By Manish Jain
2022 has been anything but kind to the global economy. The US is slowly slipping into a recession, the European economy is in shambles and China stares at a stagflation sort of situation. The issues at hand are the fragile geo-political situation, the Russia-Ukraine war, and the pandemic, which has all taken a toll on the global economy. US GDP has already witnessed two successive quarters of negative growth, the EU has been flattish but waiting now to slip into a negative zone and China, which witnessed an abysmal 0.4% growth in 2QCY22, is likely to struggle to grow at 4% also in the current year.
However, amidst all the carnage, India stands tall. We have been and again are likely to be the fastest growing economy in the world, among all major countries. Current estimates put the possible GDP growth at 7% for FY23. The core of the economy, i.e. the domestic demand, continues to remain absolutely strong. Even in a rising interest rate scenario, domestic consumption demand continues to go from strength to strength. The systemic retail loan growth remains in strong double digits for the third year in a row.
The second issue that we have been fairly proactive in tackling before it went out of control, is inflation. India remains the best place in the world as far as inflation is concerned. Our CPI inflation at ~7% is just ~ 200bps away from the long-term average. The repo rate at 5.4% is just a hop, skip and jump away from making the real rates neutral. This is a far cry from the rest of the world, which continues to struggle. The proactive approach now puts RBI as one of the best central banks in the world.
The domestic capex cycle is showing signs of revival. Corporates have been cautious, and rightly so, but the green shoots now are visible. Balance sheets are strong, cash flow positions comfortable and capacity utilization higher than the longer average. This essentially means that soon enough we shall the private sector capex come back and will come back strong, thereby pushing the system credit growth even higher than the current trajectory. This improves the overall outlook for the economy quite a bit.
Lastly, they say every dark cloud has a silver lining. The recession in USA and EU may be bad for the overall economy but helps India quite a bit. It is true that it impacts the BoP but there are ways to tackle that (Hint: Gold import curbs), however, the softening of the commodity prices help us quite a bit. The margin concerns are now a thing of the past and confidence that Nifty will be able to deliver strong double-digit growth is now fairly high.
So, the crux of the matter is India stands tall amidst ruins. In a volatile market, do not miss the opportunity. Invest every time the Nifty shows meaningful correction and you shall create wealth for yourself in the long term. However, remember to invest only in Good & Clean companies.
(Manish Jain is a Fund Manager at Coffee Can PMS, Ambit Asset Management. The views expressed in the article are of the author and do not reflect the official position or policy of FinancialExpress.com.)