Just predictions! Take it with a pinch of salt!
Circa 2035 AD. What’s special about this calendar year, you ask? Well, that’s when India will recover from the pandemic injury to the economy, predicts the Reserve Bank of India. (1). Of course, there are several preconditions, such as, for example, debt to GDP ratio remaining below 66% as against the current 75% and, most importantly, price stability or rate of inflation.
Well, it’s a long-term macroeconomic view, and as we all know, we are all dead in the long run, to quote the neo-classical economist John Maynard Keynes. What’s in store over the next 12 months, we are unsure. Four months ago, none predicted the full-scale Russian onslaught on Ukraine, splitting the world into three blocs: pro-Ukraine, anti-Ukraine, and the rest, and no one seems to have a clue as to when this war will end, and peace will be restored. In end-2019, who would have predicted that the Coronavirus would shut down the entire world, leading to a global supply chain challenge for everything under the sun?
If so, trying to predict the next 13 years is too much.
Meanwhile, the economic data coming from the government and serious economic watchers are optimistic. To begin with, the GST collection for April 2022, the first month of the current fiscal year, is pegged at Rs.1.68lakh crore — the highest collection so far, and the collection has crossed the Rs.1.5lakh crore mark for the first time. The number of e-way bills generated in March 2022 was 13% more than (7.7 crores) than the previous month. (2) It signals that the economy is on the rebound.
Government data has its share of detractors. Here’s something to chew for such doubting Thomases: the S&P Global India Manufacturing Purchasing Managers’ Index (PMI) reports 54.7 in April vis-a-vis 54.0 in March 2022. Simply put, manufacturing activity is up, marginally, that is. High inflation and the manufacturers’ passing on the cost escalation to the end-user have certainly hit sales. It is a situation far away from the full capacity utilization at factory levels, and therefore, it is too much to expect new investment towards capacity expansion.
By the by, what’s the mood among the business community? “Despite global headwinds and uncertainty, business sentiments showed an improved and resurgence this quarter. The Business Confidence Index (BCI) increased for the third consecutive quarter by 14.0% on a quarter-on-quarter basis, from 124.4 in 2021–22:Q3 to 142.9 in 2021–22:Q4. It also improved by 67.6% in 2021–22:Q4 as compared to 2020–21:Q4 on a year-on-year basis says the National Council for Applied Economic Research (NCAER). (3)
It adds that the upward movement in the BCI was driven by an improvement in sentiments for all the four components of the BCI, namely, “overall economic conditions will improve in the next six months”, “financial position of firms will improve in the next six months”, “present investment climate is positive as compared with six months ago and “present capacity utilization is close to or above the optimal level.”
NCAER Director-General Dr. Poonam Gupta emphasized that “the latest round of the ES indicates that not only have firms overcome the pandemic-related slowdown, but there is also an improvement in sentiments from the sluggishness observed before the pandemic”. . The BCI has achieved the highest level since the figure of 148.5 recorded in 2014–15:Q3.
HDFC Chairman Deepak Parekh does not mince words. Responding to a question on the Indian economy, he said: “We will have a 7–7.5 percent GDP growth for the next few years to come. The indicators are all very positive, whether you take the food grain production, rainfall, IT sector earnings, performance of large companies like steel and cement and the government’s resolve to get more money by privatisation. The government has announced the sale of Pawan Hans also, similarly IDBI Bank privatisation will happen, and LIC IPO is also happening. I think, the intensity of the government’s disinvestment process has started and we will see more and more of this, including consolidation of public sector banks.” (4)
We are living in a dynamic world. Predictions or economic forecasts are a gamble because the imponderables that will impact the economy are innumerable and difficult to depict on a matrix to deduce possible best and worst scenarios. Businesses grasp this ever-changing nature of the universe well. Agility to adjust to any unforeseen eventualities is of paramount importance. Having said that, it is not out of place to declare, “so far, so good .” What about tomorrow? You’re joking!