The World Economy is growing rapidly in recent years. The Indian economy has always shocked the global economy by its performance in the international market. Its time that we look at some of the facts talked about the Indian economy, which is the worlds’ 3rd largest economy in terms of GDP.
India can be the Best pick amongst BRIC Nations in 2013
Lets take a look at why India can be the best pick in 2013 and what should be the forward looking policies implemented by the Indian Government in order to attain sustainable growth in days to come.
India needs to move out of defensive sectors such as staples and the IT sector which have benefited from the weak rupee. Undoubtedly the services sector, which currently contributes around 56% to the GDP, has shown tremendous improvement and development but the growth is robust and would not sustain due to fluctuation in the international forex market. Also such growth is not sustained for long term. India is currently an import driven economy and needs to balance its fiscal deficit. The need for the nation at this hour is long financials, engineering, building materials and real estate.
Currently there are a number of layers which leads to bullishness on Indian economy. Indian companies have shown tremendous performance and growth in the year 2012 despite facing tough inflation. Despite of not supportive policy environment and a relatively weak economy, the growth in the Indian companies across many sectors were worth talking. If we talk about other BRIC nations, we find there is no delivery of earnings growth thus depicting the fact that the Indian companies are used to difficult environment.
With an expectation of rise in borrowing by Indian companies abroad, a strong demand for EM fixed income could be seen. This would further lead to fall of money market rates in India.
Government Policies & Reforms
The recent reforms implemented by the new finance minister provided a new energy to the economy. FDI in retail which was passed despite being opposed by many parties of coalition was one major step taken by the Government to boost the growth in sector which contributes almost 13% to the GDP. Also the market valuation is well within the normal range which compels the analysts across the world to think about India being one of the best performing major emerging markets in 2013.
A bullish expectation is seen in the banking sector as well. The policy action of RBI will have banks make more money. The NPA tend to be more in the PSU banks which might be reduced significantly with the policy reforms and the risks may get reduce for nonperforming loans for PSU banks. On the other hand, the trend with the major private sector banks has been reasonably healthy and there is not much concern pertaining to the nonperforming loans.
Talking about the disposable income and the consumption level among the individuals in the Indian economy, we see despite a lot of criticism about the Indian economy at the macro level, there has been significant rise in the consumption level. Be it in the automobile sector, retail, consumer goods, or electronics, consumption has increased significantly. Thus a lot of positives have been seen for the Indian economy and it is expected to remain bullish for the period starting 2013. The consumption pattern, GDP growth, sectoral development, policy reforms in sectors like retail, banking etc together will help the Indian economy grow at a much faster rate than expected and thus remain bullish for the period to come.