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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Good and bad

Posted by Muthu on September 1, 2019

Bad news, which started trickling in April, has reached its height on Friday, when GDP growth rate of Q1 was published as 5%

Will it get worse than this?

Yes, the current quarter (Q2) may be equal to or worse and than Q1.

There are two kind of voices always dominating the narrative; those who blindly believe and of those who blindly hate Modi.

Most of us are in the middle path, judging each action by its merit. Though we are many, our voice is not heard to the extent it should.

The government has failed big time in anticipating the economic trouble and also not using the budget opportunity to revive the economy. In fact, budget added some more woes.

The good part is that since second half of August, government has realised it’s mistakes and implicitly accepted that the economy is in a trouble.

They have been taking measures for the revival of the economy since then.

These are incremental measures and not any big bang reforms.

Assuming they would continue only with incremental measures; still this would result in better liquidity situation and lower the cost of capital.

Ample liquidity and low cost of capital would trigger economic revival.

Without any major reforms, I wouldn’t expect the growth rate to go beyond 7%.

We need 9%+ growth rate even to aim for $5 trillion economy by 2024.

Reasonable growth is possible but dream of $5 trillion may only remain as dream.

We can safely say that the economy has reached the bottom as the government has accepted the problem and have been actually working on it.

We may see the earliest sign of recovery only in Q3.

As I’ve explained many times, market reflects the future and not the present. Though I’ve no capability of market predictions, I’m aware that markets do not wait to till actual growth to manifest and start reflecting the same sometime before. This is true for both good and bad situations.

The bad news is that we have slowed down.

The good news is that this is the beginning of the recovery.

3 Responses to “Good and bad”

  1. As assumed by the author, most of us are not middle-path believers/travellers who judge each issue based upon its merit. Most of us firmly and blindly believe on Modi to revive economy and that’s why majority of Indians have voted for Modi only 3-4 months back. Very few people are Modi haters. But then, jingoism is different than economy.

  2. Piyush Gandhi said

    Sir
    I have been following your blog recently.
    I like your views and way you explain in simple words which layman can understand the status of current Indian economy.

    Thank you very much

  3. Dear Sir,

    Thank you for the knowledge that you provide for the public and make us understand the prevailing situation of the indian economy. Keep doing it sir
    Thank you once again

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