Many believe a stable government is likely led by Narendra Modi and his allies. The Modi led BJP Govt wasted a Big Mandate of 5 Years without any Economic Reforms / Industrial Policy that can lift India out of the Recession.
The top bureaucrats in Delhi highlights the economic priorities for the Government over the next term are likely be continued macro-economic stability (fiscal control and inflation targeting), lowering the cost of capital, encouraging private sector investment, improvement in the speed of the banking sector clean-up, GST stabilisation, tourism and uplifting the bottom of the pyramid with a specific focus on farmers.
Yet some kickers, like allowing banks to fund land for affordable housing projects, and some policies for the development of the institutional/HNI owned rental market would be possible. We believe economic growth could disappoint on the downside unless the property markets revives. The fast normalisation of cash in the economy after the demonetisation shock should also augur well for the housing market. Our calculations suggest 8% volume growth in the housing market could create 3m+ net new jobs. The flaring up of the NBFC crisis could be a BIG RISK and the Economic Recovery of India.
Government officials exuded confidence GST invoice matching will be completed by July and we believe if it is implemented, then GST collections growth could be closer to 20% YoY. Collections growth has already picked since December to about 12%-16% YoY, despite GST rate cuts.
Any radical labour or land reform does not seem a top priority for the government, though a minimum wage law is on the anvil. While the government has undertaken several initiatives to improve power availability, power distribution reform remains a large unfinished task for the government.