Let me begin by saying how proud I feel on hearing that the government has contingency plans in case of more global madness if Greece exits the EU. Wow! Something is working in the government at last! But such plans can at best contain damage from the contagion that will follow and can not insulate India. It is not the Greek exit that will matter so much but the sentiment of panic that will spread across the globe that will be the greatest threat to all countries. Stockmarkets, banks, every economic activity that is bound to be affected. Lenders will have even lesser confidence in weaker European economies like Spain, Portugal and Italy and their access to capital markets will effectively get denied thanks to risk premiums demanded, something that is already happening with Spain.
Back at home, the Congress party has asked the Government to pull up its socks. Somebody needs to tell these wise people that in the last six months no effort has worked. Haven't they heard of Newton's first law of motion which talks of bodies being in permanent state of inertia or motion unless acted upon? Once you go into a slumber it is difficult to get out, especially when your allies and the opposition want to ensure that you end up doing nothing. So does this mean that this will continue for the next two years till fresh elections happen? I am talking aboit a lack of reforms that is impacting the economy big time. Let me say what I think might happen till 2012-end from now on.
Once the Presidential elections get over in July, you can expect a short reforms burst during August- December 2012. Government wants to do it badly. In December, many states go to the poll. This probably the last time the UPA II will be able to reform anything. What could happen during this period? Well, with the support of Samajwadi Party, government is likely to raise diesel prices somewhat. This will not be too difficult. Any hike will help. The government can raise Rs 4 and then roll it back to Rs 2 under pressure from official and unofficial allies. We now have a rich history of rollback starting from the time of Yashwant Sinha, finance minister during the NDA regime. Second is likely to be the Pension Bill as it can bring in large amount of long-term foreign money. BJP supports the legislation and the Parliamentary Standing Committee had its own Yashwant Sinha chairing it. With some more tinkering TMC might be pacified. A 26 per cent foreign stake is not a bad start. It will bring some more dollars. Then, FDI in civil aviation could open up. the whole sector badly needs it. What else? Well, my hunch takes me only this far and then we shouldn't be too greedy, should we? From 2013 onwards, you can expect little on the reform front with all focus on being re-elected. I don't expect any of the principal political parties to be come out entirely happy with the year-end elections. Then, that's a topic for another day.
P.S By the way, Nouriel Roubini, "Dr Doom" does have many nice things to predict in 2013. A google search will help in reaching videos and articles. http://www.roubini.com/analysis/174887.php. All the stuff got uploaded yesterday
Back at home, the Congress party has asked the Government to pull up its socks. Somebody needs to tell these wise people that in the last six months no effort has worked. Haven't they heard of Newton's first law of motion which talks of bodies being in permanent state of inertia or motion unless acted upon? Once you go into a slumber it is difficult to get out, especially when your allies and the opposition want to ensure that you end up doing nothing. So does this mean that this will continue for the next two years till fresh elections happen? I am talking aboit a lack of reforms that is impacting the economy big time. Let me say what I think might happen till 2012-end from now on.
Once the Presidential elections get over in July, you can expect a short reforms burst during August- December 2012. Government wants to do it badly. In December, many states go to the poll. This probably the last time the UPA II will be able to reform anything. What could happen during this period? Well, with the support of Samajwadi Party, government is likely to raise diesel prices somewhat. This will not be too difficult. Any hike will help. The government can raise Rs 4 and then roll it back to Rs 2 under pressure from official and unofficial allies. We now have a rich history of rollback starting from the time of Yashwant Sinha, finance minister during the NDA regime. Second is likely to be the Pension Bill as it can bring in large amount of long-term foreign money. BJP supports the legislation and the Parliamentary Standing Committee had its own Yashwant Sinha chairing it. With some more tinkering TMC might be pacified. A 26 per cent foreign stake is not a bad start. It will bring some more dollars. Then, FDI in civil aviation could open up. the whole sector badly needs it. What else? Well, my hunch takes me only this far and then we shouldn't be too greedy, should we? From 2013 onwards, you can expect little on the reform front with all focus on being re-elected. I don't expect any of the principal political parties to be come out entirely happy with the year-end elections. Then, that's a topic for another day.
P.S By the way, Nouriel Roubini, "Dr Doom" does have many nice things to predict in 2013. A google search will help in reaching videos and articles. http://www.roubini.com/analysis/174887.php. All the stuff got uploaded yesterday
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