Modi 2.0 - Where Should Investors Focus Now?

It looks like Modi’s second term will be more challenging than his first term owing to the daunting economic issues. Will Modinomics pull India out of the quagmire and will investors be rewarded in the next 5 years? Yogesh Supekar takes a stock of the current economic situation and identifies investing opportunities, while Shohini Nath summarises the NDA's focus area for the next term.

- Yogesh Supekar

While the nation is still digesting the victory of their favorite leader, the Modi 2.0 government has already hit the ground running, putting efforts to put the economy on a higher growth trajectory.

The latest economic data has not been encouraging. The GDP growth has slipped below 6 percent in the latest quarter, Q4FY19. The slowdown was expected given that it was an election year and the whole government machinery may not have been able to focus on the economy. Having said that, the task in hand for the new Modi government, that is Modi 2.0, seems to be daunting.

Indian economy is faced with a slowdown and the risk is that we have not arrested the slowdown yet. Will the economic growth take a U-turn and head northwards from here? After the downslide is arrested, the focus will be on the steps that the Modi government takes to propel growth in the economy.

Current economic challenges

The Indian economy has slowed down due to rising global volatility, normalized monetary policy in advanced economies, trade war and investment re-routing to developed economies. The crude oil price rise has also been a factor that affected the Indian rupee negatively. Having said that the rupee has outperformed other Asian currencies and is the top performer amongst the Asian currencies in the past three months. Unemployment is high and will influence the priorities of the next government. During January–April 2019, almost 42 million people were willing to work, but did not find jobs according to the Centre for Monitoring Indian Economy (CMIE). Such high unemployment rate suggests a bumpy ride ahead and needs immediate attention of the government.

There is a liquidity issue in the market with several NBFC struggling to get access to funds even as, on the ground, it looks like NBFCs with a good track record are able to raise money without much difficulty.