By Ishita Gopal

Edited by Liz Maria Kuriakose, Associate Editor, The Indian Economist

The watershed general elections of 2014 have not only inspired a new spirit in the democracy regarding political issues, but have also rekindled the economy. This can be seen in the soaring figures of financial markets that hit record highs (BSE crossing the 25,000 mark), the euphoria in the industrial sector, the hope in the agricultural sector and of course, the recently projected GDP figure for FY2014 of 5.6% which is much higher than the sub 5% growth projected last year. Even though it’s a bit too early to make grand claims of resurgence in the economy, the outlook looks pretty optimistic.

The prompt removal of EGoMs and GoMs indicates strong will to expedite decision making that was earlier riddled with bureaucracy. Now no one will be able to engage in foul play as all the ministries are indirectly controlled by the Prime Minister and his cabinet. This is bound to bring back the investors’ confidence that had promptly fled with increasing political instability over the past 3 years. There is already an increasing amount of investor interest in PSUs and power companies as hopes of disinvestment programs and addressing the issue of fuel is expected.

The rupee, which had reached an all time low of 69/$ in August 2013 is amongst the best performing emerging currency of this year, rising 4% this year to59/$. Even though there are a number of factors responsible for this- one being the weakening of the dollar against other currencies due to the new progressive measures taken up by the European Central Bank  – the role of the new government in restoring faith in the currency cannot be ignored. Recent data showing a sharp slide in the current account deficit to just 0.2 percent of gross domestic product is likely to further prop up the rupee.

India’s service industry sector has also been expanding after an year long stagnation as indicated by HSBC Services Purchasing Managers’ index. This has come about because of optimism in the market regarding economic policies which are expected to promote development.

The RBI chief Raghuram Rajan has issued a statement claiming that it would work hand in hand with the new government. This is important as the working of both the institutions influence each other.

Another important statement has come from the finance minister, Arun Jaitley, who has promised to boost the agricultural sector. Farmer suicide arising due to crop failure and inability to repay loans has become a major issue in the country. Some responsible measures to reduce risk and hedge farmers, especially the marginal ones will bring much relief.

So far, so good. But to ensure this optimistic bubble around the economy remains, the government will have to deliver in the upcoming budget.

Ishita is a BA( hons) Economics student from Miranda House, Delhi University. She is a multitasker and likes to be involved in all kinds of cultural activities. Besides writing she loves playing Beethoven symphonies, choir practices ,and reading fantasy and fiction.She prefers doing research about a subject by first watching a documentary or two on it, and then reading a lot of articles from different newspapers.  Her dream job is to own a record label while doing freelance writing for a big magazine/newspaper.

 

 

Posted by The Indian Economist | For the Curious Mind