India 2011
On Monday, January 24, 2011 13:01 by Sudip Bandyopadhyay2011 will be the make or break year for India. 2011 will present the opportunity for India to cross China in terms of GDP growth rate for the first time since liberalisation began. It also poses the possible threat of India losing its steam midway by getting bogged down with silly corruption issues along with nonfunctional governance.
As a country we are at crossroads and its upto us to make our destiny. The robust GDP growth needs to be truly supplemented by an inclusive growth. This needs to move beyond rhetoric and lip service. The danger lopsided growth poses needs to be understood in the context of social stability and acted upon without any further delay.
Considering the momentum gathered by the last few years growth India can surely attain next level of economic development soon subject to prudent economic management and completion of the long pending task of enacting the requisite legislations for speeding up and removing the impediments to growth. We need a functioning parliament and a national consensus on economic growth. We need quick and exemplary punishment for scamsters which will act as deterrant.
Indian capital markets should prosper in 2011 subject to the above referred governance issues being fixed at the earliest and also satisfactory outcome in certain other key areas like monsoon and crude oil prices. In spite of all the developments, Indian economy continues to be dependent, to a great extent, on rain Gods. Monsoon needs to be good and appropriately distributed. This will result in continuance of agricultural growth and prosperity in rural India. Good monsoon also has a positive impact on domestic inflation.
After Monsoon, second most important factor for Indian capital markets continues to be international crude oil prices. This needs to remain below $100 per barrel to ensure that inflation is under control.
Our expectation is that over next 3-6 months, crude oil prices will start coming down and stabilizes at around $90 per barrel. Along with this, if the rain Gods are smiling on India, rapid growth of Indian economy and capital markets is a foregone conclusion. The Central Government has also started showing signs of taking appropriate remedial measures to fix the governance issues.
Investors with a time horizon of one year plus should treat current softness of India capital market as a great opportunity for value buying. Continued strong domestic demand and even a marginal recovery in international demand will propel Indian corporates to deliver 20-25% growth in earnings in 2011.
Looking forward to a great 2011 where India will regain its true position in the comity of nations.
