At a time when India’s economy is more robust and globalised than ever before, slide of stock prices comes as an anticlimax. Critics will say that the union budget presented a week back is the main culprit for this occurrence. While that may be partially true, what is not is that this year’s budget is anti-people.
Let us look at the present Indian economy. The GDP growth has exceeded 8% for about 4 years in a row, and contrary to popular view that India’s only hope in the competitive world lies in its service sector, the manufacturing sector has recorded robust growth of 10% in the last year or 2. Above all, country’s fiscal deficit and revenue deficit have after a long time been kept well within projections.
If these seem rosy, so they are. Foreign Direct Investment (FDI) has attained an all-time high of $9.5 billion between April and December last year, and India’s FE reserve too has scaled $180 billion, inching toward the magical $200 billion level.
In the past, when stock prices slid, the experts laid the reason on country’s bad fiscal situation. This time, as the stocks lost ground post-budget, the same experts are putting the blame on inflation rate. True, the inflation has been increasing rather fast, but the government is on corrective path to check it.
The elites of the country, who get most of the cream produced by a robust economy, are dismayed that the FM has not followed more economy-pumping measures. Instead, the emphasis is more on education and agriculture. Allocation for education has seen a whopping jump by nearly 34%. This was felt necessary for 2 reasons.
One, there is a yawning gap (and growing) between earning levels of new-age professionals and those who lack skills to avail the advantages in new economy. Also, while country’s labor force is growing, the employment opportunity is not. Combining the 2 factors, it is easy to see that a vast multitude of India’s growing labor force just doesn’t have it in them to be proven useful in the new environment.
The second reason is complimentary to the one above. India’s strength in global economy is its vast pool of skilled manpower, but even that has a finite supply. If India is to continue to remain competitive, there must be massive investment in education. Compared to its population, the country has too few quality institutes. So, unless many more institutes are opened backed by well-paid good teachers, India’s hopes to develop and nurture skilled manpower will soon evaporate in thin air.
In addition to education, the budget has focused on agricultural sector and suggested measures (like the new ‘seed policy’) to increase agricultural productivity. The FM has also announced that the massive foreign exchange will henceforth be selectively used for infrastructure projects, the roads (especially the rural roads) presumably getting more prominence.
On the whole, I’m of the opinion that the budget indicates the country’s economic future is indeed in safe hands. If the budget is followed in letter and spirit in coming days, it may be tagged ‘landmark’ in not-so-distant future.
Meanwhile, as the indices continue to slide (mid-cap stocks affected most), savvy investors will be utilizing this golden opportunity to lap up large-cap stocks, many of which are hovering around 52-week lows. Money invested in them now may turn out multi-baggers in a year’s time. Here’s wishing you all the very best of stock-luck.