Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Is this a slow recovery for India?
Mon, 1 Dec Pre-Open

Every commentator on the news seems to be upbeat about India's growth prospects these days. The gloom and doom days of 2013 have long been forgotten. Economists have are forecasting higher levels of GDP growth in FY16 and beyond. All this positivity has already been factored into the stock markets which are at record highs. Thus it is pertinent to ask the question: Is this recovery for real?

Let's consider the numbers. GDP growth in 1QFY15 (5.7%) was driven by a bounce back in the manufacturing sector due the election results. However, manufacturing growth is expected to remain muted in the short term. This is because we haven't seen many big bang reforms yet. Festive season demand was also nothing to write home about. It must be kept in mind that growth in manufacturing is preceded by fixed asset investments. The news on the investment front remains dull to say the least.

What about agriculture? This sector is still partially dependent on the monsoons which were not good this year. Also, in FY14 this sector recorded a robust growth of 4.7% on the back of a good monsoon. This time around growth expectations are muted. Slow agricultural growth also has a negative spillover effect on rural consumption. Thus, high growth in rural spending in FY15 cannot be expected.

That leaves the services sector, the backbone of our economy. Here, the news is not so bad. Some indicators relating to the travel industry are looking positive. However, service exports have not been growing at a fast pace. Also, the financial services sector is still to show a secular recovery.

Thus, we can see quite clearly that unless investments in capital formation picks up, GDP growth might stagnate. For investments to pick up there is only one cure we believe and that's reforms. A lot of them. Once we see economic reforms coming in thick and fast, all other aspects of economic growth will take of themselves, we reckon.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "Is this a slow recovery for India?". Click here!


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms