The grand election festival is over. Let’s move on.

The grand nationwide jamboree lasting nearly 3 months is done and dusted. I, like many others have been glued to all kind of screens – the television, the office desktop, the laptop and the mobile and have consumed hours and hours of television and social media content. So has a large part of the country and so has the market movers and shakers. Now that the results are out there seems to be some amount of free time that we all have. Let us make productive use of it before we get caught up in the cricket and then football and then the Olympic fever.

That is all good, but what about the country and what about the stock markets? We have witnessed a Himalayan uptick a particular day and a Marianna trench downtick the next and a settling of nerves with an uptick the day after. It seems for day traders there were enough opportunities that presented itself to buy the seaside estate or sit by it’s curb with a begging bowl. However, the long-term investors actually did make some money over the three days. But these are knee jerk stuff that I and a lot of investors are not really bothered about. What they do bother is how does the growth momentum remain!!!  And I think there are two major silos that will determine how we move ahead.

Rural demand has been beset with all kind of problems. Demonetization had dealt a severe blow to the sector and it has been a hard long trek out of it. Inclement weather in parts had a lot of agony coming with it and covid hit them when they were down and out. 70 percent of the country live in rural areas and some reports suggest a large number subsist on Rs. 33 per day. Not only is rural income abysmally low, so is consumption. But that is obvious. For the markets to remain robust, rural consumption must be healthy. So, companies will grow and expand the user base and make enough bottom-line money. To enable which the rural income has to grow substantially. Which will create a virtuous cycle that will draw in many urban parts to look into the segment and collectively create an even bigger virtuous cycle. Which will provide an incentive for the private sector to invest.

And that brings me to the second vital component. The private capex cycle.

The government over the last decade or more perhaps is doing the hard lifting of pouring in money to keep the cycle of investments and capital formation going. We all know that it is not enough and private players will have to kick in sometime or the other. And now is the time. With the mandate for continuity (with some restrictions), it is a given that larger macro parameters will continue. In the smaller context there needs to be some tinkering to make the investments attractive to the private players. Thankfully this time the private capex cycle seems to have risen to the occasion (pun unintended) and beaten the government (both State and Centre) capex and invested Rs 2.6 lac crores. With a higher PAT/GDP ratio the private sector definitely does have the money. With El Nino affect diminishing there is likely to be some stability in the agri-prices and with the commodity cycle not showing significant spikes, there is a degree of price stability. The maintenance capex which has been happening for a while is in desperate need for capacity expansion capex. And if that trend steps in we will have a growth story to really go around. New factories, offices and projects need people(employment), need material (commodities) and an entire service infra structure as enabler (read banks, restaurants, movie halls, schools). Imagine a 1000 of them.

There is every indication the latter will happen and here is hoping the former is engineered.

FM ji (whoever is becoming one), please ensure these two are specially looked into.


Prasunjit Mukherjee