We are in the New Year 2020 which also is the last year of the decade. It’s also the time to review our past performance and make better plans for the future. Credit health is one of the important aspects of our life which cannot be neglected as it is impactful on our personal growth, peace and prosperity. Let’s look at how Indian economy will fare in the new year, which in turn will impact your credit health. 

An Overview of Indian Economy in 2019

India is the third largest economy in Asia that has been witnessing a slow growth in recent months. The Gross Domestic Product growth fell to 4.5% in the second quarter of the financial year 2019-20.

The slow growth can be attributed to a number of factors such as slowdown in private consumption, investment and export, lack of credit to growth and demand in the market, etc. There were several reform measures taken by the Indian Government to boost the credit market; RBI slashed rate cuts fives times this year, super rich surcharge was withdrawn for foreign investors, start-ups were exempted from angel tax, a significant GST rate cut on corporate tax rate and Rs. 70,000 crore was infused in public sector banks to push loan growth. 

Concerning the price appreciation in real estate properties, India fared well towards the end of the year. India ranked 47th spot out of 56 countries in housing pricing appreciation with the 0.6% marginal growth. Slow sales, lack of liquidity with developers and high inventory have resulted to the reduction of prices in the industry. 

Banking Industry went through major changes in 2019. About 10 public sector entities were merged to create 4 bigger banks. The merger was called for a better control and management of lending capacity.  

The growth of Indian Economy in 2020

Although the year 2019 witnessed an all-time slow growth in the quarter 2 of FY 2019-20, the economy is all set to rebound in 2020 with the global conditions showing a positive trend. With the initial difficulties associated with Goods and Services Tax gradually getting ironed out and proactive measures taken by the Government and the Reserve Bank of India yielding positive outcomes, the economy will be on a better footing in the New Year 2020. The RBI has projected that India’s GDP will show growth of 6.4% to 6.6% in 2020. 

Following demonetisation, digital transactions have been on the rise especially among millennials. Digital payments such as UPI transactions using QR code and e-wallets have become a popular method for young consumers. According to a recent study, at least 77 percent of millennials prefer digital payments over cash. This trend will pave more transparency and accountability.  

The slew of reforms announced by the Government to boost auto, real-estate and manufacturing sectors are likely to show positive results. The announcement of Rs. 20,000 crore package for housing projects is expected to benefit 3.5 lakh homeowners and help avail much needed funds for real-estate developers. 

Corporate tax rate cut to 22% from its previous 30% is expected to infuse more capital investment in the manufacturing sector. Lower taxes enhance profitability for companies which in turn will improve business confidence and boost capital investment. The rate cut is lower than corporate tax prevalent in some of the emerging and industrialized countries.  

Although there is an increasing trend of borrowing seen among Indian millennials, the rise of bad loans is a major concern for the banking sector. RBI has warned that bad loans may increase in the coming days due to a weak macro situation, higher slippages and low credit growth. The gross Non Performing Assets may increase to 9.9% from existing 9.3%. 

How can you be credit healthy in 2020?

The way you manage your own finances will have an impact on the performance of the country’s economy. With most public sector banks fixing lending rates based on credit score, it is important to pay attention to your credit score. Checking credit score frequently will help you keep a tab on your credit health. You can also get your credit report and review it to make fine plans in 2020. If any promotion or increment is happening soon, you can make plans for a prepayment on your existing loans. In case you have a negative account that needs to be closed, prioritize it to become credit healthy. Any bad loans can signal trouble in future borrowing. 

If you have never borrowed before, it is unlikely you will have a credit score. With the availability of lifetime free credit cards and short-term loans in the market, you can get one to start building your credit score in 2020. 

If you had not given a thought of investing a part of your earnings, perhaps this is the best time to do it. You can choose an investment option that is comfortable for you and be consistent with the plan. Mutual funds, RD, FD, government bonds, stocks, PPF, post office saving schemes, gold, real-estate, etc.are some of the popular investment options that can help you multiply your wealth. Besides being an investment option, some of them can also help you save on taxation. 

Insurance is another important aspect that must not be ignored. Protect yourself and your family against disease, disaster and death with the right insurance plans. Choosing an insurance plan early in life can get you low premiums. 

Parting Note

Even though you are in a comfortable financial situation, never take things for granted. Talk to a financial expert to make plans for your future. Step in 2020 with the good credit health which in turn can get you a wealth of credit offers.