NSE BSE MARKET STATS As on 25/05/2015 SENSEX 27833.83 123.67 (0.44%) NIFTY 8431.20 27.75 (0.33%) GOLD (MCX) 27225.00 13.00 (0.05%) USD 63.63 0.07 (0.11%) GBPINR 98.42 0.83 (0.84%) 5 (09:40 AM) Nifty : 8431.20 0.33 ACC : 1508.40 0.71 Ambuja Cement : 238.60 1.24 Asian Paints : 763.00 1.6 Axis Bank : 566.75 0.3 Other Articles Column: From Plate to Plough Modi’s 5 hits, and one big miss! (http://www.financialexpress.com/article/fe columnist/columnfrom platetoploughmodis5 hitsandonebig miss/75662/) Editorial: Walking on hot coals (http://www.financialexpress.com/article/fe columnist/editorial walkingonhot coals/75671/) Column: Empowering women through cash transfers (http://www.financialexpress.com/article/fe columnist/column empoweringwomen throughcash transfers/75661/) By: Madan Sabnavis (http://www.financialexpress.com/author/madansabnavis/) | May 24, 2015 11:46 pm Fiscal 2015 was a good year from the point of view of economic risk being minimised due to a combination of factors. Call it serendipity, but somehow all numbers ended up looking better, with external factors remaining benign for most of the year, and the base effect keeping several parameters look healthier. The icing on the cake was provided by the new GDP methodology which has projected growth of 7.4% for FY15. The government was hence able to do some serious housekeeping without having to worry about these extraneous factors that have the potential of diverting attention. The moot question, however, is whether this scenario will persist in FY16? There are several risks that lie in suspension this year too, which can go either way and hence pose a threat for the economy and come in the way of a more definite recovery. The dismal science can point at six major risks that can surface, which may not be directly under the control of the government. The first is the performance of agriculture. A sub-normal monsoon has become a norm of late, as even last year rainfall was 88% of normal, leading to farm output falling across almost all crops. While the inflationary impact was minimal and localised, the impact on industry was more discernible as rural spending was muted on consumer goods including white goods, electronics, two-wheelers and tractors. This year, the IMD has provided a preliminary reading of 93% of normal monsoon, and while other factors such as arrival, progress and departure of monsoon as well as geographical spread are important, a sub-normal monsoon is a sufficient condition for inflation and growth worries. Besides, there has to be a contingency plan in place to react to a monsoon failure, which has to include alternative employment as well as measures to address rural indebtedness. The second threat pertains to food inflation, which has been the dark spot in the inflation profile all through the year. A second successive year of low farm output will most definitely be inflationary, which was not the case in FY15. Currently, overall inflation has been below the RBI (http://www.financialexpress.com/tag/rbi/) comfort zone of 6%, though food inflation has strayed at a higher level. This is a risk that has to be borne in mind as it can be compounded further in case crude prices start moving up. There are reports that there has been limited new investment undertaken in oil exploration and that the US oil capacity has been almost exhausted, in which case prices could move upwards when demand increases. Currently, it looks like that as long as prices remain within the $60-70 per barrel range, the economy should be able to absorb price changes. Third, with inflation being a threat, monetary policy is bound to be affected. While RBI can, and will, probably not hold back on rate cuts merely because there is a fair chance of higher inflation in the future, it does reserve the right to even increase rates in case inflation moves up beyond the 6% target. Hence, while another 50 bps cut in the repo rate may be expected, it would be under ceteris paribus conditions only. Interest rate is one major factor that affects future investment, and while there are other enabling factors also that have to be addressed, high rates can spoil the party. Today, several projects are stalled and are waiting for lower interest costs to get back on stream. If RBI starts increasing rates, it will push back the recovery process. 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5/25/2015 Evaluating the risk factors of FY16 | The Financial Express
Evaluating the risk factors of FY16We are on the precipice of a recovery, especially in investment and industry, and stable extraneous conditionsare necessary
Other ArticlesColumn: From Plate toPlough Modi’s 5 hits,and one big miss!(http://www.financialexpress.com/article/fecolumnist/columnfromplatetoploughmodis5hitsandonebigmiss/75662/)
Editorial: Walking on hotcoals(http://www.financialexpress.com/article/fecolumnist/editorialwalkingonhotcoals/75671/)
Column: Empoweringwomen through cashtransfers(http://www.financialexpress.com/article/fecolumnist/columnempoweringwomenthroughcashtransfers/75661/)
By: Madan Sabnavis (http://www.financialexpress.com/author/madansabnavis/) | May 24, 2015 11:46 pm
Fiscal 2015 was a good year from the point of view of
economic risk being minimised due to a combination of
factors. Call it serendipity, but somehow all numbers ended
up looking better, with external factors remaining benign
for most of the year, and the base effect keeping several
parameters look healthier. The icing on the cake was
provided by the new GDP methodology which has
projected growth of 7.4% for FY15. The government was
hence able to do some serious housekeeping without
having to worry about these extraneous factors that have
the potential of diverting attention. The moot question,
however, is whether this scenario will persist in FY16?
There are several risks that lie in suspension this year too,
which can go either way and hence pose a threat for the
economy and come in the way of a more definite recovery.
The dismal science can point at six major risks that can
surface, which may not be directly under the control of the
government.
The first is the performance of agriculture. A sub-normal monsoon has become a
norm of late, as even last year rainfall was 88% of normal, leading to farm output
falling across almost all crops. While the inflationary impact was minimal and
localised, the impact on industry was more discernible as rural spending was
muted on consumer goods including white goods, electronics, two-wheelers and
tractors. This year, the IMD has provided a preliminary reading of 93% of normal
monsoon, and while other factors such as arrival, progress and departure of
monsoon as well as geographical spread are important, a sub-normal monsoon is
a sufficient condition for inflation and growth worries. Besides, there has to be a
contingency plan in place to react to a monsoon failure, which has to include
alternative employment as well as measures to address rural indebtedness.
The second threat pertains to food inflation, which has been the dark spot in the
inflation profile all through the year.
A second successive year of low farm output will most definitely be inflationary,
which was not the case in FY15. Currently, overall inflation has been below the
RBI (http://www.financialexpress.com/tag/rbi/) comfort zone of 6%, though food
inflation has strayed at a higher level. This is a risk that has to be borne in mind as
it can be compounded further in case crude prices start moving up. There are
reports that there has been limited new investment undertaken in oil exploration
and that the US oil capacity has been almost exhausted, in which case prices could
move upwards when demand increases. Currently, it looks like that as long as
prices remain within the $60-70 per barrel range, the economy should be able to
absorb price changes.
Third, with inflation being a threat, monetary policy is bound to be affected. While
RBI can, and will, probably not hold back on rate cuts merely because there is a
fair chance of higher inflation in the future, it does reserve the right to even
increase rates in case inflation moves up beyond the 6% target. Hence, while
another 50 bps cut in the repo rate may be expected, it would be under ceteris
paribus conditions only. Interest rate is one major factor that affects future
investment, and while there are other enabling factors also that have to be
addressed, high rates can spoil the party. Today, several projects are stalled and
are waiting for lower interest costs to get back on stream. If RBI starts increasing
rates, it will push back the recovery process.
Post Comments1Like
Current Upcoming Recent
ENG 389/10 & 429/6 NZ 523/101st Test, NZ in ENG Stumps
Scorecard
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