Wednesday, 26 December 2012

India: 20(13) and beyond

In this blog I have made a point about what I know and understand regards the connectivity in the world of finance from global to India.

Few years back – before 2008 global financial crisis – India was a different country. Current aspects are changed for this emerging economy, known as ‘I’ in BRICs nations. Economics and financial experts from around the world including some of the major investment banks and credit rating agencies are predicting India to grow more than 6% of GDP in 2013. But whether it’s actually possible, or are they just trying to surge investors’ confidence. Even Indian government and Ministry of Finance too expecting record break growth in the near future. I would not disagree on India’s future opportunities and resources, but I certainly disagree on application and taking action plans.

Most of the people around the world believe that the year 2013 would be worse than past year(s). Re-elected the USA president, Barak Obama has a chance to put American economy back on growth, where the country is already bankrupt – the US fiscal deficit 103% of GDP. Year 2013 would decide whether Democratic Party in the US is able to raise taxes and cut expenses and helping the economy from fiscal cliff. To overcome unemployment issue America needs radical innovations, like nation introduced computers, dot com and social media. If the US will fail, the impact on India would be far beyond than 2008 global crisis.

On other end of the Atlantic Ocean recession is taking shape. European crisis lead by Greece’s sovereign debt and its consequences would trigger tsunami around the world. Last quarter the UK reported slowdown with negative sign. Germany, which is the only hope to bring out Euro from collapse, contracted in a last quarter. Currency Euro is the bond, which keeps European countries together in peace and prosperity state.  I wish this bond is unbreakable, because this planet really doesn’t want to bleed in the name of World wars in upcoming future. European Union is leader in trade with India – around 18% of trade. Euro fall would stop India’s roaring growth engines.

Not far from European land, there is crisis in Syria too, conflict between Israel and Palestine, Iran nuclear dispute. These all event has direct or indirect effect on India, in terms of import of crude oil or production of natural resources like gas and oil. If it continues, world would be impacted on supply side and commodities price hikes.

 This was the glimpse on world and its events, but how India would looks like in 20(13) and beyond?

I believe 2013 would become a game changer. I see year 2013 as one the biggest opportunity after 1991 reforms. In year 2013, most of the developed economics would contribute slow growth, but Asian countries like China and India has opportunity to attract investors from around the globe for better returns and wealth creation.

If India would lose this opportunity, Indonesia would be the new ‘I’ in BRICs nations. The reason behind I called 2013 a game changer is because; India has potential to grow beyond 6% of GDP, when most of the developed countries are struggling to come out of recession. This is the opportunity, it would not repeat in 2014, because center elections will be there, and political parties would be busy in waving their flags. And after that 2015-16, may be the developed countries would be back again on growth tracks after long years of slow down. There would be the opportunity for India, but it would be divided with others.

But year 2013 would not foster India easily, where in past, parliament was adjoined for days – winter sessions lost more than 120 hours, voting session on Foreign Direct investment (FDI) in retail by oppositions, disagreement on mix policies – where Reserve Bank of India is not ready to cut down interest rates because inflation is beyond comfort level.

Renowned global consultancies like McKinsey and Boston Consultancy Group came up with research papers like The Bird of Gold: The Rise of India’s Consumer Market and Paisa Vasool: The $10 Trillion Prize, and predicted India’s future growth and emerging opportunities. This all mix ideas says that probably India’s economy size would be double than current in next coming decade. This is true, because in past few years we have seen India putting its mark on world map.

My doubts would be clear when government will come up with reforms and new spirit of transparency, reforms like, land and labor reforms, Direct Taxation Code (DTC) and Goods and Service Tax (GST), General Anti Avoidance Rules (GAAR), mutual fund reforms, financial sector reforms to make them more transparent and resilient – Basel 3 etc. Including these reforms, government need to stretch its comfort levels and should look towards; inclusive growth and its implementation, human development, education system, supply side bottlenecks, infrastructure and transportation sectors etc.  These are the core areas which would take India forefront, and if government fails to implement these, India will definitely lose its shine.

And crisis storm is taking shape; no country can afford to ignore it, in terms of sovereign debt, Middle East disputes or Fed’s Quantity Easing (QE) practices. If not in near future than in longer term. The economy cannot go forever the way it is, because in economy people are involved it’s not only capitalism. But India has opportunity right now to put itself into safe haven, before global tsunami comes.

I really want you to be little personal here, it’s equally important that you – individual investor or a corporation – must hedge yourself, because if the country is in trouble government would save it with taxpayers money. So, at the end we are on the hook. And inflation is monster, and it would become much bigger than it is today. Maybe we cannot realize it today, but tomorrow we will surly going to pay the price. My view to escape from this is, to be less dependent on credit and do not follow herd while investing. Invest based on your understanding not only based on your knowledge.

“A penny saved is a penny earned.” _ Benjamin Franklin 


  1. A great view to the world wide economy.....Great work Mr. Rutvij....Thanx for enlightening us...

  2. Bhai bhai .....aavu badhu lakhta aavdi gyu....?