Indian Stock markets surged to record highs on Monday following exit polls projecting a third term for Prime Minister Narendra Modi's Government. The Nifty 50 jumped up 3.25 per cent (up by 733 points) and closed at 23,264 levels. Meanwhile, the Sensex gained 3.39 per cent (up by 2,507 points) and closed at 76,469 levels.

In the past few days, there has been notable positive economic development with the release of the GDP numbers for 2023-24 and S&P's positive outlook upgrade for India.

The GDP exceeded market expectations, showing a growth of 8.2 per cent in 2023-24 compared to 7 per cent in 2022-23. It's worth noting that the growth in 2023-24 surpasses the Government's second advance estimate of 7.6 per cent released in February 2024.

The sustainability of the current GDP growth in the long term is a matter of concern. Long-term GDP growth heavily relies on the level of investment in the economy, which has seen a healthy 9 per cent increase. It's important to note that the Government sector has been the primary driver of this investment growth.

Specifically, the Central Government's capital expenditure (CapEx) has experienced a significant surge of 28 per cent in 2023-24. However, there needs to be more momentum in the private sector CapEx. While the private sector has shown an increasing willingness to invest, the key factors affecting this are policy certainty and confidence in global and domestic economic stability.

The exit poll results signal stability in domestic economic and policy matters, which is one of the critical drivers for private capex.

With manufacturing capacity utilisation currently at 75 per cent, and both bank and corporate balance sheets in solid condition, the stage is set for a resurgence in private capital expenditure.

Ultimately, the private sector must take the lead in driving the investment cycle.

As investment plays a crucial role in job creation, leading to increased demand, ultimately validating the initial investment and attracting further investments. This sets off a positive cycle of investment and growth. It's essential to recognise that sustained investment growth cannot solely rely on Government CapEx year after year.

With both public and private investments expected to pick up in the economy, What can be done now to provide suitable employment opportunities for citizens - the answer is to focus on CapEx in manufacturing, especially labour-intensive. This is answered in one of the guarantees by Prime Minister Narendra Modi, i.e., to transform India into a global manufacturing hub. In the past, India has successfully attracted suppliers for major US corporations such as Apple Inc and Alphabet Inc's Google.

However, according to World Bank data, less than 3 per cent of global manufacturing occurs in the world's most populous country, compared to 24 per cent in China. So much has to be done in this area. Another factor contributing to job creation is a focus on boosting exports. This has been limited due to sluggish global growth. While India's service exports have remained strong, merchandise exports have specifically felt the impact of the global slowdown, which is expected to reverse.

When investments both in public and private are expected to grow, supplemented with a thrust on labour-intensive manufacturing and exports, the quantity and quality of jobs will increase. Then, private consumption, one of the main pillars of the economy, will also have 8-9 per cent growth, which was at around 4 per cent in 2023-24.

A combination of sustainable long-term GDP growth, increased private sector investment in capital expenditure, S&P's positive outlook upgrade, and the prospect of a third term for Modi's administration, which aims to position India as a global manufacturing hub, is expected to generate significant optimism among investors in India.

These factors promise policy continuity and potential for growth, suggesting a positive outlook for the market and inflow of global capital.

The new Government's 100-day agenda and the upcoming full Budget in July 2024 were also important focal points. Furthermore, the progression of the monsoon, inflation data, and the Reserve Bank of India's (RBI) interest rate policies will continue to significantly influence and guide the Indian economy in the days ahead.

So, with all these solid macroeconomic fundamentals and policy continuity, we can expect abki baar GDP growth 10 per cent paar followed by Sensex 100,000 paar.

The writer is a Professor of Finance at XLRI-Xavier School of Management and a BJP leader.