Jul 1, 2009|
India to grow at 7%, but...
India can grow at 7% provided monsoons turn up well
If the chairman of the Prime Minister's Economic Advisory Council is to be believed, the Indian economy has the potential to grow at 7% during the current fiscal FY10. Mr. Suresh Tendulkar has noted that a favorable monetary environment coupled with the stimulus package by the government will ensure that GDP growth comes in higher than the 6.7% jump witnessed in FY09. On the former, i.e., the monetary environment, he has opined that although the Indian central bank has cut interest rates by some 4.25% between October 2008 and April 2009, they are now getting reflected gradually in bank rates, a good sign for the economy.
However, his prediction has come with a caveat that the monsoons should not fail. If they do fail, then the growth might come in considerably lower. A point of view that we cannot help but agree with.
Despite the fact that share of the agriculture sector in the country's GDP has been coming down over the years, we still have a huge chunk of our population depending on agriculture for its livelihood and hence, if monsoon plays truant, it might affect consumption patterns of this set of people thus leading to a cascading effect on the overall economy. It will be fair to say that a couple of percentage points could be easily shaved off India's GDP growth rate if monsoons come in way below the long-term average trend.
Source: CMIE, Govt. of India
Carlyle bets big on Asia
It seems like the big boys of private equity are on a comeback trail in India and China. As per The Wall Street Journal, Carlyle Group, one of the world's biggest private equity firms has stated that it has raised around US$ 1 bn for a new fund that will invest in fast growing companies in the emerging markets of India and China. It has further said that the appetite among pension funds and financial institutions for these two economies is on the rise. And there could be perhaps no better time to start a dedicated fund of this sort.
Although both the Asian nations under discussion did not get as badly impacted from the financial crisis as their western counterparts, it did test the mettle of quite a few companies and hence, the firms that have been able to pass what could be counted as one of their sternest tests in recent times, would be on the radar of investors like the Carlyle Group.
It is not as if Indian and Chinese capital markets did not have a brush with the mindset of foreign investment firms like those from the private equity group. During the peak of the last bull-run, easy money coming from hedge funds and investment banks had pushed valuations to very exorbitant levels and with this hot money being pulled out quickly in the aftermath of the crisis, valuations have once started looking reasonable from a long-term perspective.
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