Growth Triggers for the Indian Economy

Indian economy has been resolute in the face of macroeconomic uncertainty, conflict in West Asia, and Europe, fancies of Inflation, supply chain disruption, Monetary policy of the US Fed, and an impending general election due in the coming days. Indian Benchmark Indexes are on an upward trajectory, breaching barriers and creating new records on a regular basis.

While Sensex is flirting with the 72,000 mark, NIFTY is also not lagging behind. FIIs are back in the market with a vengeance. Euphoria in the stock market has always created bubbles. Valuations always go for a toss. Irrational Exuberance often lays waste to significant wealth destruction. We would prefer to zero in on the metrics that could help us decipher the true state of the economy.

PMI DATA: The Purchasing Managers Index, released monthly gives us a perspective on Manufacturing and service as well as a Composite index. Any figure above 50 is treated as expansionary and beneficial for the economy. Indian Economy has been logging in robust numbers on both fronts for a considerable amount of time, which speaks of sustainability.

INFLATION PRINT: RBI, under the stewardship of Mr.Shaktikanta Das, has done a tremendous job of shielding India from the menace of Inflation. The overarching mandate is to keep the CPI print within a band of 2% to 6%. Now, the intermittent supply shocks on account of geopolitical chaos and vagaries of monsoon, it had been haywire for a while. But, MPC is keeping a hawk-eye on the trajectory and ordering preemptive action. Increasing the risk weightage of Retail Loans, and lending to NBFCs is just one of many. Adopted a "withdrawal of accommodation"stance long enough and doing its bit to dry up liquidity from the system. Call Money rates truly reflect the effect

.CREDIT GROWTH: India is a consumption-driven economy as it accounts for nearly 2/3rd of our GDP. Now, in the last couple of years, the Deposit growth of the banks (both PSUs and Private) is lagging far behind the Credit Growth. In order to garner deposits banks are offering lucrative FD rates, a bonanza for the savers. As expected NIMs are getting crimped. Now, the bulk of the credit growth is fuelled by retail loans which are primarily consumption-oriented which caused a lot of concern for the RBI. Preventive measures are already taken to make sure a 208-like crisis never materializes.

CRUDE OIL: India imports nearly 85% of its requirements from the Middle East. Since the war began in Russia, India has been purchasing primarily from them as the consignments are offered at a steep discount. Not only that, in the near future we would also consider purchasing from Venezuela as recently they have received a reprieve on their sanctions from the USA. Imported inflation was kept in check to some extent by this prudent energy security policy.

PV SALES DATA: Indian PV sector is churning out new Models, in EVs, ICE, and Hybrid variants too. They are finding a lot of takers. The order books of the companies are running into lakhs, and SUVs are stealing a march everywhere. Speaks volumes of the consumer appetite. Premiumization is a theme that's playing out here.

BANKING SECTOR: For a nation to progress, the banking domain needs to be in the pink of health. No longer bogged down by the bulky corporate loans, and burgeoning credit costs, these banks are raring to go. Tying up with the fintech, NBFCs, spending on IT infra, developing apps, reaching out to the consumer, tailor-making their product portfolio, being proactive about recognizing NPAs and taking preventive measures, record low NPAs and significant profits are paving the way for a better tomorrow.

US FED: US Fed, one of the most powerful Central banks after taking a tough stance finally in the mood to relent and decided that would go for a rate cut in 2024. This paved the way for FII money in the Indian market. Inclusion in the JP Morgan Bond index also acted as a catalyst.

As of this moment, we are in a Goldilocks economy, inflation is under control, financial institutions are profitable and willing to lend, govt. capex crowding in private investment, prudent Fiscal and Foreign policy, booming stock market, premiumization playing across consumption category. This is a Golden opportunity that we must capitalize upon to increase our GDP per capita number and create an inclusive, prosperous economy.