Oct 7, 1999|
NCAER pessimistic on economic recovery
The National Council for Applied Economic Research (NCAER) has stated that the economic recovery is unlikely to be sustained in view of the below normal monsoon, worsening fiscal situation and increase in international oil prices.
The think tank has reasoned that the agricultural growth this year is likely to fall to 3% as compared to 6% in the previous year. The increase in oil prices is expected to adversely impact the trade deficit and inflation levels. The worsening fiscal situation will not permit the high level of public investment needed to support an industrial recovery. Other factors include the low level of bank credit to the commercial sector and lower growth in imports.
The NCAER has continued to tread a cautious path while predicting an economic recovery even as other authorities have spoken strongly in favour.
Source: RBI Annual Report
Agricultural growth over the last several years has been very erratic with a boom year followed by a dull one. As agricultural production had touched an all time high last year, a moderation in growth levels was to be expected. Monsoon received this year has been at 95% of normal, much better than widely believed to be. The late pick up in monsoon activity has also led to the agricultural ministry estimating that production could be even higher than anticipated.
An increase in oil prices, as stated, will adversely affect the Indian economy. However, the adverse effect on the trade deficit would be moderated by reduced imports of petroleum products (like diesel), as domestic refining capacity in India exceeds domestic demand for the first time. The rise in prices will also lead to a reduction in the deficit of the oil pool account, thereby improving the overall fiscal position.
A pick up in industrial activity will improve tax collections, as already witnessed in the last few months. Although the collections have at times fallen below the estimates, the increase does point to an uptrend in the industrial sector. A further pick up in activity will help mitigate the dismal fiscal position of the government.
The think tank has pointed to the low growth in bank credit to the industrial sector. Commercial bank credit is a lagging indicator of economic/industrial recovery and therefore slow growth does not suggest that the recovery will be short lived.
The NCAER's view is well respected and will no doubt lead to a reworking of numbers. The view that these factors may not have that great an adverse impact, however, also needs to be considered.
More Views on News
Jul 25, 2017
Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?
May 27, 2017
What happens when minority shareholders are short-changed in the normal course of business?
Feb 15, 2017
PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.
Aug 24, 2016
And here's your chance to claim a free copy of this book...
Aug 12, 2016
And Why India's demographic dividend could turn out to be a doubtful debt...
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 16, 2017
The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407