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SLOWING GDP GROWTH |
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By Jagannadham Thunuguntla
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The GDP numbers for Q4, 2011 are subdued. These subdued GDP numbers of Q4, 2011 indicate a slowing and tiring economy.
The subdued GDP numbers of Q4, 2011 may be a precursor for the things to unfold in the upcoming quarters.
One key input from the primary markets, in the form of quantum of fund raising, provides a preview into the ecoomy regarding the corporate confidence. This also indicates the kind of mindset of corporate India in adding new projects and new capacities. This factor also underlines the investor interest in investing in Indian corporates.
The fund raising during the calendar year 2011 clearly reflects that the market is drying up. The new funds being raised is way too low to validate new capacity expansion going forward. This is actually giving unmistakable signs of tiring economy.
The fund raising through domestic souces such as IPOs, FPOs and QIPs during the period January to March is just Rs 8,974 Crores. To compare, the funds raised through IPOs, FPOs and QIPs during the calendary year 2010 was Rs 99,452 Crores. So, in the first five months of this calendar year the IPO fund raising is as low as 9.02% of the fund raising of 2010 calendar year. So, in all probability, the fund raising of the calendar year 2011 will fall short of the calendar year 2010.
The fund raising through foreign souces such as ADRs, GDRs, ECBs and FCCBs during the period January to May is just US$ 9.95 Bn. To compare, the funds raised through ADRs, GDRs, ECBs and FCCBs during the calendary year 2010 was US$ 24.69 Bn. So, in the first five months of this calendar year the ADRs, GDRs, ECBs and FCCBs fund raising is as low as 40% of the fund raising of 2010 calendar year. So, in all probability, the fund raising of the calendar year 2011 will fall short of the calendar year 2010.
The signs and indications from the primary market, regarding the slowing economy, are absolutely clear. Now, its just matter of time, we may witness sub-8% growth rates.
During the past 5-6 years, India was the top attractive investment destination amongst the global investors despite the concerns such as governance deficit, corporate governance issues, infrastructure deficit and inflation. That's largely because the "Stellar GDP Growth".
But, now for the first time after 5-6 years, India is facing inevitable challenge of slowing GDP growth. So, with this slowing GDP growth, it needs to be seen how much attraction India could able to manage from the global investors going forward. We are moving away from the era of "Stellar GDP Growth" to "Slowing GDP Growth".
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—The author is Strategist & Head of Research, SMC Global Securities Limited.
He may be contacted at jt@smcindiaonline.com
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June 2011
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