The UPA Government led by Congress got busy defending series of Scams in which its Ministers were a party, neglecting the Indian Economy and pushing it to deeper problems with increase in Social Spending(Vote Bank Politics).
Since the credit crisis, the bad growth mix (high fiscal deficit and declining private investment) has been causing a steady
deceleration in potential growth and has culminated in a stagflation-type environment in India.
The government announced some measures (Oil & gas Price Hike, FDI in Retail, etc) to contain the fiscal deficit and revive investor sentiment. While we have a positive view on the steps taken to revive investor sentiment, we are less optimistic about a quick correction of the fiscal deficit via expenditure control.
Similarly, we see no major effort by the government to manage growth in rural farm workers’ wages or improve the productivity of these workers. Hence, we believe that any correction in macro stability indicators, particularly inflation, will be very slow.
Industrial CAPEX is Very Slow – Private Investment not Taking Off
Many industrial and infrastructure projects are being delayed because of a lack of final sign-off or approval as multiple ministries are typically involved in the decision process, with no one ministry holding final sign-off authority. [ Most Ministers & Bureaucrats are Corrupt and want their fair share] National Investment Board (NIB) has proposed to discuss the pros and cons of each project at an inter-ministerial level. [In our Opinion, this will not help as Ministers have no qualifications to weigh the merit of the case and have no long term vision of the sector they are supposed to serve. Setting up of Regulators e.g like RBI is the only solution which can eliminate Corruption and Speeden the process of implementation]
With GDP Number being Revised Downwards, Weak corporate balance sheet, weak external and domestic demand, elevated inflation, current account deficit and loan-deposit ratio hitting new lows; Can the Congress Government sail the High Tide and bailout the Economy ? History suggests, Congress led Government on its way out has always resorted to leaving the treasury empty and finances in bad shape. Do we have to specifically comment on Congress & Corruption ?
You must Read on How Narendra Modi has Put Gujarat on a Growth Path Higher than any other Indian State putting to Shame the Congress Government of Dr Manmohan Singh.