Time To Spin The Flywheel

India’s GDP is currently growing at its slowest pace in almost 11 quarters. In fact if you look at the past decade, growth in 2012-13 at 4.96 per cent has been the lowest; the highest being 9.57 per cent that we reported in 2006-07. Many blame the crisis that erupted in the western world in 2007-08 for the general slowdown that has been afflicting economies the world over.

But if you look at the Indian story, 2008-09 was really a year where we actually saw a dip in growth rates with the GDP rising by 6.72 per cent. Two years thereafter, when a major part of the world was under the firm grip of a slowdown, we grew at a healthy 8.59 and 9.32 per cent respectively.

From growth rates, which can be termed as stupendous by global standards of that time, we are today staring at an economic situation, where terming it as bad could probably be a gross understatement. What changed over the past two years, for the economy to have virtually gone into the pits? Why should an economy growing at a breakneck speed suddenly be found to be facing hurdles?

India had always been looked upon as a consumption led growth story. The large, young, educated and thereby aspiring population was (and still remains) the biggest strength of the nation. Considering this very basic premise, technically there is only a limited scope for the globally changing or deteriorating economic fundamentals to impact us. But the reality is agreeably far from that.

Industrial growth has hit pathetically low levels, inflation is nowhere in the region where it can be said to be in a comfort zone and as a natural consequence interest rates have remained higher. The sum total of all this is what you are seeing in the economic growth rates. The blame lies fairly and squarely on a rather weak political leadership that has failed in keeping up with the need of the time.

The openly prevalent corrupt practices have not been discouraged and policies laid out by the government are volatile, adding both cost and risk to new business ventures. The supply side of commodities has been tightly leashed through a web of illogical policies and actions by some unscrupulous leaders for their personal benefits and as a result the commodity supply chain has been artificially constricted forcing inflation numbers to be high. Our present economic condition is a creation of our own doing and the same is being further impacted adversely by the global slowdown. On the other hand if India would have continued its momentum towards growth by fueling its potential of consumer spending, it would have become the catalyst for firing up the global economy.

The reason why I say this is very obvious. What we as a nation need urgently is a political leadership which can take some quick and bold decisions to ensure that the economy once again gets back on its feet. Well, if the super optimistic voices of those in power are to be believed, we apparently seem to be on that course. But haven’t we been hearing these voices for a long time now?

Our Finance Minister, P Chidambaram was very recently heard rubbishing the International Monetary Fund’s latest World Economic Output report which projected a 3.8 per cent growth rate for India for FY13, 1.8% lower than its last projection. “I know that the World Economic Outlook report does not share my optimism, but I may tell you that we do not share their pessimism,” he was reported to have said. It may sound encouraging, but is absolutely impractical to achieve unless the government machinery moves in the right direction of achieving it.

The very first requirement if we were to see any real growth momentum is to ensure that the projects worth thousands of crore which have been stalled for want of regulatory and environmental clearances get off the ground as soon as possible. The Cabinet Committee on Investments (CCI) in the last three months has reportedly managed to find solutions of issues related to nearly 40 projects that entail an investment of Rs 1.5 lakh crore. The traction that this initiative provides to the economy will be felt only once these projects really start moving. You can clear projects worth nor just Rs 1.5 lakh crore but may be even Rs 10 lakh crore. But unless there is a will on the ground to get them executed in a time bound manner by ensuring that all the prerequisites are in place nothing will matter to the markets and investors who have been waiting for the climate to change decisively.

Our current issue brings you the views of diverse market participants and intermediaries who tell us what to expect over the next one year. Why the year? The gloom surrounding the economy in its present state does not probably offer us the leverage to think about the festive times that are on their way. We present to you a portfolio that could help you build a good amount of wealth over the next one year beginning this Diwali. We are sure the nuggets of advice offered by various personalities will also help you build a reasonably strong opinion of how the year will probably pan out. Happy reading and a Very Happy Diwali to all our patrons!

V B Padode
Editor-in-Chief