Hesitatingly, into 2014 PDF Print E-mail
Tuesday, 31 December 2013 12:18
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We’ve reached a tipping point in many areas and that has its own dynamics

When, amidst the gloom and doom, an HUL and a GSK Pharma decide to spend $4.2 billion to buy back their shares, when a Cairn and an RIL prepare to spend $9 billion more, you know something is happening. When the Sensex is up 1,432 points despite growth remaining flat, this reinforces the feeling even though there are few green shoots in sight. When, at the peak of the rupee’s crisis, $12 billion of FII money flows out mainly from debt markets but $200 billion stays put in the equity market, you know there’s something happening beneath the hood; despite the cynicism and the apathetic political class, there is change in the air, in more senses than one.

The best thing about 2013, on the face of it, is that it is over. Yet, for all its problems, it was a year in which a lot got done to prepare India for 2014 under, hopefully, a more decisive political leadership. To be sure, you had the tired and cynical political class bringing in one bad Bill after another populist one—the land Act and the food security one, for instance. But though he mouthed the usual inanities about reforming ration shops while forgetting about the ambitious and well-executed Aadhaar project, the election-stung Rahul Gandhi has been forced to talk about growth instead of vacuous inclusion and announced big changes in the APMC Act—he even got the environment minister changed though, till the voters rejected populism in Rajasthan and opted for growth in Madhya Pradesh and Chhattisgarh, he found no problem with her work.

Globally, with this likely to be the US’s best year in a decade, Europe looking ready to just about crawl out of recession and both China and Japan looking better, India’s export story looks better. Though no one is looking at more than 5.5-6% growth in 2014 under even the most decisive political leadership given the thin project pipeline and tattered bank and corporate balance sheets, it’s the below-the-hood changes that are important. With crores of Indians on the cusp, between poverty and lower middle class, between lower and upper middle class, between rural and urban India, even a small growth is enough to push them up, to give a decent boost to consumption—which is why consumer-facing companies with strong rural arms like HUL, Hero and Maruti are reporting good results in all the economic gloom. To the extent there are reforms, such as those in the oil or telecom sectors, these push the growth envelope that much more.

There is then what our page 1 columnist Nandan Nilekani calls the network effect. At 875 million mobile phones, 140-200 million mobile internet users or 510 million Aadhaar-numbers, there is a sufficient consumer base for entrepreneurs to develop special apps for—mobile ATMs, for instance, to transfer money in rural areas—and that, in turn, boosts productivity which, at the end of the day, is what GDP growth is all about. After years of selling made-in-China smartphones that helped them cement their leadership positions in the Indian market, firms like Micromax are set to manufacture these phones in India in 2014. That has to count for something.


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