INDIAN ECONOMY CONSOLIDATING TOWARDS GROWTH MOMENTUM

The New Year 2012 has set in with a new hope for the Indian economy.In the year 2011, the European economies have passed through a very tough time and the  apprehension of "EURO" getting destabilized and insolvency of 1 or 2 large European economies, created a big impact on the entire world economy. The US economy has off late started gaining grounds and it is expected that the 1st quarter of 2012 will show much stronger indications of consolidating recovery and growth in the US, through the year 2012. The Indian economy has been passing through  tremendous pressure arising out of inflation and impact of rising interest rates at the instance of RBI monetary policy. A
heavy successive increase in the interest rates has severely impacted the industry and its growth plan.

Current Scenario

The inflation rates have started showing the sign of downward tendency and the RBI and the Government seems to have taken a view to stabilize the interest rates at this level and may consider some relief after watching the situation for few months. The recovery of industrial production growth rates in November and increase in exports are being seen as an initial indication of a major consolidation of the Indian economy, preparing itself for a major growth in 2012-13. The government initiative is needed to provide support  to the power sector and the infrastructure sector so that the current situation of absence of coal linkage, poorer  disbursement of sanctioned loans and stagnating sanction of new term loan to the power sector and other infrastructure sector can be addressed effectively. The severe crunch of liquidity in banking sector will require special attention of the market regulators and the Government. On the one hand RBI is undertaking open market operation and on the other hand the Government borrowing from the financial market has increased beyond
proportion. The fiscal deficit is expected to be much beyond the budgetary figure.

The government may consider investment of surplus cash of more than Rs. 2000, 000 Crores with public sector undertakings to further capitalize the banks, infrastructure projects and other areas where equity funding can give a big push to the growth. PSU' s have more than Rs. 2 lac crore internal accrual on an annual basis. These are to be channelized for effective usage.

Role of Professionals

The Indian economy is ready for a major leap forward and we need to prepare our clients to plan and implement significant  growth. It is very important to ensure corporate governance and business ethics are inculcated into our clients, with a view to ensure sustained long term growth of corporate sector clients. The recent jerks to a certain sections of industry in relation to 2G scam is sufficient indication of the need for ethical practices and be committed towards transparency, true and fair disclosure, creation of value and growth in a dignified ethical manner.