New Government in place? What to expect from economy over next 5 years?

Economy for normal populace has always been related to the returns they get on investments. What can they expect from Namo 2.0 ? Let’s have a quick look at our analysis:

1.      Low inflation and low interest rates

Keeping the inflation rate low was the focus of government and it would continue for this term as well. And it keeps the consumer on a stronger wicket and they keep on consuming more, which is good for economy in longer run. Over the past many years, Service sector has been focusing on domestic consumption which is driving growth.

There would be efforts seen in keeping the interest rates low. Apart from a few select schemes, one can expect interest rates to trend lower. Even today, real interest rates are one of the highest witnessed ( Bank deposit rates less inflation) in past several years and this gap should reduce.

2.      A win-win for Consumer

We have been gunning for pro-consumer policies over last few years making efforts to have prices more affordable in real estate, travel, entertainment etc. And this trend should continue over a wide array of products and services though coming at the cost of business at times.

3.      A Push in Infrastructure

For the GDP to grow at around 7% consistently, infrastructure should be pushed largely. Not only in power, telecom, airports, but also in areas of urban renewal. This requires large scale private sector funding.

4.      Growth in Service sector

Though services with focus on domestic consumption has driven growth but they still trails global standards and we can continue expecting domestic services led growth.

5.      Investors

Non inflation-beating assets are the major areas of investments for a significant portion of Indian populace. With lower interest rates, investors would be forced to look for investing in inflation beating avenues. Alternatives, which are stable and are with regulator’s approval, would be available for common man.

According to a report, India is all set to emerge as USD 5 trillion in next 5 years. Fiscal deficit has also come down from almost 6 % to 3% in last 5 years. Hence, next 5 years would be interesting to watch!