I am still o0f the opinion after reading so many books that two things are necessary to move the economy...one is money and the other is Psychology of the Masses..Untill unless the negative psychology barrier of the masses is not broken which presently is of fear ...skepticism..doubts ...uncertainty... things cannot move...and so will the economy of the world will lag and starve for growth..still say all this printed money will have its catostrophic effetcs within the next few years from today and mother of all bull market is going to mhit us in the distant future...believe in the Demographs of India and its future unstoppable growth...happy long term investing...
Let us forget about the levels of growth, let us talk about can growth rate move up. Let us talk about what is it that allowed growth in last two years. One of the big factors that drove growth positively in the last two years was this massive positive terms of credit shock that came from this huge decline in commodity prices. Now that is gone. So, you need to look forward to what is going to replace that. So, we have a bit coming out from monsoon, government spending is probably going to struggle given where the fiscal deficit is, so you are not going to get anything out for public investment itself. So, you really have to go back and look at private investment. For the last 4-5 years the private investment has continued to languish and slow and has come to a point where unless that moves up it is very hard to see growth moving up. I am not even going where the level should be. Q: We are still at 70 percent and under 70 percent capacity utilisation. Aziz: That is exactly the point. The point is that what is the reason why private sector is not investing. I would say that apart from the various supply side impediments that the government is addressing through reforms etc, I think the bigger thing is that and it is a global phenomenon, is that there is no visibility of sustained demand which goes back to the growth slowdown story. If there is no demand, as a private sector why would I expand capacity. Q: You think we could end up in disruptive policies if we chased 8 percent? Oganes: The focus should not be in obsessing about targeting a high rate of growth but rather how to get there. How to get there is, there has got to be a re-ignition of private sector investment. There is a lopsided growth dynamics in India right now which is excessively relying on consumption which is product of positive terms of credit shock that is now exhausting itself. There is an attempt by this administration of trying to narrow the fiscal deficit which means that fiscal policy will not be providing the same support to growth that it has up until now as well. So, what is going to replace that? Global trade is weak, so exports maybe they have some room to recover but it is difficult to imagine that, that being the source of growth going forward. So, it has got to be private investment and for that you need more reforms to make private investment more viable, more attractive, more appealing and for the private sector to feel that there is some money making opportunities to be pursued given the reforms.
Let us forget about the levels of growth, let us talk about can growth rate move up. Let us talk about what is it that allowed growth in last two years. One of the big factors that drove growth positively in the last two years was this massive positive terms of credit shock that came from this huge decline in commodity prices. Now that is gone. So, you need to look forward to what is going to replace that. So, we have a bit coming out from monsoon, government spending is probably going to struggle given where the fiscal deficit is, so you are not going to get anything out for public investment itself. So, you really have to go back and look at private investment. For the last 4-5 years the private investment has continued to languish and slow and has come to a point where unless that moves up it is very hard to see growth moving up. I am not even going where the level should be. Q: We are still at 70 percent and under 70 percent capacity utilisation. Aziz: That is exactly the point. The point is that what is the reason why private sector is not investing. I would say that apart from the various supply side impediments that the government is addressing through reforms etc, I think the bigger thing is that and it is a global phenomenon, is that there is no visibility of sustained demand which goes back to the growth slowdown story. If there is no demand, as a private sector why would I expand capacity. Q: You think we could end up in disruptive policies if we chased 8 percent? Oganes: The focus should not be in obsessing about targeting a high rate of growth but rather how to get there. How to get there is, there has got to be a re-ignition of private sector investment. There is a lopsided growth dynamics in India right now which is excessively relying on consumption which is product of positive terms of credit shock that is now exhausting itself. There is an attempt by this administration of trying to narrow the fiscal deficit which means that fiscal policy will not be providing the same support to growth that it has up until now as well. So, what is going to replace that? Global trade is weak, so exports maybe they have some room to recover but it is difficult to imagine that, that being the source of growth going forward. So, it has got to be private investment and for that you need more reforms to make private investment more viable, more attractive, more appealing and for the private sector to feel that there is some money making opportunities to be pursued given the reforms.
No comments:
Post a Comment