While maintaining fiscal deficit targets is important, India has much more to lose if it lost favour in terms of investment destination in the global arena.
The slowdown in the economy has forced the government to take steps towards announcing many fiscal stimuli which may adversely affect the country’s macroeconomic indicators by the end of the fiscal year. However, to flip the negative sentiment built in the industry, the economy, and investors, the government is looking at the need of the hour. “While maintaining fiscal deficit targets is important, India has much more to lose if it lost favour in terms of investment destination in the global arena,” said Rashesh Shah, Chairman, and CEO of the Edelweiss Group. The current scenario is unlike anything in the past, thus, it is important that the government actively tackles the low sentiment in the system by sending positive signals in the domestic market and globally that India is willing to make extraordinary efforts to realise its growth, he added.
When demonetisation and GST were announced by the government, the implementation of the reform faced more questions than its intent. All kinds of reforms, irrespective of their size, need good implementation, said Rashesh Shah. However, he believes that the execution has been a focus area for the government. To get the economy back on track, and on target for the $5 trillion economy, the government has taken decisions to boost positive sentiments across the industry. While Rashesh Shah said that fundamentals, sentiments, and liquidity will play a major role in the economy, he underlined the following measures and their advantage to the economy.
- Corporate tax cut: By announcing a large corporate tax rate cut and a much lower rate for new manufacturing companies, the government has clearly shown that it will leave no stone unturned to revive the economy.
- Easing of FDI norms: The opening up of FDI in several sectors is especially timely as in this era of trade wars, India can be a beneficiary. Foreign investment is a key source of economic growth as well as non-debt finance for the country.
- Announcements on single-brand retail: The announcement on single-brand retail is very important as it gives major flexibility and ease of operations for potential investors.
- Big bank mergers: The merger of PSBs is also an idea whose time had come as stronger banks increase productivity, lessen asset quality pressure, boost liquidity and credit flow, improve overall operating efficiency and corporate governance.