The 8.2% Tailwind

(Image used for illustrative purpose only)

The festive season on the Indian stock markets is likely to begin on Monday. The GDP numbers is a sweet music to millions of ears. On an upswing in past few weeks from the lows of 2018, the real party in the Stock Markets is likely to begin tomorrow and continue atleast till the formal announcement of general elections in early-2019!

India’s GDP grew at 8.25% in the first quarter of current financial year. Equally interestingly, the drivers of this impressive jump in growth came from manufacturing and agriculture, the two sectors employing maximum people.

This return to high-growth trajectory after many quarters is a good tailwind for growth in the future. The Indian economy has grown despite many local and global headwinds in recent years. There are many challenges this time around too. The US – China trade standoff, tightening of global financial conditions, continued slump of Indian currency, increasing Oil prices, shortfall in tax collections, rising current account deficit, etc. – all of these can impact growth in future. The growth in employment has been lower than expected in recent years too.

Many say that the high growth in this quarter is the base effect of slower growth in the corresponding quarter last year, “Q1 GDP growth of 8.2% is a statistic, dollar at Rs. 70 is a reality” said a politician recently. True. It does pain when one is filling petrol at a price of over Rs. 82 per litre or buying of dollars when travelling abroad or paying the school fees for your child. One does hope that the prices were low as the income is not rising at the same pace. Small businesses continue to feel the heat of liquidity and demand.

Maintaining a balance between growth and inflation has ever been a greatest challenge for our policy makers. It continues to do so.

Well into the elections year, the feel-good factor for a common man should increase in India. The demographic dividend from a young population, rapid urbanization and huge bank of our middle-class population will continue to spur India’s growth. The country need not worry too much on international factors so long as it has a large consumption pool. What is required is the sound strategy to create jobs. Keep the price rise under control and create employment. India will gain better from economists becoming good politicians in place of the politicians getting into the shoes of economists.