Is the Indian economy doing well? Are we capable enough to stand with the rest of the world?

Let’s look at it from Mr. Nilesh Shah’s point of view from his? monthly market outlook for September 2022.?

Highlighting the importance of investment in technology, Nilesh Shah mentions the importance of Jan Dhan, Aadhaar and Mobile Trinity in India, which Germany and other western countries lag, creating serious limitations for them. Jan Dhan initiative provided an avenue for the poor to bring their savings into the formal financial system.

On comparing India with the UK and US, it's clearly depicted that India is in a far better position than both the countries in few aspects. Looking at inflation in the countries, the UK has the highest chance of high inflation of about 60 percent and the US has been facing the highest inflation since 1980.? Being inflation one of the concerns, the US Fed has raised interest rates and efforts have been put on reducing liquidity. There is no reduction in liquidity despite interest rates gone up, the lead indicators are indicating sharp deceleration in economic activities in the US, the fourth quarter will be positive but fear of US Fed continuing to increase in interest rates, in third and fourth quarter, US will again slide into recession. As inflation remains at the highest level, millions of households are facing hardships due to rising consumer prices. One in every six homes is late in utility payments, leading to tsunamis of shutoffs. Despite rising interest rates, Corporate America is doing well.

India, having zero percent probability of recession, signifies a positive statement for India.?

As compared to the rest of the world, India was ahead in raising interest rates and also it has raised interest rates sufficiently faster to cool down inflation. India being one of the rare countries where inflation is still around mid single digit. Our inflation continues to remain below American inflation. Compared with the rest of the world, by raising interest rates sufficiently and timely, RBI has done a wonderful job and we are in a far better position. RBI, seeing good inflation, has now kept their inflation target at about 6.7% for the whole of FY 2023 and about 5% at the end of the year. India tipped to join Pivotal JPMorgan Bond Index .

Commodity prices have started correcting around the globe. Mr. Shah mentioned that the Indian economy is like an oasis in the desert. There is a sandstorm blowing in the global economy, due to which we will get impacted if it persists but as and when sandstorm subsides, the Indian economy will just look like an oasis. He shares that India is the only country to improve its debt ratio. It has been a matter of pride for India that we have moved from 10th largest in 2014 to 5th largest economy, having three and a half percent market share in global GDP.

Nilesh Shah also talks about the top 10 cities with the highest growth rate in the world in 2022 with Hyderabad, Bangalore, Delhi, Mumbai, Chennai and Kolkata making on the list. He shares that by 2047, Gujarat Cooperative Milk Marketing Federation Limited, popularly known as Amul, would be able to achieve a turnover of 18 lakhs crore from Rs.61000 crore, recorded in the previous financial year, as exerted from Amul Annual Report.?

He shared how the Indian economy is recovering in areas where it was not performing well. Not only corporate India but even financial services India is in a better position. PSBs are recovering written off loans, and are generating far better recovery compared to that of the past. Monsoon compared to our long term historical average is 8% positive, and higher reservoir level, supporting agriculture.

Speaking about his area of expertise, he says, equity markets, as always, are difficult to predict. MSCI India outperforms MSCI EM over the past 18 months. Since 2014 we have delivered double the return of China, almost 20 times more than that of Brazil. We have delivered positive returns to South Africa whereas South Africa is negative . India’s valuation premium over EM is high, it is lower than 100% premium but more than our historical average premium of about 55-60 %. Cost of leaving India for foreigners has been very high. Domestic investors are emerging as key drivers.?

The red flag for India is the trade deficit (a trade deficit occurs when a country's imports exceed its exports during a given period), which is running $300 billion as our exports struggle. The only weak spot in our economy is consumption. Consumption had regrown between Oct 21- June 22 but continues to struggle.?

Trade deficit still continues to be a point of concern for our economy, it's running at 30 billion dollar a month. Oil prices have corrected 25% since March 22.?

Mr Shah compared India to? guinea pigs on which all experimentations are tested. He said that it has been suggested to us that the 2050 net zero target can boost India’s GDP by 7.3% till 2032, while developed countries have suggested that zero emission policy bankrupts Britain. Pointing towards these suggestions he advises that we need to follow the age-old adage, "suniye sabki, kariye apni”.?