Sunday, November 19, 2017

Editors Space

Growth Engine

 

India’s economic growth decelerated to its slowest in six quarters in the April-June period, undermining the government’s aim of achieving 8 per cent growth in 2017-18. As official RBI data released in the recent past revealed a deceleration in India’s GDP in the first quarter of fiscal year 2018, and a distinct downtrend in GDP growth over the last four quarters of FY17, there have been predictions of a prolonged economic gloom. Finance Minister Arun Jaitley is a worried man and is desperately trying to revive a sputtering economy, which began to slow down in line with downtrend in global equities markets which was triggered by the North Korean hydrogen stink bomb. The other two factors that have slowed down India’s economic indicators are the recent demonetization and temporary disruptions due to the new GST regime.  Both these factors are transient and do not pertain to structural factors of the economy in the long run, which will eventually bounce back.  The positive indicators of an upturn have already begun.

 

At a time when most other sectors are showing a slowdown, the construction sector could buoy a slowing economy and provide the impetus for growth across other sectors, and begin the much awaited turnaround. Construction in itself is registering healthy growth fuelled by India’s trillion dollar budget to modernize its infrastructure. According to latest available data, construction equipment sales in India is projected to grow by over 10 per cent this year, continuing the momentum of the +36 per cent surge seen in 2016. This will see the market surpass the previous record high of 72,492 machine sales seen in 2011, and likely to exceed 90,000 units in 2021. Also inflows to Indian stock funds have remained positive for 17 straight months, starting in April 2016 and reaching an all-time high of Rs. 20,400 crore ($3.1 billion) in August.

 

The Finance Minister can likely look to fine tune its focus on the Construction sector and its equipment segment in particular, and position it as a growth engine capable of leading a recovery from India’s current economic crisis and falling GDP rates.




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