Everything points to a better second half of the year (Oct-Mar) in terms of industrial and economic growth, and then, to a better second half of the decade (2016-20) Car sales in India rose 17.5% in July, the ninth consecutive monthly increase. Market research firm Nielsen says demand for several product categories has grown, especially in urban India. The consumer packaged goods market grew 11% by value in the three months ended 30 June, as compared with around 7% in the previous quarter (the three months ended March), the firm said. And the growth is led by categories that are urban-centric-deodorants, chocolates, hair conditioners and other personal care products.
The Reserve Bank of India (RBI) said on 4 August that it looks like demand is picking up again, especially in urban India. Are the good times back in Asia's third largest economy? Investment growth is yet to revive; then, investment growth always leads consumption growth during a downturn and lags it during an upturn. Even there, signs of activity are visible.
For instance, Foxconn's announcement of a $5 billion investment in Maharashtra and the opening of its plant in Sri City in Andhra Pradesh bode well for electronics manufacturing in India. Foxconn has said it will bring its suppliers to India. The ensuing cluster effect will attract other contract manufacturers to India. Everything points to a better second half of the year (October to March) in terms of industrial and economic growth, and then, to a better second half of the decade (2016-20). In some ways, that was only expected. Both in the 1990s and the 2000s, India had a better second half of the decade than the first.
Three fundamental changes will help India break the cycle and also break through to higher levels of growth-maybe even double digit. The first, changes in the law to make it easier for companies to acquire land for large industrial projects. The second, the unification of the Indian market through a goods and services tax (GST).
The third, labour reforms. At this point in time, the first doesn't look possible (although the National Democratic Alliance government tried). The third seems to have been abandoned. The GST legislation lives on, and, despite having been diluted from its original form, the tax promises to add its bit to the gross domestic product. Together, the three were expected to address the so-called supply-side (or capacity) issues that plague the Indian economy and which, left unaddressed, will ensure that high growth results in high inflation, causing RBI to tighten rates, applying the brakes on the economic engine.