First, it was the finance ministry. Then came the IMF numbers. And now it is the Asian Development Bank (ADB). If all of these institutions are to be believed, India's economic growth in 2010 is likely to come in north of 8%. This is considerably higher than the 7.4% that the country managed in FY10.
Interestingly, it is the ADBs assessment that is the most conservative. The Manila based lender has projected India to grow at 8.2% to be precise. This is markedly lower than the estimate set out by the IMF of the magnitude of 9.5% when it revised India's growth estimate recently. The Finance Ministry on the other hand expects India to grow by 8.5% in the current fiscal. Indeed, we did not expect all the three institutions to come on common ground on this. What matters is the fact that all three of them expect India to do better than FY10.
We believe that there is very little to argue against these projections. Global slowdown and below par monsoons were two of the biggest roadblocks to higher GDP growth in India in FY10. Currently, both these factors are looking much better than last year. And this calls for a higher growth path for the second fastest growing nation in the world.
It is all together a different matter that India's growth potential is even higher than this. All that is needed is better infrastructure and lower fiscal deficit. Thankfully, things are looking up on these fronts as well. If not anything else, at least the government has its heart in the right place. It has been looking to speed up infrastructure reforms ever since it came to power for the second time. Also, the Finance Ministry has been growing increasingly critical of the country's fiscal deficit. However, this is just a beginning and an awful lot more needs to be accomplished.
The government is not short of confidence though. It believes that it is only a matter of time before India starts notching up double digit growth rates on a regular basis and upsets the Chinese applecart. While we have serious doubts over these predictions, we do believe that India's growth is likely to be of better quality than that of its Chinese counterpart.
This is because capitalism prevails in India to a much greater extent than in China. And it is in the nature of a capitalistic and a democratic society that although growth could come in lot slower, it is of better quality and results in greater wealth creation.
This fact has perhaps dawned on global investors as well. Otherwise what would explain the near pounding that the Chinese stocks have received in recent times whereas the Indian markets have hardly budged. Clearly, fondness for Indian equities is growing by the day on account of seemingly better prospects of Indian economy in general and India Inc in particular.