With the 2014 general elections being the pivotal point for the world’s largest democracy, there has been a lot of inquisitiveness among the investors and industrial community for expectation of a conducive economic policy by new government taking the charge at the center. Widely it is expected that Narendra Modi-led NDA could come in power albeit industry players across the sectors heavily relying that a change in hand would bring in economy-friendly governance.
Moreover, most of the rating agencies are forecasting gross domestic product (GDP) in the range of 5.6 to 6.5 % for the next two three years down the line. Going beyond that, International Monetary Fund (IMF) has forecasted GDP growth of 4 % for the calendar year 2014-18. Nevertheless, growth in this range would not be favourable in case for a country like India, where 269 million people living below poverty line and it needs to provide jobs to its exploding labour force and where the per-person income is below $4 a day (or $1,500 annually). At any point of time the predicted range of growth would not be enough. By not doing enough to accelerate growth, and thus job creation, India risks setting off a vicious cycle of lower household income, consumption and investment spending that would be so much harder to shake off – not to mention the utter loss of the demographic dividend.
Although, the worst appears to be over, it is unlikely that the Indian economy will migrate to a high growth phase of around 9% over the next two-to-three years. The agencies believe that the economy, at this point of time, is delicately balanced and requires a serious policy push to return on the high growth path.
If everything falls into place as per expectations the growth could rise in the next two year but if India misses a decisive mandate or a viable coalition after the battle of the ballot, a sustainable lift to growth won’t materialise.
Depending on where growth prints, the ramifications for businesses and the economy at large will be huge, as a report on economic outlook by the rating agency CRISIL shows that for manufacturers of consumer goods and automobiles, who thrived on the consumption boom of the past decade, the medium-term looks far less opportune.
It also asserts that positive impulses in the next five years will come from some improvement in investment, more so in its efficiency. “But these won’t rebound to the levels seen in fiscals 2004-2011.”
India’s journey towards inclusive development is getting longer and tiresome, and unless the potholes of policy stasis are paved in double-quick time, the aspirations of more than a generation will take a hit. However, an improvement in investment efficiency, which has fallen drastically over the last two years, is expected to kick in with faster project clearances, implementation of stalled infrastructure projects and resumption of mining activities. This, in turn, will support investment growth, especially when demand – both domestic and global – begins to rebound, improving capacity utilisation, thus laying the foundation for India’s entry into a phase of healthier growth.
(Dr Sunil Gupta is a Chartered Accountant by profession and Director on the board of Punjab National Bank (PNB), General Insurance Corporation of India (GIC) and Rural Electrification Corporation Limited (REC). Dr. Sunil Gupta is working flawlessly for the economic and social prosperity of India. Vision and hard work are the two pillars of his success. Appreciated by national leaders and business professionals, Dr. Gupta believes in all-inclusive participation and growth. The motive is clear – Building a better nation.)