The Bihar Assembly election verdict amid issues like rising intolerance and beef ban has hinted towards a stormy winter session of Parliament. The Winter Session is scheduled between November 26-December 23. The government on Monday reached out to the Opposition to pass key reform Bills and urged them to not interpret the poll result as a “mandate to disrupt Parliament”.
However, in the wake of the bitter Bihar campaign, the likelihood of the opposition parties yielding on contentious legislative issues appears increasingly unlikely. With the legislative agenda unlikely to go through, there are indications that the NDA government might try and push through fresh reforms and other measures through the executive decisions route.
BJP’s defeat in the Bihar State Elections is a “political pothole”, which is likely to hurt the stock market in the near-term, yet global financial services majors are positive on the country’s economic cycle.
We take a look at what brokerages have said about the economy vis-a-vis poll outcome and some of the pending agenda on the economy:
1. BJP’s big setback in Bihar elections could be a “stumbling block” to the central government’s reform agenda, global giant Barclays said. According to the global brokerage firm, the Bihar election verdict could also lead to “weakness” in the stock market.
2. Fitch Ratings said BJP’s defeat in the Bihar assembly elections is unlikely to have any major implications on the economic front, but could complicate politics for the government. The rating agency said the defeat does not change its view on the medium-term economic outlook for India.
3. Global financial services majors Citigroup, Nomura and Bank of America Merrill Lynch believe the loss would likely hurt the market in the “near-term”, but the fears of derailment of the reform agenda may be “exaggerated”. According to Citigroup, markets are likely to get affected as the Bihar loss is likely to give a break to BJP’s momentum and dominance, it would also raise risks of opposition intransigence in legislative policy making and shift the focus on reform or policy response of the govt. Echoing similar views, Japan’s brokerage firm Nomura said, economically, the Bihar defeat will be seen as a sign of greater difficulty for the BJP in pushing through its reform agenda at the centre, due to lack of numbers in the upper house and risk of the BJP becoming populist.
According to Bank of America Merrill Lynch reforms will continue to be “calibrated”, especially after the Bihar poll result, and this may disappoint some segments of the markets.
1. The government has set up a committee for simplifying the income tax act and look into provisions which lead to maximum litigation. The first tranche of recommendations are likely to form part of the next year’s Budget.
2. The roadmap for the reduction in corporate tax is likely to be announced soon and will be part of the next year’s Budget. A simultaneous phasing out of corporate exemptions is likely to be announced.
3. $7 billion debt-recast and reform package has already been announced by the government for loss-making electricity utilities and now its implementation remains to be seen.
4. Clarity on e-commerce sector is still awaited along with the multi-brand retail sector. The government is expected to make an announcement on this issue.
5. The monetary policy committee, which will consist of representatives from both the RBI and finance ministry and will decide on issues such as interest rate, is yet to be formed.
6. The Goods and Services Tax (GST), stuck in the Rajya Sabha for passage, will be taken up for consideration in the upcoming session. The Congress has been opposing the Constitution (122nd Amendment) Bill or the GST Bill on issues including the inclusion of alcohol, electricity and petrol and its products under the new indirect tax regime; capping the GST rate to 18 per cent; and imposition of additional one per cent levy by the manufacturing states over and above the GST rates for two years. The loss in Bihar may mean that an aggressive Opposition may further delay the passage of the Bill and its implementation from April next fiscal.
7. The centre is working on introducing the Bankruptcy Bill in Parliament in the upcoming session.
8. The controversial Land Bill, the Ordinance for which was allowed to be lapsed early this year following stiff opposition, is likely to be introduced in the upcoming session. Finance minister Arun Jaitley recently said that the government is making efforts to form consensus on the Bill.
With inputs from Indian Express