Investor outlook improves. Maybe
The government has made a small start in handling the economy, but even this much is enough cause for optimism. Dhirendra Kumar writes.
The government has made a small start in handling the economy, but even this much is enough cause for optimism.
The government of India appears to have restarted some economic reforms once more. There are people who are convinced that this is the dawn of a new age of reforms in India, potentially as momentous as the ones in 1991. There are others whose reaction is decidedly ho-hum, and who think that the government has done as little as possible as late as possible and will actually be able to operationalise little of what it has announced.
There's some truth in both views and from here on, it could go either way. From both an investor's or businessperson's perspective, it'll be a long time before anything much acquires a tangible form. Taking a hard-headed look at things, the steps announced so far boil down to nothing more than coverage of somewhere between 25 to 35% of the diesel losses. The rest are announcements that, if and when followed up by actual changes in laws and regulations, might will entice some foreigners to invest.
Everything else, like the softer attitude on retrospective taxation and GAAR are some time from fruition. And the less said about myriad issues from infrastructure to inflation the better. My guess is that given the situation on interest rates and corporate profits, the investment markets are operating on hope, as well as the news from the US and Europe that currency printing presses there are going to be running fulltime for a long time to come.
All of which still means that the outlook is still much better than it appeared to be a week or two back. Investors are eternal optimists, and a promise of some real reforms, some chance of actual implementation, plus some hope of liquidity-that adds up to cause for a great deal of optimists. And sometimes, optimism can create its own reality. No harm hoping.
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