatment or disposal of biomedical waste shall be taxed at 12 percent (these were earlier in the exempted category).

    This will undoubtedly push healthcare costs even higher, which is why The Indian Medical Association has requested Finance Minister Nirmala Sitharaman to withdraw the GST on healthcare services.

    Let's hope this request bears fruit because, let's face it, healthcare is already an unaffordable luxury to most in India. We’ve covered this in several pieces that talk about how embedded finance could, in a small way, ease the financial burden of healthcare on Indians.

    That’s all from me for this edition - as always, here are my reading recommendations for the week.


    Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter here and follow FinBox on LinkedIn to never miss any of our updates. 




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