It's not quite an august presence India would have liked for its troubled economy as the month of that name marks its entry. Over the past month and half despite the bright spot of monsoon rains running above average - a great relief for farmland India - the most visible casualty of the country's current unpopular status has been its currency, the rupee sliding to a lifetime low of 61.21 to the dollar, and pushing the country's financial minders into crisis management mode. Significantly enough Greg Levine, an economist at Moody's Analytics, has been led to comment, "It is unfortunate that the only good news comes from the heavens above, rather than from those running the economy here on the ground." But there has been no respite from the bad news on the ground with global steelmaking giants ArcelorMittal and Posco announcing the scrapping of multibillion dollar plans to set up plants across India thanks to concerns like bureaucratic red tape, land acquisition issues, local opposition, not to mention a weaksteel market and poor infrastructure.
Now with foreign direct investment taking a dive, economists are pessimistic about the outlook for this year. Ratings agency Crisil, for instance, has assessed that stresses and strains could increase in sectors such as power, construction, engineering and steel and has forecasted more bad loans on commercial banks' books. On company balance sheets, it has sounded a note of alarm saying one-third of the 11,500 firms it rates may not be able to make their debt repayments due to the recent central bank liquidity tightening. Any further slide in the rupee could lead to a hike in benchmark lending rates. Meanwhile India Ratings & Research too has maintained a negative outlook on the Indian construction sector for the second half of 2013. As per its report, better top-line growth and declining order book position indicate that construction companies have concentrated more on the execution of the existing order book than trying to augment the order book. EBITDA margins of construction companies are expected to remin under pressure thanks to volatile prices of key inputs such as cement, steel etc. L&T's first quarter results indicate the pressure on margins as its net profit declined 12.46 per cent to Rs 756.03 crore on 3.69 per cent growth in total income to Rs 13027.66 crore in Q1 June 2013 over Q1 June 2012.
Admirably enough, through all this gloom, our Union Finance Minister P Chidambaram, who has been busy firefighting, is still holding on to the hope of achieving six per cent growth this fiscal, and has advised people not to be worried about the current slowdown. Very obviously it will take a lot more than mere words to put the economy on the rails and to set people's already troubled minds at rest. While the knots are being unwound, the results will show up after a lag. Meanwhile, the RIL expansion plan of investing Rs 1.5 trillion in the next three years seems to be a silver lining as this investment would be across energy, retail, telecom among others and will ramp up construction and engineering order books. Ditto for investments to come from the cash rich PSUs, which are mandated to utilise their cash reserves.
For a modern developing country born in the eighth month of the calendar there is no reason why India cannot rise over its current vulnerability and recapture what is rightly its august status. All that India Inc requires is some economic belt tightening which comes from political will. And desire for Common Weal in its minders. With close to 99 bills awaiting the nod at the last Lok Sabha session, all prayers need to be directed to the accomplishment of a productive session of Parliament.
Happy Birthday India!