2013 – From Gloom, Doom to Boom! – Chawm Ganguly

chawm gangulyThe verdict is more or less out. Corporate India is ready to greet the New Year ahead with optimism. Not the guarded type that is politically correct, but genuine gut-felt pure optimism. And I say this after talking to a wide swath of opinion makers – economists, industrialists, traders, bureaucrats and politicians. While the level optimism and the underlying reasons vary, more or less everyone I talked to is of the opinion that the worst is behind us. And there are solid reasons to spread this cheer:

  1. Policy decisions are working. A lame duck government suffering from indecisiveness brought about by the compulsions of coalition politics was once the major complaint. Not anymore. A series of political maneuvers have ensured that the Government finally stick its neck out and put the desperately needed policy decisions in place. These decisions are now bearing fruit and are acting as harbingers that will put the economy back on track.
  2.  Europe and America are witnessing the first signs of economic spring and it is a matter of time before they get out of the pits they are in now. Revival in the west will auger well for the rest of the world, including India.
  3. With just a year to go before the next general elections, the UPA Government is expected to go the whole hog and go to town with its basket of goodies. Yes the 2013 budget will be crucial as will be the effect of the monsoons, but overall the trend will be towards projecting a benevolent face that is pro poor on the one hand and industry friendly on the other. Such steps are widely expected to give the much needed boost to the economy.
  4. A good number of thermal power plants are suffering from a critical supply constraint. The availability of metallurgical coal for which the country has to depend on imports too has been an area of grave concern. Both these areas are expected to look up in the current year. With the PMO tightening the screws on CIL, supply constrains of thermal coal are expected to easy while forced by their own concerns China may increase the quantity available of met coal and coke for exports manifold. While this is certainly bad news for standalone merchant coke makers in India, it may well be the fillip needed by the steel industry to do a phoenix.
  5. Similarly, the iron ore sector which was plagued by issues ranging from green to graft is widely expected to see good times ahead. With these two critical components becoming easily available at affordable prices, the steel industry is expecting happy times ahead. As a matter of fact, the 381 MoU’s that had been signed by various state governments which is expected to see a capacity enhancement by 486.66 million tons will now see the light of the day. With the gloom lifting projects that were stalled for obvious reasons will now get kick started in turn putting the multipliers in play.
  6. Listen to what the Prime Minister has to say, which is being considered by many as the real underpinning of the optimism: “As we begin our Twelfth Plan journey, it is worth noting that we do so with an economy that has shown many areas of strength. We achieved an average of 7.9 percent growth in the Eleventh Plan period, despite the fact that there were two global crises in this period. This growth has also been much more inclusive than in the past. The percentage of the population below the official poverty line declined by about 2 percentage points per year after 2004-05, which is two and a half times faster than the rate of decline between 1993-94 and 2004-05. This basic finding that poverty declined faster would hold even if the poverty line is revised. Agriculture growth accelerated from 2.4 percent in the Tenth Plan to 3.3 percent in the Eleventh Plan. Real wages in agriculture have grown at 6.8 percent per year in recent years, compared with only 1.1 percent per year in the period before 2004-05. Better agricultural performance is an important reason why poverty declined faster.States that used to grow slowly in earlier periods have done much better. The average growth rate of the five poorest states exceeds the national average for the first time in any Plan period. I think we may be reaching the stage when the term “BIMARU States” can be relegated to history. While these developments indicate the strengths of our economy, it is also true that the current economic situation is difficult. The continuing crisis in the global economy has reduced growth everywhere. It is expected to be zero in the Eurozone and Japan and emerging market economies have also slowed down. The global slowdown, combined with some domestic constraints, has meant that our growth has also slowed down. Our first priority must be to reverse this slowdown. We cannot change the global economy, but we can do something about the domestic constraints which have contributed to the downturn.”

Cheer up. Its time to sing “Happy days are here again, the economy is rolling again”.