Helping You Build Wealth With Honest Research
Since 1996. Read On...

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Revealed
India's Third Giant Leap

This Could be One of the Biggest Opportunities for Investors




Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.

AD

Why is India's growth suffering?
Wed, 11 Dec Pre-Open

Economic growth is primarily dependent upon 3 factors namely consumption, investment and government expenditure. While consumption has remained strong, India's growth has been struggling due to slowdown in investments. Higher interest rates have slowed the capex cycle. And with inflation remaining high, rates have remained firm and this has further impacted the capex cycle. With monetary tools being ineffective, the government undertook stimulus measures to boost growth. While this had a positive impact initially, this artificial stimulus has now resulted in widening deficits. In short, India's growth has been struggling due to domestic issues which are self inflicted.

And it seems India is in a deadlock of sorts which will make revival all the more difficult. Higher inflation has created a hole in the pockets of rural Indians. This is eating into their purchasing power. Thus, the consumption story has temporarily hit a roadblock. And as explained earlier, the pace of investments is also likely to remain muted due to the rising cost of capital. Lastly, with deficits already in an uncomfortable zone, government expenditure will remain under check.

The only way to revive growth is to create a climate that shall boost infrastructure investments. While cost of capital is an important factor that determines capex spend, it is not the major hurdle at the moment. The major issue is resistance coming in the form of bureaucratic hurdles. Timely approvals and sanctioning of projects will induce corporates to invest more. Right now, most corporates are sitting on the sidelines. In other words, unnecessary red tapism is hurting the execution cycles.

Another way to revive growth is to reduce rates. But this can happen only if inflation is controlled. This can be done if food & fuel inflation is brought down. While the government can do very little to contain fuel inflation since India imports majority of its crude requirements, it can take steps to improve back end infrastructure thereby reducing food wastage. This shall help curtail food inflation. Unnecessary food wastage and hoarding have been the primary reasons for rising food inflation. If these steps are taken and inflation is controlled rates can be lowered. This will revive growth.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Why is India's growth suffering?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited).

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.