The upcoming Budget is expected to bring clarity on the lines the new government is going to work over the next few years. It is not just the people, but even global rating agencies and investors are waiting to see the stand the government takes. Andrew Steel, managing director and head of Asia Pacific Corporate Ratings at Fitch Ratings told Sandeep Singh that investors are looking at better governance and less red tapism. Excerpts:
How do you see the election outcome in India and what would be your expectations from the new government?
I think that there is more chance to implement the structural changes now than it was under a coalition government.
A clear majority has not happened since 1984 and the government has full control of lower house which means that if the government has inclination and will to implement reforms then it can actually push them without having to compromise or negotiate. However, the ease of doing that and impact of the same is not easy for any government because the types of reform we are talking about have far reaching impact on population. The balancing act, however, will be a difficult as some of the things they want to do are conflicting.
While on the one hand they want to keep inflation down, they also want to reduce subsidy which means market pricing of goods which pushes up inflation.
How do you see India from a sovereign rating point of view and what would you expect from the upcoming Budget?
From our sovereign analyst perspective they want to see tackling of fiscal deficit on a sustained basis. This is an opportunity to do something structural and an indication on that is something that people would like to see in the Budget. While announcements on things to be implemented immediately may not come now, there may be statements on what they intend to do in the next Budget.
What kind of structural reforms would you like to see?
In terms of foreign funding, what investors are looking for is less red tape so that it becomes easier to get projects implemented with fewer uncertainties.
They are also looking for better standards of governance. If they come then you can also facilitate things for Indian companies. For example they (government) have waived withholding tax on infrastructure projects for the time-being, if that is extended to other sectors, it perhaps will not have an impact on inflation and