Apr 30, 2004|
Reforms: Will they suffer?
Politics has undoubtedly played an important role in shaping up of the investor sentiment towards stock markets. The reaction to the initial exit poll results is a clear vindication of the same. But the question why is the stock market reacting in such an adverse manner?
The common thread that runs across participants is that, reforms could suffer. But how true is it? Against this backdrop, we asked the investors the following question "Are you happy with the economic reforms carried out in last five years". The options were yes, no or can't say.
And the majority of the visitors seem to be happy about the last five years of reforms (76% to be precise). On the other hand, a smaller number of respondents (23%) feel unhappy about the reforms.
Now lets consider the reasons why people could be happy. Perhaps, the greatest change in the last 5 years has been the fact that the issue of development has gained significant attention. The same government, which once was talking about 'Swadeshi', is now talking about increasing foreign participation in the country. While various measures have been taken over the last five years, the road development project is of long-term significance. Secondly, the progress on the power sector de-regulation combined with issues like river linking project gaining attention also have to be commended.
There are many reasons to complain as well. What still remains as a cause of worry is the lack of adequate job creation (just 0.5 million jobs created in the last five years). Besides, fiscal deficit for both center and states combined stands at 10% of GDP, which is alarmingly high. Food and fertilizer subsidies continue to remain misdirected.
If India is able to grow at around 6% per annum, it will take us 14 years to reach the per capita income level of China and 104 years to reach the US levels. Thus, there is a need for speedy introduction and implementation of reforms to boost per capital income. Better policies towards education, health care and infrastructure are important towards attaining this objective.
Given the kind of independent regulatory environment that is shaping up, reforms per se, may not suffer. But the issue of politics is important from the aspect of stability. A significance of a stable government at the center, which can provide a long-term sense of direction for the Indian economy, cannot be understated.
Read our special report on how elections have had an impact on the stock market over the last decade.
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