2014: Growth is in the horizon!
Zee Research Group
New Delhi: Slowing growth and rising inflation marked 2013 which the country's economic managers would like to forget quickly in the hope that the new year will bring in new government and some good news.
The growth rate continued to slide throughout the year despite desperate attempts by the government to stem the tide with a host of traditional and innovative measures.
Let's find out what is ahead for the Indian economic sphere this year.
No big jumps but bulls to stay: On December 9, 2013, the Sensex hit new all-time high of 21,483.74. However, brokerages are still bullish on Sensex and Nifty. They expect the indices to set a new record in 2014. While Citi has estimated Sensex target for December 2014 at 21,800 level, UBS has projected Nifty target for 2014 at 6900 level. Similarly, HSBC has estimated Sensex target for December 2014 at 21,750 level, Macquarie has projected best case target for Nifty at 7350 level.
Power, realty raring to go: Sectors like Infrastructure, Capital Goods, Power, Realty, and IT are expected to perform well. After the general elections, a stable government at the Centre is expected to continue with the reforms momentum which would augur well for the infrastructure sector.
Consensus on buoyancy in GDP: The consensus growth estimates point to a moderate recovery in economic growth in 2014. For the current fiscal year (2013-14) that ends March 2014, international agencies and most of the private estimates say the growth will be below 5 per cent. However, according to Asian Development Bank, India’s GDP growth is expected to accelerate to 5.7 per cent in 2014-15. Similarly, World Bank has estimated growth rate of 6.2 per cent in 2014-15. Likewise, Goldman Sachs has predicted India’s economy to grow at 5.5 per cent in 2014-15 due to high exports and increase in investment demand.
Inflation going south: Goldman Sachs has projected the WPI inflation rate for 2014-15 at 6.3 per cent driven by increases in administered prices, and elevated inflation expectations. Recently, the Wholesale Price Inflation for November 2013 was at a fourteen month high of 7.52 per cent. However, going forward, it is expected that inflation would decline given the recent moderation in vegetable prices.
Downgrade threat for real? Recently, rating agency Standard and Poor's (S&P) said that India's sovereign rating could be downgraded to junk status next year (2014) if the government, in the run-up to the general election due by May 2014, does not take measures to revive reforms. Currently, S&P maintains its BBB (-) rating with a negative outlook on India, its lowest investment grade.
Banking on choice: New banking licenses will be issued in 2014. This will lead to greater competition in the banking sector. Entry of new banks and liberalisation in presence of foreign banks will increase competition in the sector.
Jobs galore: After mostly disappointing trends in 2013, the job market is looking at promising prospects in the new-year and experts believe that the worst may be over on hiring front and the employees can even look forward to double-digit salary hike of at least 10-12 per cent in 2014.
Spoiled for choice: Almost two dozen new cars are expected to be launched in 2014 as manufacturers aim to arrest the slowdown in their revenues. The carnival will begin in the first week itself, when the new Honda City diesel and Mercedes S class are launched. Other cars to be launched during 2014 include a compact sedan based on Hyundai’s small car Grand i10, Datsun’s small car GO, Honda’s seven-seater MUV Mobilio, Audi’s entry-level car A3 sedan, Chrysler Jeep, a new Skoda Superb, Maruti SX4, Tata Nano diesel and Mercedes GLA, a compact SUV, and its CLA sedan.
Will politics win over economics: All eyes on budget are on 2014-15 budget. Taking into account the election year, Finance Minister can’t afford to present an unfriendly budget. Although it would be an interim budget yet it would be politically motivated. Remember the Rs 60K crore loan waiver in 2008!
Unkind rates: Goldman Sachs has predicted that the Reserve Bank of India would continue to hike rates due to persistent inflation. They expect the repo rate moving up to 8.5 per cent by mid-2014, as the central bank moves to targeting the CPI.