Over the last three months, Value Research has taken an overt political stand for the first time in its history. In March 2014, in our cover story titled 'Last Chance for India', we clearly laid down the case for a stable, business-friendly government. We felt that yet another do-nothing coalition government for five years would set India back so far that it could lead to an unrecoverable disaster.
After May 16, when the Lok Sabha results were declared, we wrote that this was the best possible outcome of the elections. On the morning of May 17, I wrote an article entitled 'Good Morning India' on ValueResearchOnline.com that said, 'The people of India have delivered a 'no regrets, no excuses' result. We want the job done, we have chosen the man to do it, and given him everything he needs'.
Even in the early days, the Narendra Modi administration is showing it's colours. It has shown willingness-in fact, eagerness-to tackle the most difficult issues, including labour law reforms. 'Hit the ground running', may sound like a cliché, but it's true. India has very little time. Only if the government gets all important reforms started now does it have a hope of having them bear fruit in time for the next elections. But nothing is going to happen overnight. In fact, till the Union Budget is presented in July, we don't even know the exact shape of the reforms program, or what parts of it will the government prioritise.
However, the equity markets are not known for patience. The markets look into the future and price stocks according to what it believes the future will hold. Mid-cap funds are up 36 per cent in the last three months, infra funds 45 per cent, and even large-cap funds are up 20 per cent. It's heady stuff and it's convincing some people that this will go on for a long time.
But stock rallies are based not on hope and expectation, but on money driven by the hope and expectation. And so far, bulk of the money has been coming from FIIs, as has been the case in India for a long time now. However, if there has to be sustainable growth in India, then the Indian investor-the ordinary small retail investor-will have to come into the equities markets. The benefits will flow both ways-investors' money will flow into businesses and the returns will flow back to investors. It's tragic that in a high-inflation (and yet, potentially high growth) economy, long-term savings of most Indians are locked away in fixed income investments with poor real returns. We do short-term punting in stocks but our long-term savings is locked away in PPF, EPF and even FDs.
Whether it's done by through tax-saving equity investments or some other means, it's of crucial importance that the Arun Jaitley's Finance Ministry creates and implements a real plan to do this.
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