Here is a paradox that matters — between the macro and the micro.

The growth numbers for the December quarter show that the Indian economy continues to pick up momentum. Not only is consumption growing rapidly, there are some signs in the macro numbers that the investment cycle is also turning. The data from business units is less convincing. Corporate profit growth is still tepid, banks continue to be weighed down by bad loans and new project announcements are nothing to write home about. As a result, confidence continues to be weak.

The ongoing earnings season should provide important clues to whether the improvement in the macro economy will finally begin to be seen in the micro numbers. Brokerages are giving conflicting signs in their profit forecasts. Equities rallied last week because of data that showed growth picking up and inflation retreating. The rally can sustain only if corporate profits grow faster. Announcements from bellwether consumer firms, machinery makers and lenders will offer clues to whether the paradox is being sorted out.

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