Lakshmana Venkat Kuchi
For a Nation not so long ago struggling with the pandemic and its negative impact, the current day economic situation, and few positive signals emanating from the ground are something to feel good about.
Economic activity has picked up, the services sector is on an upswing and hiring too is up a bit in this sector, GST collections are healthier, growth forecast of 9.5 percent is more or less endorsed by the International Monetary Fund that tracks economies of the globe closely. Even better, from the long-term perspective is that the vaccination programme is on track and picking up momentum, something that has been noticed by IMF trackers too, who insist that global economic recovery hinges on vaccination for all across the globe. India’s iteration of starting vaccine exports too is an indication of the comfort zone the Central Government has come in, on the issue of vaccine availability.
If one looks at the stock market, indices have scaled new heights every day, with Sensex touching the 61,000 mark and Nifty crossing the 18000 for the first time. Something that was unexpected when the second wave of Covid-19 pandemic was ripping India apart, but the bull run continues on the strength of expectations generated by the positive indications emanating from the ground–signs of economic recovery and continued rush of retail investors to the capital market, and more importantly, better than expected corporate earnings. The positive sentiments seem to have overcome negative worries over high crude prices and coal shortages and pulling in three million to four million new investors to the stock market every month.
The Government’s privatization of Air India, incidentally, had its positive impact on the stock market too, adding to the confidence of the investors in the reform process, and leading to improved performance of the stocks of PSU companies listed for disinvestment. Shares of BPCL and IDBI Bank had jumped 1 percent and those of IDBI Bank and CCI gained in value as well. These three are on the list of companies that could see disinvestment. The Government is working on a Rs 6-trillion monetization plan that will include a range of assets.
Notwithstanding the ongoing debate on asset monetization announced by the Government, global bodies view it as a prudent way to go about using assets in a more efficient manner by bringing in private entities. The Opposition, of course, has dubbed the asset monetization programme as a daylight robbery and said the economy was being mismanaged as many economic parameters were in the wrong direction.
For sure, the economy contracted for the first time in several years after the two waves of Covid, but now there are signs of revival and expectations of further revival going by the sentiments expressed by the chambers. The Government is sure of the economy clocking double-digit growth this year and maintain an 8.5 percent growth all through the next decade.
But this is easier said than done.
As all is not rosy on the economic front, and there are pitfalls ahead and challenges to overcome. The stock market is not the only indicator of the health of the country’s economy and we need to factor in other developments and parameters as well.
On the face of it, there is a looming energy crisis, with the projection of shortages in coal availability that in turn affects power generation. Already few power plants in different States, reports said, had to be shut down for want of coal. Union Ministers, though, rubbish this and say there are enough stocks of coal and there was nothing to worry about on this score.
There are pressures of the retail petroleum prices that the Government ought to address, if possible, by shaving off some of the tax levied on the petroleum products and give relief to the consumers, now shelling Rs 100 plus for a litre of petrol. With estimates of global crude oil prices to rise, one can easily expect additional pressure on the Government as to how it absorbs the shock.
Even IMF chief economist Gopi Gopinath anticipated this in her assessment of the Indian economy and felt that global crude prices may rise a bit now but the cycle was sure to come down, come winter. In fact, she was bullish on the Indian economy and said the recovery appeared to be healthy. IMF expected India to sustain the recovery and get people back into even greater normalcy in terms of spending behaviour and investment behaviour. The manner in which India came from the depth of recession to a slight positive growth makes it possible to make a growth projection of over 9 percent, which will be the fastest in the world.
But yes, there is the lurking virus about which one needs to be very careful and alert. As compared to the first and second wave, India today is doing much better than before in terms of vaccination and this surely is helping in economic revival. Union Finance Minister Nirmala Seetharaman touched upon this aspect when she told the G 20 Finance Ministers and Central Bank Governors Meet in Washington that equitable access to Covid-19 vaccines for all is crucial for transitioning from a crisis to recovery and batted strongly for bringing equity in vaccine access.
On this front India is doing better than before, in terms of vaccinating people and this is surely helping in revival.
On the ground, an indication of this is to be seen on the sold-out boards put up by big hotels ahead of Dussehra's long weekend, and even violence in Kashmir seems not to have deterred tourists if the bookings of star hotels in the valley are any indication. Hotels in Goa too report a similar rush, in the face of easing of travel restrictions.
Increased hirings by companies is another indication, that slowly things are returning to normal, at least in the services sector that has begun to register growth. IT and ITES had maintained their pace of growth and they quickly adjusted to the new normal that Covid forced and remained floating amid shutdowns in manufacturing and many services. Tech firms too are now finding increasing demand for their services, given that remote working and hybrid work models are becoming the norm even as offices are slowly opening up.
Lakshmana Venkat Kuchi is a senior journalist tracking social, economic, and political changes across the country. He was associated with the Press Trust of India, The Hindu, Sunday Observer, and Hindustan Times. He can be reached on
[email protected] and Twitter handle @kvlakshman