Business as usual, India Inc growth exceeds expectation

India's economy is growing at its fastest rate in more than a year, Q3 figures show that India and other Asian economies are set to lead the world-wide recovery.

Bumper pay rises for India's civil servants, a service sector boom and growth in agricultural output helped India's economy grow 7.9% last quarter.

Exceeding expectations.

With rate of growth up from 6.1% in the second quarter, Q3 figures comfortably exceed the 6.3% expectation of economists. Accelerated growth validates government's fiscal stimulus measures and leads Subir Gokarn, the Reserve Bank of India's (RBI) deputy governor to conclude that year end predictions will need to be revised. Government had forecast 6.5% growth this financial year, 7%+ now appears possible.

Increased corporate confidence

KPMG's latest business outlook report - released yesterday - concluded that the BRIC's will play a major role in recovery. The global survey of 6,200 companies concluded that business confidence was strongest in these four critical markets. Findings suggest that economic activity will pick up in the next 12 months. Signs are India is recovering quickest.

Surprising but welcome

Unexpected growth caught economists out, Sonal Varma of Nomura was quoted as saying, "This is a surprising number. It will make it easier for the RBI to exit from the emergency low interest rate regime adopted last year."

Robert Prior-Wandesforde, senior Asia economist at HSBC said,"We believe this to be the biggest rise the Indian economy has seen since the quarterly data began in 1996."

Building on sand

With markets now worrying about exposure to crumbling Dubai, caution remains. Indian exports may take a hit, the United Arab Emirates is India's second largest export market, accounting for £11 billion of trade.

With 4.5 million Indians living in the Gulf region, many of them working in construction, likelihood is that many will return home without work. A mini economy will also be affected, between them this ex-pat community send nearly £18 billion back to relatives.

Recovery not a boom

Gokarn stresses that it is still early days. "The economy has started to show signs of recovery (but) It's not a boom yet. But as confidence returns some analysts already predict a return to growth of near 8.5% within two years.

While recovery is underway, is it sustainable? The late monsoon will damage Q4 figures, when its full affect will be seen. Inflation, while currently manageable is expected to increase, and higher food prices are on the horizon.

More developed economies must hope that next quarter figures point to a sustainable trend, only then are other economies likely to follow suit.

December 1, 2009 Add a comment

Sales figures show India auto driving out of trouble

India's auto sector - a symbol of India's economic progress - suffered during the global credit crunch. Finally there are signs that the sector is bouncing back; sales figures show that a recovery is underway.

Auto recovery

Society of Indian Automobile Manufacturers (SIAM) report that total vehicles sales for August were up 24.3% on year previous. With festival season closing, SIAM is revising their yearly growth forecast of 3-5%, "August is a continuation of last month's figures. Now, we feel growth will be in high single digits of 8-9%," comments Sugato Sen, Senior Director at SIAM.

August 09 sales versus August 08

• Passenger vehicles - 152,100 (up 22.4%)
• Passenger cars - 120,669 (up 25.58%)
• Commercial vehicles - 40,624 (up 18.47%)
• Three wheelers - 39,201 (up 22.7%)
• Two wheelers - 776,777 (up 25.1%)

Stimulating the market

The industry is benefiting from increased consumer confidence in the economy. In addition, lower interest rates; newly launched models and greater penetration in rural markets have helped automakers turn around ailing businesses.

September 13, 2009 Add a comment

Poll suggests medium term Indian economic recovery

Using the Linkedin Poll facility, India Insights carried out a survey to measure India Inc's expectations for economic recovery. Feedback suggests a medium term rally providing certain steps are taken to accelerate recovery.

Findings

Responding to the question, "Which statement best sums up the state of India's economy", over half (57%) of the 21 respondents anticipate medium term recovery. Optimistically, 33% of the sample expects short-term recovery.

In contrast 9% conclude this is a longer-term problem. No one believes India is through the worst of it, or at the other end of the scale, that India's growth story is over.

Forecasts "too optimistic"

Amit Mittal of Executive Insights comments that current worldwide recession is a first. Therefore economic forecasts are "too optimistic", as they are based on previous, less serious events.

Mittal expects the all important outsourcing industry and travel and hospitality sectors to weather the storm and the high employment, agriculture and manufacturing sectors to hold their own.

Infrastructure is key

Joy Abdullah of TNBT reasons that India's large domestic market will speed up recovery. Yet he cautions that without increased investment in infrastructure projects recovery will be slow due to the fact that liquidity wont trickle down to the average worker. Abdullah suggests India will exit recession in Q4-2009 with effects felt end of Q1-2010.

Consumer sentiment

If consumer sentiment improves, Shankar Balan of Levi Strauss India forecasts a recovery of sorts in 2010. To facilitate this Balan believes - like Abdullah - that Government must invest in infrastructure while steel, cement and fuel prices are low.

In addition, Balan feels a reduction in taxes and fuel prices will stimulate demand and boost recovery. May national elections lead Balan to conclude that "vote winning" decisions will be made.

"Wait and watch"

According to Ronak Sheth at Next Link, the consumer is in, "wait and watch" mode, and consumer sentiment will not improve for some time. While Sheth understands the consumer wants to feel richer, he concludes they will save, not spend. Using India's real estate sector as an example, Sheth shows how reduced loan rates don't always translate to increased sales.

If you are a Linkedin member and would like to see the results broken down in further detail, click here.

February 14, 2009 Add a comment