Finally, the Indian economy is looking up and the feel-good factor is back. According to an India Today report (June 8), the worst is over and there are signs that the Indian economy is sprouting tender shoots of recovery. This, the editor-in-chief Aroon Purie says, is because of India’s demographics, the size of its domestic economy and robust growth in the rural sector. “It is this that has given many hope that India will recover faster than the rest of the world,” he adds.
From a low of 7,000 points, the stock market index has hit the 14,000-plus levels. (activity in the private equity market picked up after a lull as early as March, a Business Line report points out). The upswing in the markets has helped ease the cash crunch for companies. Cement and auto sales have registered double-digit growth; Tata Steel sales were up 31% in April, compared to sales in the same period in 2008. For the third successive year, India’s agricultural output will hit a record – 99 million tones of rice and 77.6 million tones of wheat. The growth of rural India has led to Bharti Airtel, for instance, touching the 100-million mark in the number of mobile phone connections. Overall, as Shankkar Aiyar writes in India Today, there is intensified industrial activity and revival of domestic demand. Aiyar also mentions that the increased confidence stems from the fact that globally the worst fears of a 1939-type depression seem to be receding.
The front-page headline in Business Line (June 8) read: Industry on road to recovery; growth nearing last year’s high. It mentions cement, coal and capital goods being the first to recover. The previous day, the business daily had quoted a Labour Bureau survey to report that there has been an increase in the hiring of direct workers and that contract worker lay-offs had seen a reversal in the March quarter. There were also reports (June 6) in the paper of demat accounts swelling “on big-ticket IPO hopes” and a stable government and rising stock markets enthusing investors, and of Morgan Stanley Asia being more bullish on India than on China - its chairman Stephen Roach felt that the Congress victory had changed the outlook (June 4). The company has predicted strong market conditions for 2009 and has said the Sensex could be trading at the 19,000-levels by the end of the year. Indeed, even as early as the first fortnight of May, FIIs inflow had crossed the $1 billion mark in seven trading sessions, and according to The Economic Times, FDI inflow ($11 billion) had outstripped FII pull-out ($8.3 billion) in the third and fourth quarters. Also, high net worth individuals are entering the equity market.
On June 3, The Economic Times carried a banner headline on its front page: ‘Slump shadows fade away’. The report mentions core sectors getting back on track and six core sectors (power, crude oil, refinery products, coal, cement and finished steel) clocking a growth of 4.3% in April, the fastest in 10 months. According to a report in the paper (May 11), the State Bank of India has reported robust growth in profit and business despite the overall negative economic environment of the past six months – the bank, the report pointed out, was eying 25% growth in deposits and lending. Adding confidence was the fact that NRI remittances had risen 20-fold in 2009.
The performance of nationalised banks has been heartening. According to Business Line, Bank of Baroda’s net profit soared 172% on overall income growth; Indian Bank Q4 net was up 63%; SBI profits rose 46% in Q4 on higher income. The Economic Times reported that hotels chains like the Marriott, Accor, Hyatt and Royal Orchid were expanding in full swing in India.