Major disappointments and some hope. That was how the outgoing year turned out to be. The year was unusually challenging for the average Indian, and all those who took an avid interest in the health of the nation’s economy. New governments took over both at the Centre and in some states including Orissa that were expected to end the widely-worrying policy paralysis that derailed the economy. The nation continues to live on hope.
The last couple of years saw the country being besotted by a sub-5 per cent growth. With a base as small as India’s, the below-5 per cent rise in GDP numbers was rather frustrating, to say the least. With the economy still down on the dumps, a lot is being expected from the new government at the Centre.
Prices of all essential commodities sky-rocketed during the year, with a marginal stabilization for some items towards the year-end noticed. Potato took the cake in Orissa. Rupee had an almost-free fall vis-à-vis greenbacks for most part of the year with its value coming down as low as 68. While a recovery seemed in sight with the coming of the new government, INR has begun sliding again as the year came to a close.
The stock markets were on a never-before high, scaling new heights with every passing day. However, most of this rally was sentiment-driven, riding piggyback on hopes that the NDA government would deliver on the economy front. However, the scene began unraveling sooner than later. Most of the fizz seen in the stock markets immediately after the new government took over fizzled out as we came to sign off the year.
The recent decision of the Centre to discontinue with the excise sops for automobiles and other white goods has been the latest dampener. The government could have waited till February to announce the rollback in the excise sops. Nevertheless, the new government has generated tremendous hope for an economic revival, what with the stock markets remaining range-bound for most part of the year.
Two things – oil and rupee – dominated pages in most economic dailies in 2014. While crude rates bottomed out in five years bringing in a much needed relief for the common man, a steep depreciation in rupee negated most of the gain accumulated from cheap crude. With the global economy still in a recessionary phase, demand for oil remained subdued throughout the world, especially in the US and European markets. So much so, crude rates came down as low as 55 dollar a barrel by end 2014. Countries like India which meet a bulk of its oil demand through imports got a windfall gain. However, this was not an unqualified benefit.
Cheap crude meant a hit for oil-exporting countries like Russia, Middle East, US, and Latin American nations. These countries suffered to the extent crude prices declined. It derailed their economy, debilitating their capacity to import goods from countries like India. Further, the continuous fall in crude prices since June is likely to pile up an estimated Rs 10,000crore loss for oil companies which would take this hit on their raw material front. Besides, in the last 15 days alone, rupee has depreciated to 63.95 against the dollar. Refiners buy dollars with rupee and the INR’s depreciation makes their crude purchase costlier.
What is more worrying for oil marketing companies is their inventory loss which threatens to shift the ground beneath their bottom-line. State refiners operate in a 60-day inventory cycle as most of their units are inland and not coastal. The oil processed in any period is contracted 60 days in advance at prices prevailing then. Therefore, a sudden slide in crude prices can only bring in losses for them.
All said and done, 2014 was a roller-coaster year for the Indian economy. Despite predictions of a 5.5 per cent growth this fiscal, likely reaching out to seven per cent in the next two years, as is projected by the finance minister Arun Jaitley and some rating agencies, optimism is tempered by ground realities that call for stronger actions.