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Yearender 2014

Posted at: Dec 26, 2014, 8:07 PM; last updated: Dec 26, 2014, 8:07 PM (IST)ECONOMY

From a shuffle to salsa

With the new government in the saddle, the economy is trotting out of the woods of despair
From a shuffle to salsa
Modi gave a new lexicon of growth to economy and business. His economic policy is more about “nuts and bolts” and less “visionary and glamorous”

Sanjeev Sharma

With Prime Minister Narendra Modi’s ascent to power in May galvanising the economy, business  and stock markets, 2014 undoubtedly marked the beginning of the era of ‘Modinomics’.
Stock markets and the economy perked up on the euphoria of his election with the BSE Sensex touching record highs above the 28,000 mark and delivering more than 30 per cent returns this year. Marking the return of hope, GDP growth improved to 5.7 per cent and 5.3 per cent in the first two quarters of the year.
However, inflation has been a major victory for the new government and relief for households as the endemic problem of the past five years is relenting. It has touched zero per cent in the last reading of the year — the lowest since July 2009.
 The fall in inflation has been helped in no small measure by the rout of crude oil prices that crashed to a five-year low of $60 a barrel. This has helped in reducing petrol prices by almost Rs13 a litre. Along with this came the government’s most important policy decision of decontrolling diesel prices. Subsidies are being targeted by re-introducing the direct cash transfer on LPG.
Modi government’s approach is reforms oriented — clearing the impediments to doing business, attracting more investment and generating employment. “Make in India” has become the flagship programme of the government to boost manufacturing. Foreign investors are being lured by easing FDI norms in erstwhile taboo sectors like Defence, Railways, Insurance and through the PM’s overseas trips to the USA and Japan.
Modi has walked the talk and has implemented what he promised in his pre-election speeches. The new government’s maiden Budget saw the first cuts in income tax rates in almost four years. The government set up a Special Investigation Team (SIT) on black money, although it has decided not to divulge names of those having black money in foreign accounts.
The banking sector, too, has got a strong policy thrust. The Jan Dhan Yojana has garnered more than 8 crore bank accounts so far. RBI Governor Raghuram Rajan, who was hailed as a saviour of the economy last year in tough conditions with his innovative monetary policy, has remained an unflinching inflation warrior. He has not cut interest rates even as the growth is weak and the clamour is growing.
Compared to the doomsday scenario last year, the rupee remained relatively strong but did weaken in December to 63 to the dollar following turbulence in the Russian rouble and a China slowdown. Auto sales that are a barometer of consumer demand,  remained tepid during the year.
E-commerce was the corporate story of the year as the space exploded with consumer interest and with Flipkart, Amazon, Snapdeal becoming the czars of online retail.
On its part, India Inc is gauging the change in style of the new government. Modi is taking on the tough issues like reducing subsidies, lesser sops in the first year of office, when governments generally tend to have more political capital so that the fruits of growth can be delivered in the fag years of the tenure.
Expectations are running high, but the economy will take some more time to recover.

inflation warrior: RBI Governor Raghuram Rajan stuck to his tough stance on tax rate cuts in spite of the mounting pressure from all quarters

Change of guard: Ranbaxy Labs changed hands for the second time as Japanese MNC, Daiichi Sankyo sold it to Sun Pharma                       

FB widens net: Facebook acquired the instant messaging service WhatsApp in a $ 19 billion deal to create a formidable social network force            

Bull run: The BSE Sensex reflected the positive sentiment by kissing the 28,000 mark and delivering more than 30 per cent returns this year           

The wow moment: Successful landing of Philae lander on a comet  by the European Space Agency marked the beginning of a new era in space science

rising star: Seen as the next Ambani in the making, Gautam Adani has been the biggest gainer in the stock market rally and in the Forbes list of billionaires

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