Growth In Economy - Pros & Cons

India needed a stable government to drive towards better economic growth. Stable govt. will have better control on reform policies and some key themes that govt. promise in their 100 day action plan;

A. National Priorities

• · Infrastructure & Transport
• · Power, Healthcare
• · Affordable Housing
• · Urbanization

B. 6 high growth employment sectors that need reforms

• · Agriculture & rural
• · Financial Services
• · IT/ITES
• · Mining & Metals
• · Trade/Retail
• · Telecom

C. 4 cross cutting enablers

• · Education
• · Taxation & National Identification schemes
• · Enhancing capital flow
• · Climate change

Pros: Intrinsic demand for Infrastructure development;

• · Power deficit – ~11%+, huge latent demand for power
• · Kilometers of road per person or growth in volume of goods transported over the years – Infrastructure investment imminent
• · Just 1 out 6 person have mobile – Telecom will grow
• · Cars per’000 person – Going forward auto sector will be growth engine for manufacturing
• · Urban population % is growing – Latent demand for urban infra. Development
• · Medieval health care systems – Demand driven

Cons: Difficult global market

• · High fiscal deficit a huge concern (11 %+). How investments in infrastructure projects be sustained? Selling PSU’s? It can be one partial option.
• · Shrinking external capital market, scarce FDI money, etc… - Show me the money!!
• · Manufacturing sector under huge-stress, where is the money? And the orders?
• · Frantic pace of urbanization – Need for affordable housing, Urban MTS, affordable and good healthcare system. Is someone listening?
• · Inflation & Exchange rate threat
• · Volatility in commodity prices e.g. Crude prices has rocketed from $40 to $70 in 6-8 months (75% increase)

Some Sectoral Views;

Green Zone (++): FMCG, Telecom, Agriculture and Education

Yellow Zone (+): Infrastructure, Pharma, IT/ITES, and Financial Services

Red Zone (-): Real Estate, Media, Transport, Automobile, Cement, and Metals & Mining

Hope that the intrinsic demand and effective governance will take our economy to growth path.

Northbound Sensex

Things have been just about ok. Reading a lot about markets, but can't make of my mind whether to invest with long-term or gamble.

Market where euphoric for last couple of weeks and then you have these "experts" (or whtever crap!!) media calls them, all gung-go about the new govt. and about sensex touching 21,000 and that everything else will look good.

I wonder if congress have some magic wand for our the economy, which they couldn't use for 5 years and will use it this time around (remember India has high fiscal deficiet (11%+)

I ask questions to myself;

1. Is northbound sensex proxy for improvements in the capital market? Definitely not.

2. Is northbound sensex infuse quick & enough liquidity in the system ? No

3. Is northbound sensex bring out realty sector of dumps? Maybe, but how one can justify exorbitant prices developers paid when things where looking good.

4. Is northbound sensex will open avenues for funding from equity market? Yes - People believe that PSU's will bat first

5. Is northbound sensex will benefit the retail/small shareholder? No to Maybe - Most of them are in my category- Confused

SilverLining,

The other day i was listening to my CEO and he narrated his experience with the new govt.'s senior minister, who apparently told him "Don't Bribe" his official for govt. projects. Sounds great, but the feeling wears down easily when you hear about donation row in TN.

Let's hope that govt. pushes for sustained & collabrative growth engine for all of us benefit.

-Jai Hind