Mithilesh Kumar Sinha
A Goldilocks Economy is one which enjoys sustained economic growth and low inflation. A Goldilocks economy is when growth isn’t too hot, causing inflation, nor too cold, creating a recession. It has an ideal growth rate of between 2-3 percent, as measured by GDP growth
Indian economy is enjoying a Goldilocks moment as growth is picking up without spiking inflation, which allows a market-friendly monetary policy. The latest data showed that factories increased production faster while retail inflation eased for the second straight month in February. India had done a remarkable job in repairing its macro economy from CY 2014 to 2017. In a significant recovery, Asia’s third largest economy, India’s Gross Domestic Product (GDP) grew at 7.2 per cent in the third quarter of financial year 2017-18 (October-December).
All is well when economic growth is high and inflation is low. The Indian economy seems to have finally come to this happy place as the latest set of data showed that factories increased production faster while retail inflation softened for the second straight month. The Goldilocks economy, with higher growth and lower inflation, is back both in India and globally, a welcome change from the recent inflation scare.
The Index of Industrial Production grew by 7.47% in January, with manufacturing maintaining its impressive pace of expansion at 8.69%. The pace is faster than expected and coupled with softening inflation comes as a pleasant surprise to the markets.
A broad-based industrial recovery is on track and investment too seems to be reviving, albeit slowly. Capital goods held on to the impressive 14% growth, and the driver of consumer goods growth was durables.
What is more comforting is that all this quickening in growth is not adding to inflationary pressure. Retail inflation’s fall to 4.44% in February from 5.07% the previous month should please policymakers, although they’re likely to see through the fall in vegetable and pulse prices. Core inflation, a reflection of demand pressures on the economy, too has softened but by only a small margin
India will again to be the fastest growing economy in the world, with a promising Goldilock economy that will grow and grow and subsequently will alleviate poverty and hardship, The budget has allocated a record Rs 5.97 lakh crore for infrastructure. The policy thrust on BRAHMA (Banking and Finance, Rural, Affordable Housing and MSME-led Acceleration) is likely to spawn a healthy microcosm of backward and forward linkages, and ensure that the ensuing pickup in economic activity is broad-based and inclusive.
India’s Goldilocks economic scenario can be a strong influence on investors’With domestic and global data suggesting a pickup in economic growth, analysts believe that stock markets in India will extend their recent gains but economic indicators will remain a deciding factor for the market momentum.
