The year of execution

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Given the high inflation, the year may exhibit preference for a stable rather than volatile interest regime. Given the high inflation, the year may exhibit preference for a stable rather than volatile interest regime.
SummaryGiven the high inflation, the year may exhibit preference for a stable rather than volatile interest regime.

U nlike the usual, trying to paint a picture for the year on the back of a tough economic environment that is perceived to be low growth is quite difficult.

We are currently living in a low growth environment and looking for growth in the coming years. No one would disagree that we need to have growth in the economy, better employment and aggressive investment in infrastructure.

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However, one thing that has emerged in the recent past is that the VUCA world is going to exist in days to come. This is nothing but Volatility, Uncertainty, Complexity and Ambiguity (vuca). Looking back, none of these factors have been in short supply. We have had enough of it, as a result of which we are now debating how things can shape up for the economy and in turn for investors of all kinds.

During uncertainty, what works best is to maintain the discipline of consistently getting the basics right. The year gone by brought on multiple issues to worry about. One of the most prominent ones was the twin deficit. Fiscal deficit and CAD were identified as the main problem from the overseas investors’ perspective.

The challenge was to retain the India sovereign rating at investment grade. We have always believed that India Inc acts fast and takes tough steps whenever the external balance gets disturbed. Last year, many steps were taken to keep the twin deficit at a desired level.

India Inc’s commitment to keep the fiscal deficit below the red line at the cost of growth was a tough decision. However, India did not have much of a choice to do the same as economic sentiment continued to remain weak.

On the currency front, we averted a big crisis when the rupee was marching towards 70 to the dollar. While this benefitted exporters on one side, imports (especially oil) remained under pressure. However, a change in the oil price mechanism saw the burden of oil price movement systematically and periodically passed on to the consumer.

I believe the consumer too is smart to cut down expenditure where his pocket pinches beyond a point. While in this process, CAD came to be contained, progressing well towards the targeted number, there sprung the need to increase the flows through FDI.

While the year gone by has not produced much from the economic growth point of view, the Indian economy

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