Lessons from Coca-Cola

The Indian economy is facing tough times as the industrial activity has slowed down, impacting the revenue collection. On the other hand, the government borrowing is rising. Fiscal deficit has widened to a worrying 5.9% of the gross domestic product (GDP). Oil import bill is shooting up, compounding the problem. The government has not been able to push through important economic bills due to opposition, including from its own allies. There are also allegations from different quarters of policy paralysis which government has been consistently denying.

But among all the pessimism and low investor confidence, there is one company that is very bullish on India. And that company is Coca-Cola. The global soda giant in the last 10 years invested US$ 1.4 bn in the country and is planning to invest, treble that amount in the next 8 years. The reason why Coke is bullish on India is because of the country's strong fundamentals. At around 6.5%, India's growth rate is better than most of its counterparts in the BRICS group. It is also equal to the average growth rate of the first 12 years of reform. India's growth has been driven by investments made by the government and the private sector. Last year, investments accounted for an impressive 35% of GDP. This is not a sign of an economy going into stagflation.
Perhaps the main reason to be optimistic on India is that virtually all the reforms introduced under Prime Ministers Narasimha Rao and Atal Bihari Vajpayee, which raised the growth rate to 8-9%, remain in place. Policy paralysis has not meant policy reversals. Besides, the savings rate remains above 30% of GDP; and the earlier reforms-led productivity rise should continue to assure gains from these savings. Thus rather than bickering and blaming each other, Indian politicians and corporates should learn from Coke and help kick start India's growth story. Equitymaster.com is India`s leading independent equity research initiative