Stim­u­lus needed

Money Times - - Bazar.com -

Stock in­dices may be scal­ing new highs but their fun­da­men­tals may not be that sup­port­ive at least for now. Do­mes­tic as well as for­eign liq­uid­ity is adding fuel to the fire. In­dia once had a GDP growth of over 8-9% but one poor mon­soon de­railed this growth. Some stim­u­lus was ap­plied to ig­nite the growth but was im­me­di­ately with­drawn as the econ­omy seemed get­ting back on track. To­day, de­spite the great reforms ini­ti­ated by a govern­ment bereft of ma­jor scams, the GDP is still strug­gling around 4-5% in quar­terly read­ings. It ap­pears that de­mon­eti­sa­tion did not get the de­sired re­sult and hit the econ­omy hard. GST, an­other great move, cre­ated a lot of pain in im­ple­men­ta­tion since In­dian mer­chants and traders have for cen­turies dealt in bills and ‘chit­this’. But this could be teething prob­lems, which may be re­solved in an­other four to six quar­ters. How­ever, this is a cru­cial time for the govern­ment to win the state polls and pave the way for 2019 Par­lia­men­tary elec­tion. The poor IIP data does not speak well of the govern­ment’s plank of devel­op­ment in the next gen­eral elec­tions. The sit­u­a­tion needs to be changed and charged. Stim­u­lus is the only so­lu­tion by way of some fruit­ful govern­ment ex­pen­di­ture to boost con­sump­tion and con­se­quently the de­mand. This alone can im­part con­fi­dence to the pri­vate sec­tor to ig­nite the capex switch and get go­ing.

A wor­ri­some fac­tor that the govern­ment needs to ad­dress on a war foot­ing is the rise in the num­ber of job­less. In­dia boasts of the largest ‘un­der 35’ pop­u­la­tion but it may also have the largest block of un­em­ployed youth! It is thus a greater so­cial and po­lit­i­cal prob­lem than an eco­nomic one. The govern­ment is aware of it but even with con­tin­u­ous and chronic flog­ging, the devel­op­ment cart is not mov­ing. In­dus­tri­al­ists are shy­ing from capex how can one ease the in­er­tia and set the ball rolling? STIM­U­LUS is the only so­lu­tion to re­vive the econ­omy that is in re­verse year. How and when it will come about and how it is quan­ti­fied and timed de­pends on the de­sired im­pact. Let the an­nounce­ment of the Stim­u­lus pack­age not be con­sid­ered neg­a­tively. The coun­try is on a sec­u­lar up­trend and a lit­tle grace­ful push could help but which must with­drawn or re­called there­after.

The PM’s meet­ings with his min­is­ters and sec­re­taries and eval­u­at­ing their achieve­ments, break­throughs and short­com­ings may be an ex­er­cise to for­mu­late the en­su­ing bud­get. The meet­ing with the czars of in­dus­try is also aimed at eas­ing the stim­u­lus dose and get­ting the lead­ers to wrest the ini­tia­tive in growth.

By its slow inch­ing up­wards, the mar­ket is in no way free from ap­pre­hen­sions. The in­tra-day pos­i­tives and neg­a­tives high­light the un­cer­tainty in the minds of in­vestors. All the mar­ket pun­dits can vouch that a sub­stan­tial fall or correction is ruled out. And this is the dan­ger sig­nal as the mar­ket has a ten­dency to go against the una­nim­ity. It also has a ten­dency to catch us on the wrong foot with­out a warn­ing. But, don’t let this scare you be­cause In­dia to­day is too large a do­mes­tic con­sump­tion story. The macros are in great shape and the reforms ini­ti­ated will lead to some re­mark­able re­sults.

Now fol­low us on In­sta­gram, Face­book & Twit­ter at mon­ey­times_1991 on a daily ba­sis to get a view of the stock mar­ket and the hap­pen­ings which many may not be aware of.

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