India’s growth was the topic of debate in a seminar jointly organised by The Chartered Institute for Securities & Investment (CISI) and LALCAP here in London. The panel included Sir Michael Arthur KCMG, ex UK High Commissioner to India; Lord Meghnad Desai; James Lamont, MD, FT; Alok Sharma MP, Conservative Party UK among others. Issues covered were – Global and domestic economic tailwinds and headwinds affecting growth, outlook for Indian markets for the next 12 months given the drivers and risks, influences ahead of 2014 general elections, politics, scandals and the issue of governance, foreign investment: will India be favoured again.
India’s GDP growth has dropped from 9% in 2011 to 5% in the current year. However, the good news is that it took 60 years to reach a GDP of 1 trillion, a mere 5 years to get to 2 trillion and by 2020 it should be touching 4 trillion USD.
Most panelists bet on a slugging growth pegging it at 6%, at least till the elections. Post election, the outlook was at best unclear. The view was that it is easier to arrest a decline than to kick start growth all over again. So things are not looking easy any which way.
Headwinds are strong with the end of QE in the USA, inactive Central Government in Delhi, South-South trade declining, elections looming large in 2014 with strong anti-incumbency sentiment pervading the electorate and no clear political party enjoying majority support.
Tailwinds are contributed by commodity prices, unrest in the Middle East making it an unsafe investment destination, an entrepreneurial culture, a growing middle class with rising aspirations, and a young population.
India rewards those with immense patience and those who will take the time to understand the diversity and history of its people. Despite the I in BRIC being the laggard with abysmal power generation, there are enough instances of great businesses being created with little capital, Flipkart was one such example quoted. Indian companies could possibly be stellar examples for the world.
Indian politics is riddled with corruption, scandals and scams. The 2014 elections offer a choice as someone said, between an affable but ineffective person and a religious implementer. There will be 110 mn new voters this election – no one knows what they are thinking. Modi is likely to be a divisive candidate for the BJP, according to some. On the other hand, there seems to be a ground swell in his favour. Will his religion dominate his political ideology or will the seat in the Centre make a secularist out of him?
No one really knows. And if Mrs. Sonia Gandhi stands for PM all bets are off!