Posts Tagged ‘wage hikes’

INDIAN ECONOMY – GAINING STRENGTH Part 1

Stock market reflects & discounts the overall conditions in the economy.Besides, stock prices in the market are also governed by the investor behavior & valuations. Sometimes investor’s optimism takes the market valuation to a level that it does not matches up with the actual future growth, thus becoming the basis for correction & vice- versa. It is said that “ markets may remain irrational till the life of human being”. Now let us have a look at the economy to see what lies in the future & how it is shaping up for the next leg of growth.

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Indian economy is expected to grow by 7.2% in the fiscal ended on 31st march 2010 & is projected to expand by 8.55 in the current fiscal year and 9% in the next year. The continued improvement in the sentiments of the manufacturing sector which currently contributes around 15% in GDP is likely to play a major role in taking GDP growth to double digits.

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Strong industrial recovery has been the key underlying strength behind the recovery of GDP. During April- December 2009, the index of industrial production (IIP) increased by 8.6% over the corresponding period. Factors that will drive the growth in the industrial production are:

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  • Improvement in agriculture output- Tokyo-based Research institute for global change has predicted normal monsoon rains in india for the current year. On the belief of climatic conditions will remain normal during the year we expect the improved availability of agricultural output to push up production of manufactured food products..

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  • Rising consumer demand – as the business conditions are improving & corporate are giving wage hikes, we believe this will strengthen the sense of financial security in the minds of urban middle-class. A rise in purchasing power and availability of easy and affordable loans are expected to increase the demand for durable goods like auto, consumer appliances.

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  • More availability of mining products- we expect natural gas & crude oil output would increase as the result of the efforts that are being done by companies like Reliance & Cairn India. Coal Production will also rise owing to the allocation of new coal blocks by the government. Fertilizer & Electricity sector would be the key & direct beneficiary with the improvement in the gas & coal availability.

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    Stay tuned for more on this 🙂