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 Some stimulus was applied to ignite the growth but was immediately withdrawn as the economy seemed getting back on track.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 The country is on a secular uptrend and a little graceful push could help but which must withdrawn or recalled thereafter.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.