Posted by : Kapil Saturday, February 8, 2014
As predicted here, India's lowered its growth estimate for FY14 from 5% to 4.9% but it still turned out to be a positive news as India had lowered the growth rate estimate for FY13 to 4.5%. India had achieved 4.6% growth in H1 FY14 and as per current projection H2 growth would be around 5.2%, signalling positive growth momentum for India.
Predictably, the finance minister expressed satisfaction over the growth outlook and direction for the economy. Like corporate earnings, managing macro perceptions has also become a game, and is driven by managing expectations and delivering slightly better than what the market generally expects you to do. Not everyone buys into it of course,but it has its supporters.
To be true the growth rate expectation has been lowered than previously estimated, and would generally be seen as negative for the economy and for the stock market. However, since government had lowered the growth rate estimate for FY13 to 4.5% vs original estimate of 5% (by estimating size of economy in FY12 to be larger than previously thought), the implication is that economy is beginning to pick up momentum and signals that growth rate is beginning to turn around. Importantly, it means that there is a now a chance that it can pick up even more in the future. All you can say is "Well played Chidu!"
Unbelievable? Believe it...
Notes to Self: See Self Serving Bias