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Revealed
India's Third Giant Leap

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Can this revamp India's investment cycle?
Tue, 16 Jun Pre-Open

Poor corporate earnings, fears of a deficient monsoon and a probable rate hike by US Fed have been some of the recent concerns for the Indian equity markets. Even the recent repo rate cut by the RBI turned up as a non event for the Indian markets.

In the midst of these negative developments, there is some good news. An article on Economic Times highlights that the government's indirect tax revenues have grown by 39.2% during first two months of the fiscal (April and May 2015). With this improvement in indirect taxes, the Finance Minister - Arun Jaitley is looking to increase its spending towards infrastructure and agriculture. The key areas are roads and shipping along with rural development and agriculture. As per Mr Arun Jaitley, this spending can provide the necessary boost, given RBI's conservative stance post the recent revision in the repo rate.

It is imperative to note, the revenues had remained sluggish, and hence even the government spending had come under pressure in the last couple of years. Therefore, this development is a positive step towards revamping the capex cycle. However, we view this development with a pinch of salt.

While the reforms process is already underway, more needs to be done. What India really needs and desperately is an environment where unnecessary regulation, corruption and red tape is done away with. The government needs to resolve to sort out the bureaucratic hurdles in time bound and transparent manner. The real game-changers for India would be progressive reforms related to land ownership and acquisition as well as labour laws. Then one can be more hopeful of encouraging participation from the private sector players too. While some green shoots are already visible, we would look forward for more development on this front.

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