Wednesday, August 22, 2012

PRASHANT SHARMA, LEAD ANALYST, COMPANY & MARKET INTELLIGENCE, DATAMONITOR INDIA

Faced with the rising fiscal deficit & inflation, it will be a challenge for policymakers , both on the economic as well as political front, to spread the economic benefits

A strong financial system with a prudent central bank at the helm of affairs insured the economy from any global upheaval, as witnessed in the aftermath of the sub-prime crisis. The fiscal deficit, together with inflation, will be India’s major challenge in 2010–11. The combined deficit will continue to be in double digits. India will look at divesting the huge value locked up in its vast public sector enterprises, and also at public-private partnerships and selling services licenses like the recent 3G auction for telecom services to bridge this gap. Exports have rebound, but it was on last year’s lower base. Managing the growth with stimulus withdrawal will pose another challenge. Datamonitor believes spreading economic benefits uniformly and an inclusive growth remain the biggest economic and political challenge.

Overall, in 2010 and beyond, the economy is likely to remain strong on the domestic front with internal consumption as key growth driver. Supply side especially food distribution system could bring challenges and poor monsoon turnout will add as a major concern. Business confidence level of both domestic and foreign investor is strong. Datamonitor expects the softening of commodities prices, benign interest rates and a normal monsoon forecast auguring well for the Indian economy, and with small pauses amidst challenges, its growth run will continue.
 

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