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.