Quarterly results, new data show economy could be turning around
More macro data, including that showing a cooling of inflation, and a rebound in exports and factory output suggest a favourable shift in the economy.Updated: Oct 27, 2017 08:10 IST
Recent data, including some better-than-expected corporate results in the three months ended 30 September, may indicate that the economy is turning the corner, say economists. Meanwhile, the government’s huge bank recapitalisation drive is boosting investor sentiment.
The two — the second was announced only on Tuesday — are dispelling the sense of gloom that set in after economic growth decelerated to 5.7% in the quarter to June — the slowest pace in three years.
On Thursday, the BSE’s benchmark Sensex extended the lifetime high it hit the previous day, gaining 0.32% to 33,147.13 points.
Hindustan Unilever Ltd (HUL), India’s biggest maker of packaged consumer goods and a good measure for consumption demand in the economy, beat analysts’ expectations on Wednesday, reporting a 16.42% increase in net profit for the September quarter on the back of a 4% increase in sales volume. HDFC Bank Ltd, Kotak Mahindra Bank Ltd and Axis Bank Ltd, cement maker ACC Ltd, metals producer Hindustan Zinc Ltd and software exporters like Infosys Ltd have also reported robust second-quarter growth, reinforcing confidence that the growth momentum is accelerating.
More macro data, including that showing a cooling of inflation, and a rebound in exports and factory output suggest a favourable shift in the economy, recovering from the disruption caused by the rollout of the Goods and Services Tax and last November’s demonetisation of high-value banknotes.
The National Democratic Alliance government, which on Tuesday announced a Rs 6.92 trillion of investment for the construction of roads and a Rs 2.11 trillion recapitalisation package for state-run banks weighed down by bad loans, has been under pressure to boost economic growth and create more jobs ahead of crucial state elections, including in Prime Minister Narendra Modi’s home state of Gujarat, and national polls in 2019.
Rajiv Kumar, vice-chairman of the federal policy think tank Niti Aayog, said the measures announced on Tuesday indicated the best possible approach.
“It gives impetus to economic growth while maintaining fiscal stability. This comes as a pleasant surprise to the private sector and will stimulate private investments in the economy,” Kumar said in an interview.
The bank recapitalisation plan will help address the bad-loan problem at banks which is constraining the economy, credit rating company Standard & Poor’s said on Wednesday.
Experts are deriving confidence from a rebound in industrial production to 4.3% in August, the fastest in nine months, as the disruptions caused by GST waned.
“… there are signs that revival of the growth momentum may be just around the corner. The reason for this optimism lies in the trends in exports and imports in September 2017,” said DK Srivastava, chief policy advisor at EY, in a note on Tuesday.
First Published: Oct 26, 2017 22:42 IST