<div>Economists and investors have turned optimistic about the Indian economy since the Narendra Modi-led National Democratic Alliance (NDA) government came to power in May 2014.</div><div> </div><div>India continues to lead the global confidence index for the quarter with a one point increase from last quarter to 131 followed by Philippines (122) and Indonesia (120).</div><div> </div><div>The consumer confidence in urban India reflects levels last achieved in the first quarter of 2011, which, according to Nielsen, has been propelled by a positive growth in consumer spending on consumer packaged goods and a gradual decrease in job security concerns.</div><div> </div><div>An increase in consumer confidence index is a sign of brighter prospects for an economic recovery.</div><div> </div><div>Inflation makes consumers baulk and tuck away their purses. Additionally, higher inflation translates into monetary tightening and higher interest rates which again stifle consumption. These factors are now gradually easing.</div><div> </div><div>Inflation, measured by the consumer price index, came off its double-digit stretch by December 2013. Since August last year, inflation has remained below 6.5 per cent for the most part. The current inflation rate is also within the Reserve Bank of India's (RBI) 6 per cent target for January 2016.</div><div> </div><div>In May, the output of eight core sector industries expanded for the first time in three months to 4.4 per cent helped by a recovery in the production of electricity, cement and oil refining. This was the highest growth since November 2014 and reflects a pick-up in the investment cycle and the economy.</div><div> </div><div>Indirect tax collections in the April-June period of 2015-16 have risen by over 37 per cent, much higher than the 19 per cent growth target set by the Union Budget for the current financial year.</div><div> </div><div>International commodity prices continue to remain depressed. Lower oil prices mean reduced financial burden that the government has to bear on account of subsidies for petroleum products and fertilisers. Gold prices too have fallen making imports of the yellow metal more manageable from the balance of payments point of view.</div><div> </div><div>Investment activity in the country is expected to see a revival soon with the RBI having cut interest rates thrice since January by 25 basis points each, taking repo rate to 7.25 per cent. Banks have also started passing on the benefits to consumers by cutting lending rates.</div><div> </div><div>However, the index of industrial production (IIP) for the month of May came in at 2.7 per cent, falling from 4.1 per cent. Analysts are of the view that since November 2014, IIP numbers have been reasonably robust, averaging about 4 per cent. So it's an aberration but the overall trend hopefully remains positive.</div><div> </div><div>The economy is expected to expand 7.6 per cent this fiscal year ending in April 2016. Growth is seen picking up to 8.2 per cent next fiscal year. However, a delay in the passage of crucial reforms — Goods and Services Tax Bill and Land Acquisition Bill — high financing costs and a stressed banking sector have hurt the government's plans.</div><div> </div><div>At present, the broad numbers on the economy look good. The Modi government should not loses the determination and resolve to reform and fix policy problems to improve growth on a more sustainable basis.</div>
