Wednesday 1 June 2016 - India may grow at 8.4% in FY17

India is poised to be the fastest growing economy for next 15 years. On 31st May 2016, India's Central Statistical Organisation released core sector data and GDP numbers for FY16. Major market players like Nomura, Care Ratings and CNBC expected India GDP FY16 Q4 at 7.6%. We, at expected Q4 GDP at 7.8% just minutes before official release. IIP data growth increased the expectations of many. India's GDP grew at 7.9% in January - March quarter of 2015-16 taking overall economic growth to five-year high of 7.6% for the entire fiscal.

Nearly 50% of India's population is under 25. India's GDP may reach double digits driven by higher consumption by both rural and urban Indians. The Indian Capitalist expect India's GDP for FY17 to grow at 8.4% making us the fastest growing economy in the world. Our analysis and forecast for FY17 is as follows.

India is a shining star in global economy. With 8.4%, India may retain the spot for fastest growing BRICS economy beating China by nearly 2%. India's higher GDP is backed by increasing rural demand. Agriculture, electricity, telecom and cement are expected to be the growth drivers for India's economy.

India is facing severe back to back drought. The most affected states are Telangana, Maharashtra, Andhra Pradesh, Madhya Pradesh and Uttar Pradesh which are considered to be India's green belt. Agriculture grew by mere 1% in FY16 but there is reason to cheer as IMD has predicted above normal monsoon in FY17. Half of India's population live in rural areas and agriculture is the largest occupation. Better rainfall will lead to higher incomes and thus more consumption. India is expecting bumper demand in agriculture which will help to revive industries as well as services. Bumper supply in agriculture will shadow higher fuel prices and will keep inflation under control.

PM Modi has set an ambitious target for 24x7 electricity across India. India has undertaken a task to electrify 18,000 villages in 1,000 days. The project is digitally monitored through mobile application published by Rural Electrification Corporation. As of May 2016, 8,012 villages have been electrified and connected to the grid. Core Sector data of Q4 FY16 GDP shows stupendous 15% growth in electricity. In 302 days, 9,985 villages will be connected to the grid. By March 2017, all the villages in India will have electricity.
9.7 crore LED bulbs have been sold under UJALA scheme. All the cities in India will have LED street lighting by 2018. India is poised to become a leader in global LED market with the market share of 13%. LED lights will save 20,000 MW electricity every year and Rs. 40,000 crore annually on power bills. Renewable energy space is yet to pick up pace.

In telecom, it's a battle for 4G. Reliance Jio Infocomm with the investment of Rs. 1,50,000 crore will commence operation in Q3 FY17. Data speed wars and attractive pricing will improve the customer base of 4G. Jio is planning to add 10 million customers for 4G within 3 months of launch. Telecom analyst suggest that 75GB 4G may get as cheap as Rs. 200. With more and more people coming online, FY17 will be the golden year for click and brick companies. By Q4 FY17, India will have 1,50,000 kms of fibre optic cable laid. RailTel, the internet arm of Indian Railways will connect 100 railway stations with high speed Wi-Fi. Mobile handset maker Foxconn may start its mobile manufacturing factory by March, 2017. Telecom sector will see Acche Din in FY17

Cement sector may see a improvement in demand for FY17 due to pickup in construction activity and favourable monsoon. Work on major infrastructure projects like Katra - Banihal rail link, metro rail and widening of national highways will add impetus to cement sector. expects Cement sector growth at 6% in FY17 compared to 3% in FY16.

Momentum is building up faster than anticipated. India's GDP success will spell out positive story that soon there will be recovery in private sector. Those criticising GDP numbers are themselves clueless about the solution. Investments will flow in FY17 thus cheers to the future.

- Chaitanya Kulkarni ( Founder, )

No comments:

Post a Comment