Thursday, January 9, 2014

GLOBAL ECONOMIC EXPECTATIONS 2014

The new year has began and expectation of lot of aggressive & positive vibe is in the air.2013 was an eventful year for the world economy hence I am no longer inclined to focus or draw any lines highlighting any events. 2014 is another year where the global economy is going to see lot of turnaround across globe. First of all the global economy is going to witness a number of election where change of power would happen in political segment followed with new expectation and economic policies. The below list is the name of the countries which are going to witness turnaround in their political climate.

Well its well clear that new policies are bound to rule the world in 2014.


Indian Election is going to be one of the biggest events for 2014 since it will decide the fate of the Asian economy and money makers of the developed economies. The current position of the economy is very weak but provides a stupendous opportunity of growth for the next 5 years term. Many of us has already taken fro granted that FY-15 Indian Economy would find a GDP growth of 6%+ which is an very aggressive expectation. Well those who have taken this GDP growth should be ready for an big blow since the whatever growth would come it would come from H2 of FY-15 since major part of the H1 would be devoted towards election and Budget & Policy expectations. Even in the H2 part of FY-15 there would be slow growth since bottle necks are too much and time is less.

The process of GDP growth would be gradual. The call is simple and clear. DTC & GST are yet to get shape and unless this happens the economic revenue of India would not grow well. Multiple taxation system has created problem for the business development within the economy.8%+ GDP growth is only achievable when the
In the sector based segment its well clear that Infrastructure is in the rock bottom levels and any movement from here would be growth but wait for an minute. We have been hearing this rock bottom story for the past 3 years but no growth has come. It will neither come immediately. It would take another  years time to get the growth since the investment climate is so week that injection of steroids could only spook the growth for the sector. Plan medicines would not be able and hence privatization and easy policy frame work is required to get the growth in this sector.  For example if infrastructure projects have to take 37 clearances across 11 ministries then just imagine how you can bet on an speedy recovery in the sector. Hence it would take some time to remove these bottle necks so that GDP growth jumps to 8+ as dreamt by my beloved readers. While increasing the investment/GDP share is an issue, the incremental capital/output ratio has crossed 6.5, again highlighting inefficiency in capital usage and the fact that the problem is not just with fresh projects, but stalled projects.
 In between the new government has to face the heat of rising bills of NREGS, Food security Bill, National Urban Health Mission and all these would be an compounding burden on any government whoever comes in.
On the earning side its well clear that companies have gone through hard times and they have created few historic new base levels for the FY-15. This is going to be an key trigger for the stock market to keep the momentum alive. In between mid companies are going to be the game changers as it has been in the previous growth phase of the Indian economy. One should understand and link that growth of the Indian economy is based upon the growth of Mid cap companies, getting converted into Large caps. On the merger space we found that in 2013 and prior to those companies have been looking to raise additional capital through equity and sale of non-core assets. The trend is likely to extend into 2014. Well that would provide the Indian corporate to stop diversifying and experimenting into loss making ventures. Moreover real investments and real players would come to explore the opportunities.

The world economy would find squeezing of capital as well as inflow of capital the only battle which will be exciting to watch would be who keeps the positive inflow in the system. One should have an clear idea that the developed economies are no longer going to feed the global economy with easy money. Hence tapering speed breakers will be there, at the same time emerging economies would find policies and funds to keep the system alive. I have already marked in my previous article that 2014 would be a banking revolution year since major focus would be towards risk management and protection against tapering.

Well for till now this is what I have in my series 1 of 2014 world Economic expectations. I have kept is short so that one can memorize the stuff and be ready for the 2nd series.
Written By

Indraneel Kripabindu Sen Gupta & Hardik Bhatt

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