Worst over, but real growth to come post elections: Adi Godrej

After better than expected GDP or gross domestic product growth in the second quarter, there seems to be an increasing voice amongst economists and analysts who believe the worst may be over for the Indian economy.

Industry stalwart and Godrej Industries chairman on Tuesday lent voice to what seems to be an increasing consensus now.

Speaking to NDTV, Mr Godrej said that although he believes the worst may be over for the Indian economy, investments will only start picking up post the elections which are due next summer.

"Post the general elections, capex (capital expenditure) cycle will pick up," he said.

The Indian economy has been showing some signs of recovery with GDP or gross domestic product growth coming in at a better than expected rate of 4.8 per cent against 4.4 per cent during the previous quarter. The country's economy grew at a decade-low 5 per cent last fiscal.

"I expect the worst is behind is. I expect in the second half of the year we'll have better growth than the first half, I think the main reason is monsoon has been good, agriculture has been good," Mr Godrej said.

Although, Mr Godrej expects growth to start picking up form the second half of the year, he said investments will only start flowing in once the new government is in place.

"I think any new government will take the right decisions because they will have to express what they will do based on which they will be voted in, so I expect the new government will start off well and I think that will help acceleration of growth," he said.

Slow government clearance and policy paralysis is what led to growth slowing down, he said.

While lauding the new Reserve Bank of India (RBI) Governor Raghuram Rajan's efforts to stem the rupee fall, he said, the rupee should have never been allowed to depreciate as much as it did.

The rupee on August 28 had hit an all-time low of 68.85 and was the worst performing Asian currency at that time, but has since recovered under the aegis of Dr Rajan and is currently trading at 62-levels.

One of the factors that helped the rupee recover was narrowing the current account deficit by curbing gold imports.

On Monday, data showed that current account deficit data, which is the difference between the outflow and inflow of foreign exchange, for the September quarter narrowed sharply during the second quarter to $5.2 billion, or 1.2 per cent of GDP. Last fiscal it was at a record-high of 4.8 per cent of the GDP.

"I think India Inc was taken by surprise with the sudden and rapid depreciation of the rupee which to my mind, the blame lies in the door of the Reserve Bank of India, they should have defended the rupee, it should never have been allowed to depreciate beyond the 62 or 63 level... I think we paid a major price both on inflation and growth because of the laxity of the Reserve Bank of India at that time," he said.

The current calendar year and the next fiscal year are both expected to be better, he said.

"I think in 2014 consumption levels will rise because as I said GDP growth is expected to be better, I think it will lead to a better sentiment among consumers, so I expect consumption to pick up during 2014," he said.

Both topline and bottomline growth are also expected to pick up for industry in the next fiscal, Mr Godrej said.