Return to a high growth trajectory will be gradual and will happen over the coming years<
05-Jun-13   15:10 Hrs IST

Mr.Sivasubramanian KN
1) India's economy expanded by 4.8% in Q4 FY13. What factors would lead to the growth trajectory in coming years?

GDP data released recently showed that India's economy expanded by 4.8%yoy in the March quarter, slightly higher than the upwards revised 4.7%yoy growth clocked in the sequentially previous quarter. The marginal pick-up was largely due to some improvement in industrial output at 2.7%yoy (2.5%yoy previous quarter), while services sector remained resilient. Private consumption slowed, and the impact was partially offset by acceleration in exports. Broad-based deceleration across sectors resulted in the full year growth falling to 5% from 6.2% in FY12.

We continue to believe that the worst is behind us and growth is likely to pick up in the current financial year. Some of the key drivers are expected to be reduced inflationary pressures, favourable monsoons, and improved environment for project execution. The latter could be supported by a policy push and export revival led by developed market demand. The fall in consumption in recent years has been a concern and this could change helped by pre-election spending and lower interest rates. However, a return to a high growth trajectory will be gradual and will happen over the coming years.

Along with the economy the RoE for Corporate India may also well be on the path of bottoming out. Rise in consumer / investment spending along with falling borrowing, input and wage costs augurs well for earnings growth in the year ahead.

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