Kumar Mangalam Birla says markets are too euphoric and the economists are too pessimistic

• One of India’s biggest billionaires, referring to the bull run in the markets, said "economists are now searching for alphabets that will adequately describe this trend of cautious optimism."
• The Reserve Bank of India in its financial stability report pointed out that the ‘disconnect’ between India’s stock market and economy definitely poses risks to financial stability.
• Birla said that several indicators like GST collections, electricity demand, railway freight movement and passenger vehicle sales have shown positive growth numbers in the recent months.

Kumar Mangalam Birla, one of India’s biggest business leaders and the owner of the over $48 billion Aditya Birla Group, has an interesting take on how the recovery in the Indian economy is being perceived: markets are euphoric and economists are pessimistic, in Birla’s view.

The musings, coming from one of the country’s biggest industrialists, are significant coming ahead of India’s annual budget on February 1. The state of the economy, which will be reflected in the annual economic survey a day before the budget speech, will have a bearing on Finance Minister Nirmala Sitharaman’s approach and the policy announcements she makes for the coming year.

So, what does Birla have to say about the economy?

In his latest note posted on LinkedIn, Birla shared the same fear that even the Reserve Bank of India (RBI) has. The RBI, in its latest financial stability report, pointed out that In India, while the economy has been called out as “weak”, the stock markets have rallied to an all-time high.

However, Birla is more optimistic than the economists at RBI, or elsewhere. “In India too, the initial prognosis and narrative of experts proved to be excessively pessimistic,” he wrote.

“The economists, I am told, are now searching for alphabets that will adequately describe this trend of cautious optimism,” Birla, whose companies include Ultratech (the country’s biggest cement maker), Hindalco (the country’s biggest aluminium company) and overseas units like Novelis, added.

Responding to Birla’s comments, Mahesh Vyas, an eminent economist leading the Centre for Monitoring Indian Economy (CMIE), a think tank, said, “Economists are pessimistic. Economists are worrying about the economy. We are always hopeful in this pessimism, we keep looking for and sometimes finding green shoots. Currently, the search for that green shoot is really the most difficult one.”

“One can say, since we have seen a decline this financial year, the next financial year we will see an increase which will be good but on a net basis, it’s difficult for me to see that in the next year we will have entirely covered the lost ground. We should look beyond the GDP to see the concerns the economists are talking about,” Vyas told Business Insider, in a chat where he raised an alarm around high unemployment in India.


This is not the first time that Birla has sounded more excited about the recovery, especially in sectors, like cement, aluminium, where he is a major player. “There was a big question around what would happen to infrastructure spending. If I just see aluminium and cement businesses, they’ve both come back to pre-COVID levels very quickly,” he said during a candid conversation at BI Global Trends Festival 2020.


There is indeed a lot of divided opinion on the nature of India’s economic recovery since the pandemic broke out. Noted economist Arun Kumar too had said that India’s economy is not really recovering as fast as the government claims. Instead, the economy may contract by 25% in the current fiscal year.

On the other hand, market experts like Nilesh Shah, MD of Kotak Mahindra Asset Management Fund⁠— also a part-time member of the Prime Minister’s Economic Advisory Council⁠— is more optimistic.

In an interview with Business Insider, Shah cited the spike in GST collections ⁠— a record high in December ⁠— aside from data from the Google mobility index and the Reserve Bank of India’s foreign exchange reserves to show that all is relatively well. “Put all of this data together, we are seeing a month-on-month improvement in the economy,” Shah explained.

Ahead of the upcoming budget, on February 1, when Finance Minister Nirmala Sitharaman is expected to announce measures to further bolster the economic recovery, the debate is just gaining momentum. The sustainability of India’s economic recovery⁠— or that of the market rally⁠— will be clear in the months to come. As Birla himself put it in his latest post, “it will take another quarter or so to see whether this bull run would last.”

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