As I continue to maintain, India is a good growth story. Even for the longer term. But let’s not build too much of expectation. Concern areas:
Weak domestic demand
· Domestic demand is not revving up, despite the optimism all around. Private Final Consumption Expenditure (PFCE) hardly budged. An anaemic 0.3% as compared to Q1 2009-10
· Inability of the government to spend is visible. Government expenditure went down
· GDP, from the expenditure side, grew at a mere 3.66%
External demand is showing clear signs of slowdown and given that US is poised for a double dip and Europe expected to see troubled time next year as the austerity measures kick in, one can’t be too optimistic on that front.
Monsoon can again play a spoilsport. In fact, the concept of a normal monsoon is a misnomer. Bihar, Orissa and West Bengal is facing severe drought. Elsewhere there is flood. Average – a normal monsoon. Impact – agriculture unlikely to be a big growth driver going forward. Rural demand would also taper off. Saving grace would be continued focus on community and social service. Thankfully, the 3G auction gives some leeway to the government to continue with social spending without impacting the deficit adversely. However, this luxury will not be afforded next year. Not surprisingly, the roll out of DTC has been deferred by another year.
Bottomline – while I appear pessimistic, I am not. I am being realistic. I do not believe in going overboard with expectations. 8% growth rate is still fine and I will continue to be bullish on India.