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Stock market boom drives economic optimism in India
Tuesday, 04 November 2003, 20:30 IST
NEW DELHI: From stock market to the business sector, people are looking to make their fortune with India's economy as it takes big steps towards recovery from a lumbering growth rate and decades of inward looking policies.
The "feel-good sentiment" sweeping through all sectors of the economy is reflected in the sharp surge in consumer spending across a wide range of sectors that has put Asia's third largest economy on the radar of international investors and companies.
And helping India eye major economic dividends are a booming stock market that crossed the magical 5,000 mark Monday for the second time in the nearly two-decade old history of the benchmark Bombay Stock Exchange index.
The most bountiful monsoon rains in a farm-reliant country, a pick up in industry activity, a sharp surge in off-shoring of jobs by overseas companies and consumer demand are other factors that are feeding optimism on the economic growth front.
"There is a dramatic turnaround in the national sentiment about the country's economy, which reinforces the feel-good factor that is back with a bang," said noted economist D.H. Pai Panandiker.
Reinforcing optimism of higher economic growth in the current fiscal year, the Reserve Bank of India (RBI), the country's central bank, Monday said the Indian economy would grow between 6.5 and seven percent in 2003-04.
The projected seven percent economic growth figure will be the strongest full-year expansion in the last six years. The last time India's economy grew over seven percent was in 1996-97, when it touched 7.8 percent.
"The seven percent growth is not something that India has not achieved earlier but if we meet the target in this year it would be a great achievement in itself given the sluggish world economy growth," Panandiker told IANS.
India's agriculture-dependent economy grew by a moderate 4.3 percent in the fiscal year ended March 31, 2003, mainly due to a 3.1 percent fall in agriculture produce, as the worst drought in three decades ravaged large parts of the country.
More than five decades after the country's independence and all-round technological leaps, the weather god is still the chief provider to the India economy where agriculture remains the mainstay for millions.
Analysts say the "feel-good" factor has now begun to seep through the wider economy. Car sales, for example, jumped 26 percent for April to August this year compared with the same period last year.
Mobile phone users' base has almost doubled from six million a couple of years ago to nearly 12 million and is now threatening to exceed the population of fixed-line telephone subscribers.
But the biggest boost comes on the stock market front with the benchmark share market index closing Monday at 5,063.03, a level not seen in three-and-a-half years.
Analysts say the crossing of the crucial 5,000-mark comes as a major boost for investors who had badly burnt their fingers in the last few years dormant domestic stock market.
"The crossing of the 5,000 mark clearly shows the faith of the domestic as well as international investors on the fundamentals of the Indian economy," said Neeraj Deewan, a senior analyst with brokerage firm Quantum Securities.
The seemingly never-ending rally on the bourses has already helped the key share market index to register a gain of nearly 50 percent since the beginning of the current calendar year.
The market index has also gained over 72 percent since it touched a six-month low on April 25, making it one of the best performers in the Asian region.
Indian stocks had remained dormant since the dotcom bust around three years ago. A flood of accusations of shady dealing and stock price manipulation had also kept the investors away from the market.
Foreign fund investors have not remained oblivious of the boom in the Indian stock exchange. Foreign funds have pumped more than $4.5 billion into Indian stocks so far in 2003 compared to about $763 million in the whole of 2002.
Said economist Surjit Bhalla: "The Indian economy is finally on a takeoff path and the most important thing is that the projected seven percent growth in the current fiscal will not be a one-off thing.
"The recovery in the industrial sector, increased investment and low interest rate regime clearly indicate that higher economic growth would be sustainable in the years ahead as well."
Source: IANS
Source: IANS