Year 2014: When the economy pinned hopes on PM Modi

The Indian economy seems to be on the cusp of revival, at least the euphoria on the formation of the Modi government suggests so. PM Narendra Modi took charge of the government on May 26, 2014.

PM Modi has promised to make it easier to do business through speedier clearances and stable tax policies, giving investors in the economy hope of a rosier future after years of low growth and high inflation.

Aided by the decisive political mandate, any government received during the last 30 years, the economy grew at 5.7% in the first quarter of 2014-15, exceeding expectations. This was the fastest pace since the fourth quarter of FY12, while being dramatically up from the 4.6% rise recorded in the preceding quarter.

Continuing its upward growth trend, the economy clocked better-than-expected GDP growth of 5.3 per cent for the July-September quarter.

As part of efforts to promote manufacturing, the government has opened railway infrastructure to 100% foreign direct investment (FDI) and raised the overseas funding cap in defence to 49% from 26%. The government has also announced the setting up of eight electronics manufacturing hubs and seven electronics manufacturing clusters across the country.

Retail inflation, which the Reserve Bank of India (RBI) tracks for setting lending rates, edged down marginally to 7.8 percent in August from 7.96 percent a month earlier, helped by slower annual rises in prices of fuel and clothes.

According to official figures, wholesale inflation fell to a five-year low at 1.77 per cent in October while retail inflation hit a record low of 5.52 per cent in the same month.

Finance minister Arun Jaitley might be buoyed by the GDP figures but faces challenges on the fiscal deficit front. The figure for the April-October period stood at Rs 4.76 trillion ($76.77 billion), or 89.6 per cent of the full-year target. The deficit was 84.4 per cent during the comparable period in the previous fiscal year. With this pace, the government is likely to surpass the fiscal deficit target before the fiscal end.

It has been a smooth ride for the Sensex this year with the index gaining 30.8 per cent till date. Analysts expect the index to scale new heights on the reforms carried by the Modi goverment. The index jumped a staggering 1,470.03 points or 6.14%  on May 16, the day when results of Lok Sabha elections were declared.