Sorry for delay in posting, here we goes with economy topic.
Will Indian economy gain the momentum in term?:
The slowdown in the Indian economy has raised the concern regarding whether is it due to business-cycle or changes in the fundamentals. So we will look at what are the main drivers of economy for the last decade.
1. Investments
2. Consumption
3. Growth in service sector
4. Growth in Rural economy
Investment could be done in manufacturing, service and infrastructure sectors. It is mainly depends upon supply and demand factors, as of now demand side there is no shortfall. demand in all the sectors is robust and increase in household income also adding to it. Another factor which is contributing to demand side it efficiency of the industry in setting up the projects in short time. Setting up 50000 MW power plants in five years is one example for this. When everything is fine, then how would it slowdown? yes there is one reason for this. Main factors are issues in environmental clearances, land acquisitions and shortage of power supply. One more reason could be interest rate, which is actually short-term in nature.This is the area where supply and demand are not matching. Government should take some actions in these areas to improve the situation and market sentiments.
The very next factor is consumption. As we all know about it, it is very strong. Increase in domestic per capita income, urbanization and easy access of rural markets. Rising in affluence has spurred the consumption of good and services. So far as good as it is, but here comes the enemy to halt the consumption. Main factors are inflation and availability of finance to get the goods and services. Since inflation hovering at top, everyone will ask for cut in interest rates, in my opinion it would be a big mistake. Because, increase in availability of credit will again make inflation to look at sky. Rate cut and availability of finance are inter dependents. That is why recently RBI cut the SLR by 100 basis points to increase the liquidity, which is actually useful for really profitability projects. I guess you understood what i mean. Here is one more area where government should address, Agriculture. It is badly effected by poor monsoon and shortage in power supply. But govt. can't do with monsoon, which doesn't have any control over it but it should address power shortage, which is major concern across all the sectors.
Next factor, Service sector which has more than half pie in Indian GDP. It has been growing very strongly. It has been growing at 7-8% Y-O-Y growth. It is the back bone of Indian economy. employment generation capability of service sector is very well known to every one especially to engineers. Because diversification in the sector it hasn't effected that much by EURO zone crisis. As far as it concern for indian growth perspective it is will contribute its part.
Last factor which has been the most changed area, rural economy. Since more than 70% of Indian population is living in rural India, it will affect growth. Communication technology, road transportation, SCMs (supply chain management), financial services at low interest rates and NREG scheme, which is the major factor in boosting the rural economy, are made the rural economy to increase in fast phase. And one more main factor is diversification of rural employment. In the past it was one agriculture, now it has changed totally and made not sensitive to monsoon.
As far as my opinion, all the fundamentals are strong which would look other way. But here are some factors which made them to look other way are lack of clarity in policies (GAAR, environmental, mining and ect). Business cycle and global factors are also affecting the growth. In the other day FM approved selling of ownership in PSUs, which will kill two birds (Slowdown and inflation) with one stone.
So the final conclusion is that, since the Indian economy fundamentals are strong it can be reached to 8% growth in the very next year and more than 7% in current FY with with Govt. policy reform and i hope PC is more positive in taking actions to boost the economy.
What do you say...?
Will Indian economy gain the momentum in term?:
The slowdown in the Indian economy has raised the concern regarding whether is it due to business-cycle or changes in the fundamentals. So we will look at what are the main drivers of economy for the last decade.
1. Investments
2. Consumption
3. Growth in service sector
4. Growth in Rural economy
Investment could be done in manufacturing, service and infrastructure sectors. It is mainly depends upon supply and demand factors, as of now demand side there is no shortfall. demand in all the sectors is robust and increase in household income also adding to it. Another factor which is contributing to demand side it efficiency of the industry in setting up the projects in short time. Setting up 50000 MW power plants in five years is one example for this. When everything is fine, then how would it slowdown? yes there is one reason for this. Main factors are issues in environmental clearances, land acquisitions and shortage of power supply. One more reason could be interest rate, which is actually short-term in nature.This is the area where supply and demand are not matching. Government should take some actions in these areas to improve the situation and market sentiments.
The very next factor is consumption. As we all know about it, it is very strong. Increase in domestic per capita income, urbanization and easy access of rural markets. Rising in affluence has spurred the consumption of good and services. So far as good as it is, but here comes the enemy to halt the consumption. Main factors are inflation and availability of finance to get the goods and services. Since inflation hovering at top, everyone will ask for cut in interest rates, in my opinion it would be a big mistake. Because, increase in availability of credit will again make inflation to look at sky. Rate cut and availability of finance are inter dependents. That is why recently RBI cut the SLR by 100 basis points to increase the liquidity, which is actually useful for really profitability projects. I guess you understood what i mean. Here is one more area where government should address, Agriculture. It is badly effected by poor monsoon and shortage in power supply. But govt. can't do with monsoon, which doesn't have any control over it but it should address power shortage, which is major concern across all the sectors.
Next factor, Service sector which has more than half pie in Indian GDP. It has been growing very strongly. It has been growing at 7-8% Y-O-Y growth. It is the back bone of Indian economy. employment generation capability of service sector is very well known to every one especially to engineers. Because diversification in the sector it hasn't effected that much by EURO zone crisis. As far as it concern for indian growth perspective it is will contribute its part.
Last factor which has been the most changed area, rural economy. Since more than 70% of Indian population is living in rural India, it will affect growth. Communication technology, road transportation, SCMs (supply chain management), financial services at low interest rates and NREG scheme, which is the major factor in boosting the rural economy, are made the rural economy to increase in fast phase. And one more main factor is diversification of rural employment. In the past it was one agriculture, now it has changed totally and made not sensitive to monsoon.
As far as my opinion, all the fundamentals are strong which would look other way. But here are some factors which made them to look other way are lack of clarity in policies (GAAR, environmental, mining and ect). Business cycle and global factors are also affecting the growth. In the other day FM approved selling of ownership in PSUs, which will kill two birds (Slowdown and inflation) with one stone.
So the final conclusion is that, since the Indian economy fundamentals are strong it can be reached to 8% growth in the very next year and more than 7% in current FY with with Govt. policy reform and i hope PC is more positive in taking actions to boost the economy.
What do you say...?
