Investment Outlook , Published Jan 18, 2018
Structural reforms aren’t easy, but they
do deliver growth. There are three
priorities: structural initiatives, fiscal
responsibility and investment stimulus.
By pursuing all three, the government
has ensured additional multiplier
growth benefits will come forth.
The pursuit of the three aforementioned
policies creates a resilience to
macro-economic shocks, raises economic
growth and reduces unemployment. There is a
lag however, on the materialization of growth
benefits and in the short term, there is
substantial pain and resistance to change.
Aadhaar, Jan Dhan, demonetisation, GST, and
soon benami, are working synchronously to
create a new, inclusive infrastructure. Central
to the reforms is the move away from cash,
towards electronic payments, away from black
money to white, from unorganized to
organised and towards a national biometric
identification based financial system.
Following structural reform, the government
has come through with the other two legs: an
infrastructure stimulus, and banking
recapitalisation. The Modi government has
also strengthened its economic and legal
infrastructure with real estate and bankruptcy
legislation, applied corporate governance
mandates for the PSE sector and fiscal
transparency. The farm loan waivers and crop
insurance programs have reduced regulatory
bureaucracy and helped India jump 30 spots in
the ease of doing business.
Though it isn’t easy, structural reform works.
The economic literature is abundantly clear on
the impact of structural reforms. Reforming
countries experience a growth acceleration in
the medium term, following short term pain.
Reforms in banking significantly raise growth
and make economies attractive for FDI.
Recent developments have witnessed a
number of brokerage houses coming forward
with revised upgrades to India’s 2018 growth.
We expect India to be the fastest growing
large economy in the world in 2018.
Investment Outlook 2018