After a subdued year of growth in 2013, 2014 began on an optimistic note for the global economy. However, unforeseen calamities and events spoilt the party in the US and the Eurozone. The US economy contracted during the first quarter of 2014 (due to severe weather) and is now expected to grow by 2.1 per cent versus an earlier prediction of 2.8 per cent, according to World Bank estimates. Despite being mired in geopolitical tension, the Eurozone currently has no threat of facing a deflation, even as growth forecasts for 2015 have been cut.
In Asia, the leading emerging economies of India and China had suffered a slowdown in growth over the past couple of years. However, both economies seem to have arrested this trend in 2014. Specifically, India’s GDP growth for first quarter of 2014-2015 was recorded at 5.7 per cent, a significant improvement from 4.6 per cent registered in the preceding quarter. In fact, this was India’s fastest quarter-on-quarter growth in the last two years. Notably, the manufacturing sector bounced back from a contraction of 1.4 per cent in Q4 2013 to an expansion of 3.5 per cent during the first quarter. The Consumer Price Index in August was noted at 7.8 per cent, dropping from 8.28 per cent noted in May 2014.
Backed by the expectation of a revival, other investment trends are also looking strong; for instance, total foreign direct investment in India has shown a growth of 52 per cent during H1 2014 compared to the same period last year. Private equity investment in real estate also witnessed an upsurge, with investments in 2014 surpassing 2013 levels by 21 per cent during the first three quarters itself.
These were some of the findings in a new report by Cushman & Wakefield, one of the world’s largest privately-held commercial real estate services firms.
Cross-border investments reached a four-year peak due to attractive valuations and stable yields. With increased confidence of global investors, fund houses have been able to raise hefty corpuses. Moreover, measures such as the introduction of Real Estate Investment Trusts (REITs) and relaxation of FDI norms is expected to generate capital infusion for the real estate sector.
Much of the exuberance that is being witnessed in India stems from the recent Parliament election results. The landslide victory of Prime Minister Narendra Modi led National Democratic Alliance has not just brought about a stable political center but also cleared the policy paralysis that India suffered from in the past couple of years.
Moreover, the Modi-led government is now taking steps to ensure that its development agenda can be implemented; this is evident from the Prime Minister’s meetings with Japan and China and his recent tour of the United States, generating funds for large infrastructure projects, stressing on the importance of removing bottlenecks, emphasising on inclusive growth by making India a global manufacturing hub (with the Make In India initiative) and relaxing VISA norms.
Through its dialogue, announcements and actions, the government has insisted on bringing about change through development. Among other initiatives, it has also enumerated that it wants to build 100 ‘smart’ cities in India and allocated funds towards it. The implication of 100 ‘smart’ cities, bullet trains and allied infrastructure developments can hardly be exaggerated; it will have critical links to sectors such as real estate, manufacturing, cement, construction and will impact employment positively. Therefore, the improvement that we have so far seen in the Indian economy will increase manifold as policy measures are transformed to action.
Source: Cushman & Wakefield