Dubai: Is India’s economy finally in a position to write-off that COVID-19 infested 2020 as a lost year and refocus all energies on a breakthrough 2022?
Sure, there are concerns about what the Omicron variant might do, but based on all available economy indicators, prospects are there for a decisive return to growth – and even be one of the fastest growing economies at that.
Most recently, the official data showed India’s GDP growth to be 8.4 per cent in the second quarter of FY2022 as against a contraction of 7.4 per cent in the corresponding period in FY21.
Whether it is in manufacturing, the tech industry, the startup space, or at malls and shops dotting the country, the sentiment is turning positive, and could yet turn into full-on bullishness. Ahead of Prime Minister Narendra Modi’s visit to the UAE next month – his first foreign visit in 2022 – the impression is that corners have been turned and it will be a straighter line to the kind of growth performance the government has been expecting for some time.
Take manufacturing, for instance. “(India’s) exports grew by 250 per cent to Rs46 billion in the first quarter of FY2021-22 (between April to end June) while imports dropped 800 per cent from Rs3.2 billion to Rs600 million,” said Suresh Kumar, Chairman of the consultancy Tricolour Values Group as well as at the Indian Business & Professional Council (IBPC) Dubai.
There is now a well-articulated strategy, a strong intent, and some positive early results in manufacturing across 13-odd sectors.
“There is now a well-articulated strategy, a strong intent, and some positive early results in manufacturing across 13-odd sectors. Of course, manufacturing is a long-haul and there are - and will be - challenges. But the country is clearly and consensually set on this course and attracting the top sectoral names in the world through a well-crafted PLI (Production Linked Incentives) scheme. This is half the battle won and created the momentum for a multiplier effect.”
Heavy investment inflows
Tracking the Indian stock markets will provide enough evidence of the kind of foreign funds that they have been attracting. Sure, this has also resulted in periods of market volatility as foreign investors dropped their exposures in Indian equity, but the Sensex (and Nifty) had one golden run in 2021.Even when it was felt that investors were turning skittish, the markets managed to correct themselves.
A strong contender
Anuj Puri, Chairman of the real estate consultancy Anarock, reckons he knows which way the wind is blowing. “As things stand now, the Indian economy is showing significant green shoots of revival, with different agencies even predicting double-digit growth in FY2022-23 – the highest in the world,” said Puri.
“Other than the SME sector – which is still struggling to reach pre-pandemic levels – most others are picking up steam. The residential property sector, for instance, made a strong comeback post the easing of pandemic-infused lockdown restrictions, and this was clearly visible in recent housing data.
“As per Anarock Research, the first three quarters of 2021 saw residential sales of almost 146,000 units in the Top 7 cities, which was 5 per cent more than all four quarters in 2020. This indicates growing demand for homeownership amid pandemic-like exigencies.”
Gulf NRIs do their bit
The Indian rupee has been running weak for the better part of the last two years (today’s (December 9) rate is at Rs20.43 to one dirham), and triggered a sizeable remittance and investment outflow from NRIs in the UAE and Gulf. Property has captured a big part of these investments.
Last year, India saw $83 billion in inward remittances from all over, while this year, as per the last available data, it has crossed $87 billion. “The constant depreciation of the rupee against international currencies, fairly affordable residential real estate amid developer discounts and offers, low home loan rates, government incentives, etc. have made investment in Indian real estate an attractive proposition,” said Puri.
Corporates chase growth
For Mukesh Ambani’s Reliance Industries, these 24 months have been extremely lucrative, not just on the results delivered by group companies, but in attracting the world’s interest. Investors now include the likes of Abu Dhabi’s Mubadala and Saudi wealth fund PIF. The latest Reliance outreach with the UAE is a multi-billion dollar venture in Abu Dhabi’s TA’ZIZ industrial cluster.
Even outside of Reliance, India’s corporate houses are doing their part. The automobile sales are getting back into some form, while the healthcare and pharmaceutical sectors have picked up some valuable lessons during the Covid phase and which will help them in future.
“The pandemic was perhaps the biggest stress asset that India Inc. ever faced - even more brutal than the 2008 financial crisis,” said Siddharth Razdan, Director – Offshore at Firstbridge Fund Managers. “The manufacturing sector faced the big challenge of safety of employees vs need to keep factories running. The service companies adapted faster because of WFH.
“Many companies used this opportunity to clean up their acts, revisit business models, rationalise costs and rejig their top management. They adopted ‘digital-first’ strategy as a core of their survival and growth plans. There are clearly a few winners and beneficiaries.
“The Indian government also used this opportunity to roll out incentives and reforms like never before to support sectors. Chief among them was the Production Linked Incentives (PIL) for thrust sectors such as textiles, auto, and of course, pharma.”
* More sectors coming under the successful PLI (Production Linked Incentive) scheme;
* Issuance by the government of long-term, subordinated industrial and infrastructure bonds, similar to global banks and corporates and thus create robust market- making framework; and
* Corporatizing where possible all government services and de-bureaucratizing/removing ministry-level oversight to signify 'more governance, less government’.
