Reforms !!!

Reforms ahem!

 

There was unprecedented rumble of benevolence when PM announced the reforms in various sectors. 

The govt, long accused of policy paralysis, started aggressively issuing statements which are still being debated as being mere announcements or actual reforms. 

I’ve tried to list the reforms below:

FDI

·         Proposed FDI of 51% in multi-brand retail

·         Proposed FDI of 49% in aviation

·         Proposed FDI of 49%
in insurance

·         Proposed FDI of 49% in pension

Infrastructure:

·         Increase in diesel prices

·         Cut in number of subsidised LPG cylinders

·         Financial restructuring of state electricity distribution companies

·         Divestment road-map

·         Foreign investment of up to 49% in power trading exchanges

·         Raising FDI cap in broadcasting from 49% to 74%

Policy Issues:

·         Revised draft of the companies bill

·         Drug pricing policy

·         Clarity on General Anti Avoidance Rule (GAAR)

Pending:

·         DTC (direct tax code)

·         GST (goods and services tax)

(source: value-research online)

               

Reforms just don’t happen by a mere announcement. It all depends whether the govt will actually implement all that it is making noise over. From both the investors & businessman’s point of view, it’ll be a long time before any of these announcements attain tangible form.

I really don’t know why the INR & stock markets reacted so overwhelmingly on the mere announcements. As days later nothing much has changed, it’s the same commotion all over. Today both the INR and the stock markets are spiralling towards their pre-reforms (announcements) era. Maybe the investors are utter optimists. They see light even in meagre announcements and hope that something might essentially happen at the end of it.

 The ground realty is still the same, as discussed in my earlier blogs. There is lack of power, lack of infrastructure, expensive real estate, lack of skilled labour, lack of public transport to ferry labour to & from the factories, labour unions which are hand in glove with local politicians and the list continues. Not to forget that for any business to start not only umpteen permits are required but the corruption has to be coped at every step.

A businessman will only start up a new business or plunge into an already existing one, if he sees that there is some determination in what govt. has announced. There have to be periods of sustained policy actions, coupled with alterations in required rules for confidence to grow for investment. It was a real sham, when the other day Supreme Court had to remind FEMA to make necessary changes in it's rules, so as to ease FDI in various sectors, as announced by the PM.