Stormy rally in stock market but negative factors of economic growth

AHMEDABAD: The Sensex surged to 30,000 at the start of trading today on support from local factors as well as favorable signals from the Federal Open Market Committee meeting and fears that Chinese real estate company Evergrande could default on debt.

Investors, meanwhile, are a little apprehensive as the stock market has seen an incredible rally. When this boom bubble bursts, it will bring a huge wave of decline and everything will sink.

The rise in the stock market is being seen by some as a sign of a sharp recovery in the economy. But is it really reasonable to look at the stock market as an indicator of economic growth? This is because even though the stock market is soaring, figures from other economic indicators such as unemployment and manufacturing in the country are giving a slightly different signal while manufacturing activity has not picked up.

The manufacturing sector plays a major role in the economic development of the country but activities in the region do not seem to be gaining momentum. August 2013 saw a slowdown in manufacturing activity in India due to the impact of demand due to the outbreak of the Covid-12 epidemic and rising costs.

In August, the India Manufacturing Purchasing Managers' Index (MEN. PMI) as well as the Service PMI fluctuated. In addition, the number of urban as well as rural unemployment has increased in the country. Business-employment is booming. But many people's incomes have been hit harder than ever before. Other adversities remain. Thus, there is a huge gap between the figures and the real situation. In the first quarter of the current financial year, the Indian economy has grown at a rate of 20.1%. On this basis, the government says, the economy is improving and it is moving in the direction of growth again. According to government data, the agriculture sector has continued to grow at a rate of 7.5 per cent this year as against 7.5 per cent in the first quarter of last year.

The country's industrial output grew by 11.5 per cent in July. The output of the construction sector, which accounts for a large share of the total industrial production index, grew by 10.6 per cent in July 2011. In the April-June quarter, the index increased by 3%.

But there is also a positive aspect that the Indian stock market is not alone where there is tremendous growth. Stock markets around the world have risen following the US Federal Reserve's tempering stimulus and interest rate hikes.