It was suffering from ‘policy paralysis’ as 2014 began with some ‘green shoots’ here and there, then a stable government came promising ‘achche din’, but the Indian economy will desperately need investments on the ground to return to its high-growth path in the new year.
The sentiments have already got a boost — since the formation of the new government headed by Prime Minister Narendra Modi — and the economy can indeed grow by over 5.5 per cent in 2015 if the ‘right noises’ get converted into real action on various fronts including ease of doing business, experts believe.
The factors helping in this objective include decline in inflation levels, continued boom in stock markets and expectations that RBI would also oblige with a much-awaited interest rate cut in the new year.
After witnessing a sub-5 per cent growth, 2014 saw improvement in economic activity with the growth bouncing back to 5.5 per cent in April-September period.
Though the year began with a low growth of 4.7 per cent in January-March quarter, momentum built up post election results in May in which BJP-led NDA won a huge majority in the Lok Sabha polls.
While various initiatives taken by the new government in the last six months are yet to yield results, there has been a distinct improvement in the business sentiments which were reflected in the booming stock markets.
The stock market benchmark Sensex has gained close to 30 percent or over 6,000 points this year, recording its best rally in five years.
In addition, the declining prices of vegetables and softening of global crude oil prices, helped in containing inflation. While the WPI-based inflation touched zero in November, the retail inflation was at 4.38 per cent, the lowest level since February 2012.
Chief Economic Adviser Arvind Subramanian said: “There has been an improvement in economic growth as well.
We were growing slow and slow for 12 quarters, that has bottomed out. And we seeing early signs of recovery, but it’s not durable it hasn’t taken hold yet”.
The key initiatives of the government which have helped improving the investor sentiments include a commitment for not resorting to retrospective amendments to tax laws and eliminating ‘tax terrorism’, relaxation in FDI policies and hike in foreign investment caps for various sectors including insurance and launch of the ambitious ‘Make In India’ campaign to boost domestic manufacturing.