INDIAN PRIVATE SECTOR: TAKE A LEAP OF FAITH

IIP for November 2015 arrived with third quarterly results. CPI for December last year came at 5.60%, still within the RBI target. IIP contracted at 3.2% as Diwali shutdowns occurred in November this year in contrast with October in the previous year. December numbers of IIP will give a better picture of the economy. Global events with Chinese economy as a major catalyst are the driving force for any domestic economy. Crude oil has fallen below $30 and is expected to touch $ 20 according to many analysts. There cannot be a better scenario for fuel importing country like India to bounce back with higher GDP. In the just released IIP numbers, manufacturing sector was the main drawback contracting by 4.4%. Manufacturing sector cannot be pumped up only by the government with restricted public investment as fiscal deficit target has to be met in the current fiscal. Thus the need of the hour is private sector initiative in all major industries creating a ripple effect across the whole economy. But the private sector is holding back with many companies hoarding high cash and marketable liquid assets. What are they waiting for? China to start galloping again, Brazil, Mexico and South Africa to get back to their original currency exchange rates, OPEC to cut production, or even US FED to roll back its interest rate hike. Are they waiting for all these perfect conditions with even GST, bankruptcy and land acquisition bills to be passed in the immediate parliament session? All of this seems highly impossible in the short run. If the domestic private sector does not take risk and move fast in this volatile climate which is going to stay for a pretty long time, foreign investors might take the required initiative and flourish benefiting the Indian population and their own respective domestic economies.

For Indian industry to move forward, private sector has to believe in the strong macro fundamentals and our financial infrastructure. Until and unless they don’t take a leap of faith, Indian economy will not prosper and catch with the biggest economies of the world.