5 reasons to be India positive

Image source: www.freedigitalphotos.net
- Manika Premsingh

Think India, think gloom. This is the tone of almost every India economy related thought today. True, there is reason for it: in the recent times, GDP numbers have shown dismal growth and rupee is falling on account of fading investor confidence in the Indian economy as well as a difficult global environment. But curiously, while we are concentrating on the developments, the positive trends seem to be passing us by. So here are five economic trends in the Indian economy that should bode well for it in the coming months, and potentially even impact growth positively.

#1. Inflation is relatively tame: India’s headline inflation figure, as measured by the Wholesale Price Index (WPI) has significantly improved overtime. The latest monthly figure, for July 2013, showed a rise of a very manageable 5.8% on a year on year (yoy) basis. In fact, for FY14 so far, inflation has been subdued at sub-5% levels in 3 of the 4 months for which data is available. In comparison, in July 2012, inflation was a still high 7.5%.
#2. Foreign trade figures are turning encouraging: India’s merchandise foreign trade numbers are coming back in health as well. While export figures for FY14 so far show a small 2% growth over the corresponding period of the previous year, July figures actually show an 11.6% growth over the previous year. And this is not all. With import figures still declining in comparison with the previous year, the trade deficit has actually shrunk in July 2013 to US $ 12.3 billion from US $ 17.5 billion during July 2012.
#3. Credit growth is stable: Despite the fact that growth has been slowing down in India for a few quarters and optimism is downbeat credit growth is steady for the fortnight of August 23, 2013, the latest number available. This is an encouraging sign at a time when investments in the economy have been weak.
#4. Ample rainfall augurs a good agricultural harvest: In a country still dependent on South-West monsoons for a good crop, the ample rains during the season so far augur well. For the season so far, 22 of the 36 meteorological subdivisions have reported normal rains, and rains for the country as a whole are 11% in excess of normal for the season till now. While the agriculture output depends on the spatial distribution of rainfall as much as on the quantity, the overall picture does indicate more positive news than negative. With a majority of India’s workforce employed in agriculture and related sectors and around 20% of GDP derived from it, this is a positive for incomes and growth in Q3 and Q4 of 2013-14.
#5. Rupee depreciation could encourage exports: While the sharp depreciation in the rupee is indeed worrisome given that one-third of our import demand is in the form of oil, which is relatively inelastic and hence means a ballooning in the trade deficit, it also makes Indian exports more competitive overtime. In fact, exports for India have been hit in the recent time by the prolonged global slowdown, and this factor could lend some support.

Image source: www.freedigitalphotos.net

No comments:

Post a Comment