The Indian economy has shown exemplary resilience and withstood the twin whammies of GST and demonetisation. India has many positive factors going its way.
India Inc witnessed a major earnings recovery lending it a much-needed competitive edge.
For the quarter ended September 30, 2017, results for Nifty 50 companies- (40 others, excluding BFSI and 10 BFSI) have been along expected lines. Excluding a few, a majority of the companies have reported results in line with consensus estimates.
There was an 11.2 per cent year-on-year growth in net sales of 40 Nifty50 companies (ex-BFSI), while there was a 10.2 per cent growth in net profit. There was an 11.1 per cent YoY growth in the net interest income (NII) of 10 Nifty BFSI companies, while there was a 26.5 per cent growth in net profit.
If seen from a holistic perspective of the Nifty 50 set, 16 companies have reported earnings above expectation, 10 companies have reported earnings along expected lines, 14 companies have reported mixed numbers and only 10 companies have reported numbers below estimates.
India's elevation into the top 100 in the World Bank's Ease of doing Business (EODB) global rankings from 130 last year is a crucial endorsement of the government's economic policies and reform programs.
At a time when the government has come under severe criticism from the opposition for the economic slowdown, the annual report comes as a ratification of India's improved business environment. The move also reaffirms the world view that the Narendra Modi government is determined to eliminate red tape, remove bureaucratic hurdles and streamline approval process to transform India into a global investment destination.
The upgrading of India's credit rating by Moody's Investor Services from Baa3 to Baa2 and a shift in outlook from neutral to positive comes in the wake of the government forging ahead with a sustained roadmap of fiscal consolidation. The improved rankings have the potential to increase foreign FDI and FII investment inflows into India on a sustained long-term basis. Borrowers can access institutional credit at concessional rates which are likely to witness a fall of around 50 bps.
The announcement by the government of an ambitious Rs 2.11 lakh crore bank recapitalisation plan to provide public sector banks with a credit pipeline whose balance sheets have been bogged by NPAs. Recapitalisation would inject much-needed liquidity into the banks and improve their lending capacities, boosting the investment cycle in the economy.
Macroeconomic fundamentals have shown a marked improvement owing to a moderation in the debt-equity ratios of a majority of the BSE 500 companies. As corporate balance sheets get better, India Inc has embarked on a slow yet steady deleveraging (reduction in debt-equity ratio) drive to unload its significant debt burden.
Growth momentum has been boosted in the rural economy with an uptick in consumption revival. As companies augment their distribution channels in rural areas and a good monsoon and the prospect of a good agricultural crop boost farmer (consumer) morale, there is a perceptible increase in sales transaction volumes in rural India which is emerging as a key demand hub.
The India growth story was largely driven by a rise in Indian merchandise exports at a six-month fastest pace in September 2017. There was a 25.7 per cent rise in exports to $28.61 billion in September as compared to $22.77 billion in September 2016.
The rise in export volumes was a positive development for the economy and led to the narrowing of India's trade deficit in September 2017 to $8.98 billion as compared to a deficit figure of $9.07 billion in the corresponding period of 2016. In spite of uncertainties like frequent rupee volatilities and a pervading global protectionism threat that possess the capability to curtail India's export growth, Indian exports are expected to traverse a higher growth trajectory in the months ahead.
On the flip side, hardening oil prices and political risks both within and outside of India continue to be impending factors for the economy which seems to be running a smooth course for now. This augurs well for investors willing to buy into the long-term India story.
