In FY19, the GDP grew 6.8 per cent as against 7.2 per cent
in FY18. Through an online platform called PRAGATI (Pro-Active Governance And
Timely Implementation), the prime minister himself reviews key infrastructure
projects and the hurdles they are facing every month. Foreign direct investment
is coming into the country and soon private investments will also pick up. Combined
with weak sentiment in the capital markets, a shallow domestic bond market, and
the currency risk of international borrowing, many Indian businesses will be
starved of capital for growth. This mess cannot be fixed by tweaking fiscal and
monetary policy.
NBFCs continue to be a problem area but large NPAs are behind us. Consumption has been cut down over the last 6 months. Capital goods and infra sectors have not performed satisfactorily over the last 10 years. Currency woes continue with the Rupee trading at 69.73 to the dollar on May 29, 2019. Construction sector is expected to be the key driver of this quarter. Liquidity issue expected to ease over a period of time. Toll collections have slowed to 8%. If inflation continues to remain low, interest rates will come down. No clarity on capital allocation and price mechanism. Investors concerned over underlying unpayable debt.
Debt concerns are embodied in financial system. There is
lack of FDI reforms, and less privatisation over the last 5 years. International investors come for expectations
in the near-term. Debt worries are weighing in on financials. US + China trade
accounts for 85 per cent of global GDP but non-resolution of trade war is dangerous for
the world. Expect Donald Trump to make deal with China soon on this. Dramatic change
in expectations from Fed. Fed may
abandon all ideas of tightening monetary policy. There will however be limited
impact of trade war on India. India is better placed versus global peers. India
looking better than most other markets and 10 per cent GDP growth possible for
many years.
1. Govt should consider more reform-oriented policies. India’s growth hinges on reforms agenda.
2.
India needs a more transparent financial system.
India needs long-term govt backed investment.
3.
There should be a genuinely independent RBI and
there should be less govt interference in RBI decisions.
4.
The crisis in the NBFC sector sees not enough
money supply with customers not having money to buy products.
5.
Need to push demand with flow of credit to the
consumers.
6.
The JAM trinity (Jan Dhan, Aadhaar and Mobile)
enables the creation of an India stack for India’s 21 new bank licensees.
7.
“On tap“ banking licenses, well capitalised
NBFCs and healthy incumbents, lead to a multitude of institutions that can
address the supply side of credit.
8.
The MUDRA refinance channel can be digitally
plugged into this system.
9.
This combined with the latest machine learning
algorithms will be able to make high quality lending decisions which are fully
auditable.
10.
The manufacturing sector needs to grow from the
current levels of 16-17 per cent of GDP to a more healthy 25-30 per cent which will enable the
economy to grow at a healthy 8-9 per cent per annum.
11.
One quick way for the government to incentivize
industry is to focus on increasing capacity utilization by cutting back on
excise duty rates.
12.
The long-term strategy of the government should
therefore be to move away from the country’s dependence on oil and the spend of
foreign exchange.
13.
The government must in earnest implement the
National Electric Mobility Mission Plan.
14.
The power sector impacts the manufacturing
sector’s growth in more ways than the obvious.
15.
The lack of power in one part of the manufacturing
sector effectively “robs” capacity in the entire manufacturing sector.
16.
In the power sector, govt should address fuel
supply woes, weak grid network and SEBs and improving the tendering and
execution time cycle.
17.
In order to meet these objectives, sometimes
competing but often complementary, the government may well consider a framework
that incentivizes production while continuing to tax profits.
18.
It is worthwhile studying the feasibility of
giving foreign defence industry an opportunity to continue supplying to our
defence forces but with their production base in India.
19.
This may be difficult to evaluate but if
manufacturing is to get a decisive fillip then localizing defence production
may be a big game changer.
20.
New models like hybrid annuity and
toll-operate-transfer can revive investor interest in the roads, ports and shipping
industry.
21.
BOT toll model is time tested. 35-40% equity
getting committed from lenders side.
22.
Rural distress should be addressed.
23.
Private companies should revitalise the vendor
and marketing networks.
24.
For corporate investments to happen, the
environment on the ground has to be conducive.
25.
Large and voluminous projects should not be
stuck, capacity utilisation should be increased.
26.
Should improve job market and consumer
sentiment, debt overhang leading to high NPAs of stressed banks must be
addressed.
27.
Focus on delivery and clearing stressed projects.
28.
To create jobs and boost consumer sentiment,
growth needs to be spurred in labour intensive sectors.
29.
Political will needed to pass critical bills
including the Ram Mandir.
30.
Need to fix India's archaic education policy and
carefully, gingerly tread the language policy.
No comments:
Post a Comment