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After opening the day in the green, the Indian share markets have continued their momentum and are presently trading on a strong note. Sectoral indices are trading positive with stocks in the metal sector and banking sector witnessing maximum buying interest.
The BSE Sensex is trading up 140 points (up 0.5%) and the NSE Nifty is trading up 50 points (up 0.6%). The BSE Mid Cap index is trading up by 0.8%, while the BSE Small Cap index is trading up by around 0.7%. The rupee is trading at 68.19 to the US$.
The World Bank has pared India's GDP growth forecast for FY17 to 7% from 7.6% earlier. The World Bank attributed the downgrade in forecast partly to the demonetisation exercise.
Along with the World Bank, the government of India has also pitched for a 7.1% GDP growth in FY17. This estimate is below the 7.6% growth recorded in FY16.
We believe, FY17 GDP growth could be significantly lower than 7.1%. Growth in India has slowed down in the recent months. This was seen on the back of demonetisation. The government has not factored in the negative impact of demonetisation in the above 7.1% GDP estimate for FY17. This we say because the government did not have the data to do so.
From The 5 Minute WrapUp... 'No one is willing to stick their neck out and make a FY18 GDP growth forecast. It would be foolhardy to do so without adequate data. The first such prediction will come from the government itself in the Union Budget next month. We are not sure if the government would have sufficient data on the impact of demonetisation to have an accurate GDP growth forecast in the budget. Watch this space.'
Here is what Dr Jim Walker, founder and chief economist of Asianomics Group, had to say about the government's estimates in his latest Asianomics Macro update:
A while back, in an interview with Vivek Kaul and Rahul Goel, CEO of Equitymaster, Dr Jim Walker had shared his views on a variety of topics including the Indian and Chinese economies. It's worth revisiting.
In another news update, data from the Reserve Bank of India (RBI) showed that there is no major pickup in digital payments volume in November. As per the RBI, the total amount of money transacted through digital channels in November did not see a huge jump, and even registered drop in many cases.
As per the RBI data, the volume of transaction on mobile wallet for the month of November increased to 138 million against almost 100 million in October. However, the net value of money transferred in November stayed flat at Rs 33 billion against Rs 33.8 billion for the previous month.
The government's demonetisation drive has propelled India to become a cashless society. The cash crunch, long lines at ATMs and hassles with the Rs 2,000 note have veered many people towards digital transactions. And as days go by, many seem to expect that India will now move inexorably in the direction of becoming a cashless economy.
But is India ready to go digital?
If one has to go by ground realities, they are not so conducive. Facts show that India is not going to become a cashless economy anytime soon. The reality remains that the absolute quantum of such payments is just not large enough compared to the size of the economy.
It would indeed be a positive development if India moves to a cashless economy. It will ensure lower costs, improve transparency in transactions, and open up opportunities for some companies. However, for that to happen, the whole financial system should be made more secure, fool proof, and easy to operate in.
To know more on digital India and its far-reaching implications, you can read the recent edition of The 5 Minute WrapUp titled Is Digital India Also Made in China? It offers some intriguing insights on how digital India is related to the global war on cash.
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