FM armed with Conviction, needs Ganesha's blessings!
By Geetanjali Kedia
Finance Minister P Chidambaram, looked fully determined, charged up and full of action, while addressing the media yesterday (Tuesday). FM has categorically stated that, to boost the economy, more measures will be unleashed by the Govt. He has stated that, till 30th October, the department of Revenue, Disinvestment and SEBI would decide on steps to revitalize the economy, hinting that these steps will be in the areas, which he had talked on 6th August, after he took over as FM.
The Govt. has window available till 30th October, as code of conduct may get enforced, due to state elections of Gujarat, Karnataka and Himachal Pradesh in November-December. So, all the required steps for reviving the economy would be taken up and announced by then.
Though FM has rolled out ruling back of diesel price hike, LPG cylinder cap and FDI in retail, it is likely that government may raise the cap limit of LPG cylinders from 6 to 9 or 12 in a year. This limit has been raised to 9 in Delhi, which is likely to get extended to pan India as there is no reason for geographical discrimination.
RBI had cut the Cash Reserve Ratio (CRR) by 25 basis points to 4.50%, which will release Rs. 17,000 crore of funds in the banking system. This will prompt the banks to lower the interest rates. Even RBI may look to cut the repo rate in its 30th October meet, relying on Govt. having promised to deliver more on reforms.
FM has also dashed the view that Govt. has acted on fears of downgrade by rating agencies. He said that Govt. does not frame policies for rating agencies, but are framed, which are doable and are implementable.
It is important to note that, how moves by the Govt., can change the views of the industry, investors and analysts. Allowing 51% FDI in multi-brand retail and 49% in aviation sector will definitely see global giants coming to India. In aviation space, many foreign airlines from Middle East and South East Asia are keen to make investments in Indian carriers and formal talks may begin soon with Spicejet, Go Air and Kingfisher Airlines.
In FDI in retail, we are likely to see many global giants from US and Europe, who will be keen to come to India. Due to few players available in aviation and retail space in India, valuations of such companies can go quite high. Despite many foreign carriers saying that they are not too keen for India, this may not be their intent, as nobody can overlook Indian economy, which is the second fastest growing economy in the world.
Infact, we have seen very small policy initiatives from the Govt till now, which will be much more, which are expected to be implemented in next 45 days. These measures are likely to have its far reaching implications, which can strengthen rupee, see good FII Investments as also a bullish stock market ahead. For Thursday however, markets may see profit booking due to the uncertainty on Mamata Banerjee still looming.
It seems that Diwali has come 2 months ahead on Ganesh Chaturthi! Goddess Lakshmi will be blessing all of us, in second half of FY 13. Only prayer we should make to Lord Ganesha on the eve of His birthday is to give wisdom and patience to the opposition political parties, especially the 3Ms – Mulayam, Mayawati and Mamata!