I had wanted to do a rewind of events during 2013 in this column. But given the fact that the year was a complete washout, it would only remind us of how little was achieved and how painful the period was.
So I am going to decipher where we stand. Are we at the cusp of recovery? Are the green shoots for real? What does 2014 hold for our industry?
Industrial growth is abysmal currently. Agriculture is a star performer and the saver. Construction has contributed around 4.8 per cent to GDP while mining and quarrying have suffered with the bans in Karnataka and Goa. Home finance, which was cruising at 30 per cent per annum has also contracted to a growth of 15 per cent, according to market leaders like HDFC. Owing to the sub 5 per cent economic performance of the GDP in the first two quarters, we need 5 per cent plus growth figures for the next two quarters to close with a GDP growth of over 5 per cent. So far, according to the picture that has emerged for the half year, we were not gaining any traction. The weakening of the rupee has strengthened exports and if this trend were to continue, manufacturing could get a spurt. A great monsoon is creating a wave in agricultural production that will queer our pitch for growth.
So are we at the cusp of recovery? For this, we need to analyse why we got here. For the past two years, at the risk of sounding like an old gramophone record, I have stated repeatedly that green tape was the new red tape; that Parliament discussed Lokpal for far too long at the cost of passing bills that could facilitate improving foreign investment in our infrastructure; that Coal India should have set up JVs as a phased privatisation programme; that funds from Gulf countries that were hitherto moving westwards could be drawn into India; that attracting foreign retailers or handing out bank licences should hardly be our priority. Now the Finance Minister has begun working on drawing FDI and Rs 4 lakh crore worth of projects have been cleared by the Project Monitoring Group but after having neglected the economy for 24 months during which time the economy has dived deeper into a morass. Now the Government is attempting to undo the very knots it tied us in a classic case of tying one's own shoelaces and trying to run.
Green shoots will remain green shoots and not evolve until the new government is formed. The industry will be in the process of restricting debt for the most part of 2014, again untying the very knots tied by the Government. High inflation with low growth besieging our nation is the result of supply bottlenecks that need resolution; but, in the shorter term, the RBI has had to resort to higher interest rates that have strangled growth. Now with Raghuram Rajan at the helm, this is being fine-tuned to resuscitate growth.
The good news is that things will get better. Agriculture will provide a reason for optimism in an otherwise dismal financial year. The new government will need to step up industrial growth, build faith and improve the sentiment of investors towards the economy. The good part of being in this industry is that we have seen the worst and are well past the dark days. So cheer up, sunny days are ahead....Happy New Year!