But luckily, the bulk of Iraqi oil, pipelines, and its export mechanism/ports, are all in the south of the country, which never came under threat. Also, the global oil prices never did go up to incorporate a ‘war premium’. But all in all it proved to be a silver lining for India and China, two huge consumers of world oil.
Cairn India has incidentally just announced very promising
onshore gas finds in Rajasthan which when developed will contribute its mite
towards India’s energy security.
Governor Rajan at the RBI, working on reorganising the
central bank to make it more nimble and useful , is already buoyed by the fact that the monsoons
have turned out quite well, if a little uneven in its favours .
This will, in itself, lead to lower food prices, meaning
primarily vegetables, as the cereals and grain have enjoyed a bumper crop from
last year. However, because of primitive handling and warehousing, there is
always a lot of spoilage and wastage in
the midst of poor people going hungry.
But with lower fuel prices expected to persist, the cost of
transportation of foodstuffs and other goods to market will also work lower.
Rahuram Rajan may indeed be able to start cutting interest rates soon, thereby
enthusing business and industry and improving the investment climate.
The stock market meanwhile, is on a roll. It has received $
12 billion in FII investment already this year, taking the Nifty above 7800 and
the Sensex upwards of 26,000. Much more is expected in the second half, when the pace of
investment from abroad generally accelerates.
In 2012, 65% of the $24 billion total came in the second half of the year, and in 2010 it was 84% of $29 billion that came, all in the latter part. In addition, domestic investors have now joined the rally, inclusive of the mutual funds focussed on equity, and all sectors of the market, ranging from the micro and small, to the medium and large stock indices, are now heading upwards, broadening the base of the bull-market and increasing its stability.
A healthy stock market growth will assist the Government’s
divestment programme of equity in a number of PSUs ,slated to raise anywhere
between Rs. 60,000 and 80,000 crores. Private companies also have ambitious
plans to raise money from the stock market, and this looks like a very good
prospect going forward, particularly with the PSU banks groaning under their
burden of NPAs.
However, there are some lurking external threats. Governor Rajan, famous for having predicted
the Wall Street collapse of 2008, three years before the event, is once again
warning of an impending financial crisis in the US, brought on by excess
liquidity sloshing around, paid for with trillions in borrowed money. This,
even as the US has reached the end of its stimulus programme, and might even be
looking at raising interest rates in the
future. GDP growth rates however, in the
US and Europe alike, are not encouraging as yet, and unlikely to pick up in an
atmosphere of prolonged stagflation.
India, on revival
path, towards 5.5% this fiscal, and more, up to 8% in GDP going into 2016 and
2017, is definitely going to remain attractive. China is being closely watched for signs of
distress after its blistering pace of double digit growth, now slowed to around
7% of GDP. But, it seems to be ostensibly coping fine at these levels.
Both India and China, housing half the population, and a
good deal of the demand in the world,
will continue to grow faster than most other countries. Of course, the Chinese
economy is already several times larger
than ours, and getting ready to rival that of the US. China also runs
substantial and globally rare surpluses, but
India has a good chance of narrowing the gap over the coming years.
Of course, India’s
early revival to near double digit growth now hinges on massive investment in
infrastructure, a certain vehicle for over $ 1 trillion in investment. India is
seeking investment from a number of countries including Japan, China and now
Singapore, into this sector and others, and there are several other countries
keen to invest, particularly now that
the tangle of red-tape is being cut. Some commentators think the Modi
Government might have a tough time in motivating the bureaucracy, but Modi
himself is undaunted, having cracked
this particular nut in Gujarat before.
At present, the domestic signs are all good, the best
amongst both the EMs and BRICS, and sure to get better as the pace of reforms
picks up. The Modi Government, with its absolute majority and a business-friendly prime minister, inspires
strong investor confidence. Other reports also forecast a revival in private
equity (PE) interest in India.
The Government is also working on revamping the agricultural
remuneration scenario to get away from the stranglehold and exploitation of
middlemen. The contribution to GDP from the agricultural sector, now at 17%, is going to be enhanced dramatically.
Rates of agricultural growth nationally, currently languishing at below 3%,
need to be better. Gujarat has turned in
10% agricultural sector growth year on year, and this needs to be replicated nationally, if we
are to banish poverty.
A new National Common Market For Agricultural Produce with
many Spot Markets is being created to take things forward from the present
Agricultural Products Marketing Council (APMC) and the Food Corporation of
India (FCI). Combined with a new body
tasked to push federalism and authority to the States, things are likely to be
transformed.
This new mechanism is
expected to put bigger profits directly in the pockets of farmers, using
strong IT inputs for real-time
information flows. It will also reduce huge inefficiencies from antiquated
operational methods while creating afresh modern infrastructure for materials
handling, warehousing, cold chains etc.
The potential rewards of these second generation reforms,
including those in defence production, insurance, construction, etc. under
process, will positively impact the fortunes of millions of the urban and rural poor, and become the
unbeatable electoral game-changer going
forward.
(1,102 words)
August 18th,
2014Gautam Mukherjee
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