Updated on 26th August 2014   

  • Economy moving out of less than 5% trough, in 5-5.5% range this year
  • Sowing still lags behind for India’s main crops, will hit agri growth in the third quarter
  • With rising input costs and slight pickup in demand, pricing pressures harden for firms
  • Current moderate inflation numbers will start upwards by last quarter
  • Consumer markets have great expectations from the festive season ahead, but no sustained upswing 
  • With inflationary pressures rising in the latter part of the year, even high end durables will be impacted.
  • Poor growth likely in both urban and rural sectors for FMCG products.


Finally the economy is set to move out of the less than 5% growth trough; we estimate the Q1 numbers to show growth at 5.3%. Going ahead, though there is not great cause for cheer, as the annual growth is anticipated to stay within 5.5%. There are many more positives compared to last year, which give hope. Yet, the burden of structural deficiencies will take time to address, if they ever are, by the new government. So what are the new highs? IIP and the PMI data show the manufacturing sector out of its slump, power generation continues to turn in high growth, pressures from crude oil have eased, auto sales turned in two consecutive months of positive growth in sales, FMCG sales have been upwards since April and with sales on Independence Day weekend doing well, consumer durable firms now have great expectations from the festive season ahead.


But wait, the happiness quotient isn’t rushing to the top yet! On the negative side, we have crop sowing down by 4 million hectares this year so far compared to last year, with particularly steep drops in coarse cereals, oilseeds and pulses. This will automatically raise inflationary pressures by the end of the third quarter. The monsoon has picked up but there are huge regional variations and the rural sector is not completely out of the woods yet, so demand for consumer durables etc. will rise but moderately. Industry needs more on action from the government for infra projects to take off, though many have been cleared recently. There is need for clarity on the road ahead for the coal sector, after the recent Supreme Court ruling on all previous coal block allocations, while gas pricing is the next one to be decided on. Net net, clearing the backlog of poor policy over the past few years will take time, and have a fallout in the short-term, there is a lot to fix to get to the 7% growth goal.