The headwinds facing India’s economy are known. Slowdown in investments due to bottlenecks related to energy, minerals, land acquisition and a general environment of policy execution uncertainty are a reality. Higher crude oil prices have worsened some key macro-economic indicators, even as euro zone concerns have resurfaced. A barrage of such news hits us daily and has kept the overall mood in the stock markets sombre and tentative.
Global factors aside, from a governance perspective it is a pity the Indian economy isn’t growing faster. I strongly believe India’s growth rate will be higher if policy makers get their act together.
However, by being overly pessimistic and bearish, investors would be doing themselves a big disservice. While there may not be an all-encompassing tailwind for the stock market, opportunities abound on a stock-specific basis.
Our world has progressed because of optimism and running with the possibilities. Even at a sub-optimal economic growth of seven per cent or thereabouts, India has several things going for it. Consumer-facing sectors, barring intermittent dips, should continue to do well, as consumer aspirations have got stirred in India and, once unleashed, these can’t be contained. Rural India’s potential growth rate is very high as it has a per capita GDP (gross domestic product) and penetration levels that are lower than the average for the country.
The rural economy is much more broad-based and not just dependent on agriculture. So, here too, there may be an odd year of volatility, barring which rural growth should hold well and continue to be very resilient. Knowledge-intensive sectors have less government, and more energy and initiative and should continue to do well, as also the prudent financial services firms, as a big percentage of our population remains unbanked and under-banked.
Another matter to be kept in consideration is that progress and growth are not just based on economic decision-making by the policy makers, instead these have been led by technology. In the last two decades, the advent of the internet and proliferation of the media and mobile telephony have spurred economic growth in a big way. The march of technology is relentless, be it the ongoing surge in data consumption or progress in alternative energy.
Investors in the financial markets would do well to take lessons from some of the wealthy businessmen who do business in the physical economy — they are optimistic, have positive energy and are focused on what is working and not always fretting about what is not. So, instead of being paralysed by pessimism and bearishness, investors would do well to focus on finding individual companies which are growing nevertheless. Also, looking for value in what is not working due to cyclical factors should help investors generate wealth in the medium to long term.
The author is head (equities), Tata Mutual Fund