2014 has been an important year for the Indian economy. The poor growth rate in the economy and double digit inflation levels have posed a huge challenge to the Government and the country’s central bank RBI. The continued global slowdown in many countries has also complicated matters for the Indian economy.
However, the first half of the year witnessed a historic event with the Bharatiya Janata Party (BJP) being the first party in 30 years to attain a majority win at the Central Government. With Mr. Narendra Modi becoming the Prime Minister of the country, ‘Achhe Din’ or ‘good days’ has been promised to the Indian economy. The first major event which was a precursor to this was the Union Budget, presented by Finance Minister Arun Jaitley. This outlined most of the Government’s policies and reforms to be undertaken in the coming year and during its term in office.
The economic expectations for India have started looking up after the elections, and foreign investors have also started showing interest in investing in the country. Here are some important economic expectations for the rest of the year.
Fiscal situation: India’s fiscal deficit situation has been very bad and this is an important economic consideration. A poor fiscal situation not only hampers growth in the country directly, but also discourages foreign investments. The fiscal deficit was 5.7% in 2011-12 came down in the subsequent year as the Government reduced expenditure. However, the current Finance Minister in his Budget has aimed to bring down this number to 4.1% in this year on the back of increased revenues in the form of widening the tax base. Although this ambitious target of the Government may not be achieved this year, the path to fiscal consolidation will definitely begin this year, by increasing the net of tax payers in the country.
Inflation: Inflation has been another pain point in the economy for the past few years. The price of basic items like fruits, vegetables and grocery has continuously been increasing, thus affecting the common man. Monsoon is an important determinant of the level of inflation. This year, the monsoons have been below normal levels. It is therefore expected that inflation will not come down substantially from current levels during the rest of the year. However, there could be respite the following year, on the back of various steps taken by the Government to streamline processes and thereby control inflation.
Growth: The level of growth not only indicates the state of the economy, but also acts a psychological determinant of future growth. If the economy posts poor growth, foreign investments will also be low. Over the past few years, growth rates in the Indian economy have fallen to abysmal levels on the back of poor governance, negative sentiments and global pressures as well. The industrial growth showed signs of recovery in May at 4.7%, which is a huge positive signal. Initiatives by the new Government and renewed interest in the Indian economy will result in similar improvements in growth rate over the rest of the year.
Interest rates: Interest rates in the economy depend on the policy directions by RBI. On the back of high inflation and tepid growth, RBI had kept interest rates high over the past few years. Although inflation is not expected to go down substantially this year going forward, it is expected that growth rates will pick up. As a result, RBI can bring down interest rates over the year, albeit in a slow and phased manner.
The first signs of turnaround of various economic indicators for the better are expected to be witnessed during the rest of the year, as the new Government begins to implement its policies and gets into action.
However, the first half of the year witnessed a historic event with the Bharatiya Janata Party (BJP) being the first party in 30 years to attain a majority win at the Central Government. With Mr. Narendra Modi becoming the Prime Minister of the country, ‘Achhe Din’ or ‘good days’ has been promised to the Indian economy. The first major event which was a precursor to this was the Union Budget, presented by Finance Minister Arun Jaitley. This outlined most of the Government’s policies and reforms to be undertaken in the coming year and during its term in office.
The economic expectations for India have started looking up after the elections, and foreign investors have also started showing interest in investing in the country. Here are some important economic expectations for the rest of the year.
Fiscal situation: India’s fiscal deficit situation has been very bad and this is an important economic consideration. A poor fiscal situation not only hampers growth in the country directly, but also discourages foreign investments. The fiscal deficit was 5.7% in 2011-12 came down in the subsequent year as the Government reduced expenditure. However, the current Finance Minister in his Budget has aimed to bring down this number to 4.1% in this year on the back of increased revenues in the form of widening the tax base. Although this ambitious target of the Government may not be achieved this year, the path to fiscal consolidation will definitely begin this year, by increasing the net of tax payers in the country.
Inflation: Inflation has been another pain point in the economy for the past few years. The price of basic items like fruits, vegetables and grocery has continuously been increasing, thus affecting the common man. Monsoon is an important determinant of the level of inflation. This year, the monsoons have been below normal levels. It is therefore expected that inflation will not come down substantially from current levels during the rest of the year. However, there could be respite the following year, on the back of various steps taken by the Government to streamline processes and thereby control inflation.
Growth: The level of growth not only indicates the state of the economy, but also acts a psychological determinant of future growth. If the economy posts poor growth, foreign investments will also be low. Over the past few years, growth rates in the Indian economy have fallen to abysmal levels on the back of poor governance, negative sentiments and global pressures as well. The industrial growth showed signs of recovery in May at 4.7%, which is a huge positive signal. Initiatives by the new Government and renewed interest in the Indian economy will result in similar improvements in growth rate over the rest of the year.
Interest rates: Interest rates in the economy depend on the policy directions by RBI. On the back of high inflation and tepid growth, RBI had kept interest rates high over the past few years. Although inflation is not expected to go down substantially this year going forward, it is expected that growth rates will pick up. As a result, RBI can bring down interest rates over the year, albeit in a slow and phased manner.
The first signs of turnaround of various economic indicators for the better are expected to be witnessed during the rest of the year, as the new Government begins to implement its policies and gets into action.