Weak fundamentals on the macro front have been exacerbated by a lack of policy decisiveness and the diminishing popularity of the incumbent UPA, as seen in recent state elections. Allegations of corruption have been negative for sentiment and investment projects. Concerns are rising that the dual leadership model of the Congress that worked well in the past may not prove very successful this time around.
With the former FM Pranab Mukherjee now contesting Presidential election, PM Manmohan Singh has taken over charge of the Finance Ministry which is in a very bad shape.
Inheriting a slowing economy with elevated inflation and low levels of confidence, Dr Singh clearly has his hands full. Given the setback to one of the allies that has stymied several reforms such as raising FDI limits in insurance, aviation, retail; pension reforms; land acquisition; fuel price changes; railway tariff hikes etc, there
is some hope that the next few months could see a bit of thawing on the policy front.
If the UPA Government can implement the following it could make the environment conducive for investment and help reduce the number of projects being stalled.
- Addressing coal availability concerns and SEB losses in power
- Clarity on land acquisition and sorting out mining issues
- Clearing doubts on the inconsistencies in the taxation policy both on retrospective taxation and GAAR
- Clarity on spectrum pricing in the telecom space
- Enhancing capital flows through a commercial dollar bond issuance
- Implementing Fiscal Reforms – GST; Use of Aadhar for minimizing subsidies
- Raising FDI Limits in various sectors
It is now widely recognized that the deceleration of Economy to a 9 year low has been due to a slowing in investments and thus INR collapsed under Pranab’s mis management of the economy. Can the Dual Horse cart of Dr. Singh and Sonia put the economy back on track ?