Early signs of green shoots in the economy

Early signs of green shoots in the economy

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There is growing evidence that the economy is on a welcome rebound after lacklustre GDP growth of 5.7% in the first quarter.

Notice the smart uptick in commercial vehicle sales, credible growth in the ‘core’ sector, and the Purchasing Managers’ Index (PMI), both for manufacturing and services, have risen.

The way forward is for the government at the Centre and the states to proactively improve the ease of doing business, so as to coagulate funds and follow through project implementation with big-ticket investments.

In parallel, there is the pressing need to speedily resolve pending issues like prompt reimbursement of input tax credit under GST.

Also required is firmness to tackle the problem of high corporate indebtedness, and proceed with divestment of stressed assets as per the Bankruptcy Code, in a time-bound manner.

It is notable that the credit profile of corporates has seen marked improvement lately. The credit ratio, the ratio of upgrades to downgrades, is now 1.88 in the first half, as against 1.22 for the entire last fiscal.

 

The primary capital market, both for equity and debt, is buoyant as well. It should boost corporate investments, provided there is improved governance and investor confidence revives.

The RBI expects a rise in the inflation rate going forward, but oil prices have begun to soften and food prices are expected to stay subdued too.

A package of measures for the small-scale sector affected by demonetisation, and segments like textiles, should pay handsome dividends on the growth front in the short term.

Consumption trends should also get a boost as the state governments carry out pay revisions following that of the Centre.

The bottom line is that the prospects seem sanguine for the economy to traverse to a higher growth path.

[“Source-economictimes”]