Happy New Year 2013 — that’s not merely for the sake of salutation. As the year 2012 ends, across a range of bankers, industrialists, economists and policy makers polled by Business Standard, there is only one overwhelming sentiment for the coming year: Optimism.
From the Prime Minister’s Office, which faced one of the toughest years since the United Progressive Alliance came to power in 2004, to the highrises of Mumbai’s financial centres, there is a pervasive sense of growing confidence. That is probably why C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, feels “2013 will be better than 2012 as there is a reversal of pessimism in the industrial sector, which will also result in a pick-up in investment activity next financial year”.
India Inc agrees. “I think 2013 would be a better year for India than 2012. This is because we have initiated a lot of action in getting on to the right path. I am hoping all that would lead to the right results,” says Chanda Kochhar, managing director and CEO, ICICI Bank, the country’s largest private sector lender.
Even for those who watch India from afar, there is renewed hope. “Two reasons why growth actually fell this year are paralysis in decision making and tight monetary policy. Both are receding now — monetary policy, not fully, but it will change,” says Arvind Panagariya, Bhagwati Professor of Economics at Columbia University. “A flurry of reforms have also happened,” he adds.
Those belated reforms, however, have also sparked anticipation for more action from the government — and not only because the West may finally be pulling out of a prolonged economic freefall. “Growth next year would be significantly better than this year. First, because of base effect; second, reforms are being brought in; and third, some recovery is seen in Europe and the US,” reasons Godrej Group Chairman and CII President Adi Godrej. “This year (2012) will be the worst growth year to my mind in a long time,” he adds.
Not so in 2013. “For now, we expect a modest acceleration in growth next year,” says JPMorgan India Economist Sajjid Chinoy. “How much the economy accelerates will depend on how significantly the government can ease supply bottlenecks and how much the global economy re-accelerates,” he says.
That’s reason enough for the chief of India’s biggest bank, State Bank of India, to wait and watch. “I would rather like to do the prediction after the Union Budget. It will depend on the Budget, monsoon and how the different state governments play out,” the bank’s chairman, Pratip Chaudhuri, says.
In contrast, industrialists like Videocon Group Chairman Venugopal Dhoot don’t need more convincing. “All the bad news for the country is now over. I am expecting inflation to moderate next year and economic growth to pick up,” he says. “The fact that there is political stability at the Centre will give lots of confidence for us to invest in new projects.”
Maybe because that sort of stability has been elusive in recent quarters, Rajeev Talwar, executive director of realty major DLF, has more realistic expectations. “Signals from the government are very good, with the passing of the Companies Bill and the Banking Bill. Investor sentiment is improving and its results will show in next year,” he says, adding: “The government seems to be turning the corner (rather) than turning a deaf ear.”