Economic Survey: Stress on better jobs, investments - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Outlook Arena
  • Feb 27, 2013 - Economic Survey: Stress on better jobs, investments

Economic Survey: Stress on better jobs, investments

Feb 27, 2013

Economic Survey for 2012-13 did not read very differently from that of preceding few years. But the difference lay in assessment of economic variable with clear cut targets in mind. Chief Economic Advisor Raghuram Rajan's maiden Economic Survey presented today enlisted three key objectives. These were reviving demographic dividend, shifting from consumption to investment-led growth and countering macroeconomic challenges like inflation and deficits.

Sizing up demographic opportunities

Outlining the gap in demographic profile of India with its emerging peers the Survey stressed on the need for job creation. A larger workforce in India cannot necessarily deliver better per capita income and higher GDP growth. Larger workforce translates into more workers only if there are productive jobs for it. Comparing India with where China was 10 years back may offer a good perspective. But the Survey suggests that blindly replicating their trajectory may be unwise. We completely agree with this. The risks and challenges for India are very different today than they were for China a decade back. And hence our approach to job creation and productivity improvement also needs to be different. Focus on education, skill development and industrialization could offer some meaningful solutions.

Shift from Consumption to Investments

Taking a departure from India's consumption focused growth approach, the Economic Survey stressed on investments instead. The fact that a falling trend in investments was responsible for India's growth slowdown is entirely true. There were two reasons for this. First of all the number of stalled projects saw a substantial rise since early 2009; in both value and volume terms. What is more, as of December 2012, six sectors accounted for about 80% of all stalled projects: electricity, roads, telecommunication services, steel, real estate and mining. Secondly, there was not much traction in new project investments. This was a fallout of the first problem notably that rise in the number of stalled projects meant that the ability to begin new projects was reduced. Various factors that have contributed to these problems include difficulties in land acquisition, coal linkages, and mining bans as well as policy issues relating to spectrum allocation. Firm interest rates also reduced the propensity of the corporate sector to make new investments.

Given that the growth rate of the economy since FY04 has been strongly correlated with investment, it goes without saying that the Survey believes that a pickup in investments is very important if growth has to improve. The Survey states that policies to remove investment bottlenecks as well as structural reforms to encourage productive investment have to be put in place. Financing of the same will also be essential. Further, if inflation reduces further, a moderate monetary policy would also help in spurring investments.

Short and medium term prospects

The Economic Survey has projected that the Indian economy will grow in the range of 6.1-6.7% in FY14. This is based on the expectation that the three major sectors of the economy will overcome most of the challenges faced in FY13. Disappointments in terms of monsoon, moderation in inflation and recovery (albeit mild) in global growth could be the dampeners.

We believe that adequate policy focus on the three key objectives of this Economic Survey coupled with timely execution could have a multiplier effect on India's long term growth rate.

Tanushree Banerjee

Tanushree Banerjee (Research Analyst), is the editor of Stock Select and, ValuePro Equitymaster's oldest recommendation services. She is also the editor of Equitymaster's most popular newsletter read by over 300,000 subscribers, The 5 Minute WrapUp. Tanushree started her career at Equitymaster covering the banking and financial sector stocks and scrutinising RBI policies. Over the last decade, she developed Equitymaster's research processes that helped us pick out various multibaggers, across all sectors. A firm believer of "safety first" when it comes to investing, Tanushree closely follows the investing philosophies of Warren Buffett, Jeremy Grantham, and Joel Greenblatt.

Equitymaster requests your view! Post a comment on "Economic Survey: Stress on better jobs, investments". Click here!

  

More Views on News

Ride the Indian Real Estate Revival with this 'Different' Smallcap Stock (Profit Hunter)

Mar 23, 2021

Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

More Views on News

Most Popular

How to Invest in Silver

In the absence of ETFs (exchange traded funds), the only available options for investing in silver are physical purchases fro...

The Next Smallcap Winners (Profit Hunter)

Apr 30, 2021

Price is the only due diligence one might require to buy this business.

Time to Buy Smallcaps? (Fast Profits Daily)

Apr 30, 2021

In this video, I'll show you why I favour smallcaps over the Nifty.

Sell in May and Go Away? (Fast Profits Daily)

Apr 28, 2021

Does the concept of selling stocks in the month of May, work in the Indian market?

Are the Stock Markets Deaf to Covid Agony? (Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS