Reforms with a Vengeance

By Research Desk
about 12 years ago

By Geetanjali Kedia

 

With FDI in Multi Brand Retail (51%), Aviation (49%), Power Exchange (49%), Single Brand Retail (100%) and Broadcasting (74% in Teleport, DTH, Cable Network and Mobile) having notified, Govt. has sent a loud and clear message to the country, including all the political parties, that they are here to do the serious business, without caring for the survival of UPA-II, till May 2014.

 

“India First” is the new slogan and mantra of the Congress to implement these reforms, as these reforms are seen in the larger interests of the country and its citizens. Even the communication through media has started by the Govt., whereby gains of each policy initiatives are being explained to the people of India. First in the series is highlighting the benefits of FDI in Multi Brand Retail.

 

In respect to the political picture, it is almost certain that the doors of UPA-II are shut for TMC forever. On the other hand, BSP support from outside is seen a political compromise by BSP, to avert mid term poll, as also to go slow on CBI matters against its Chief. Sensing this, SP has promptly stated that they are extending the support to the Govt., to keep communal forces away, in coming to the power. Effect of this on BJP is that, they have no courage to call for a special session of Parliament, asking the Govt. to prove its majority on the floors of the House.

 

In this scenario, NDA is seen getting weaker day by day, while there is no headway or logic of forming Third Front at this stage. This may therefore see UPA-II to last for atleast next one year, if not 18 months, which in our view is also likely.

 

Hereon, Govt. is likely to continue with its reform process taking advantage of the dilemma of various political parties. Govt. is likely to take up FDI hike in Insurance and Pharma sectors. Rajiv Gandhi Equity Scheme announced in the Budget is also approved. Withholding tax on all foreign loans has now been reduced to 5% from 20%, which will see good foreign inflow, easing the liquidity crisis of India Inc., as also rupee getting strong against US$.

 

One of the bigger reforms, of debt restructuring of Discoms, will be taken up by the Govt. on Tuesday, wherein, 50% of the debt of Discoms will be assumed by the State Governments. Once, this sails through, it will have far reaching implications, with positive seen for dedicated power finance companies, like PFC and REC, as also various PSU banks, which have good exposure to power generating companies. Prominent PSU banks are PNB, having 9% of its advances having lent to power sector, with Union Bank, Oriental Bank and Dena Bank in the space. This will also keep the target of capacity addition of 80,000 MW in 12th Five Year Plan on track, which will in turn be seen beneficial for Capital Goods and Power producers.

 

Though some broad policy initiatives are stated above, but Govt. can take up many other measures, which can vastly change the view on our economy, which was otherwise seen as ‘a dull and paralytic economy’. We have seen effect of the some of the measures – the changing view and sentiment of investors; Nifty having moved to 5,675, Sensex to 18,700, and this momentum is likely to continue for next one month as well.

 

So the stage is all set, now hoping for some action replay from our FM-PM duo!