Crude Shock! Good For India

The reforms will take some time to implement; however, it will have far reaching consequences. This will definitely help PSBs to bridge the performance gap between them and their private counterparts. For example return on assets at private sector bank is 1.6 per cent against 0.5 per cent for the state-run banks. Similarly gross non-performing asset ratio at the PSBs is more than five per cent compared to a little over two per cent in the non-state run banks.

Besides, the formation of “Niti Aayog”, replacing Planning Commission, which was considered a white elephant and has lost its relevance in the current economic scenario, is also a step forward in bringing the states and centre closer towards working for the development of the nation. The new institution will seek to put an end to slow and tardy implementation of policy, by fostering better inter-ministry and better Centre-State coordination. The governing council comprising chief ministers of all states and lieutenant governors of Union territories and fixed-tenure regional councils to address specific issues, affecting more than one state or region.

Coming down to the market most of you must be anxious with this sudden and sharp fall in the market. The primary reason, being the risk off trade in the global market triggered by confluence of various factors such as Greek political uncertainty, fear of Fed tightening rates and fall of Brent crude oil below USD 50 per barrel first time since May 2009. In fact fall in the crude oil prices is good for the Indian economy and we believe that this is the last leg of fall of crude oil prices.  This will help Indian economy primarily in three ways. It will help to curb our fiscal deficit as according to some estimate the fuel subsidies will fall by around USD 2.5 billion, Investment bank Nomura estimates that this fall can potentially boost growth by 0.4 per cent and finally inflation measured by WPI could slow by around two per cent. The icing on the cake is hike in excise duty on petrol and diesel that will garner another Rs 15000 crore.

I believe the current lower crude oil price gives the government right opportunity to expand the strategic storage for crude oil and should not be missed. The project to build a strategic storage for crude oil was given the go ahead early in 2004 by the NDA government. With a total capacity of five million tonnes, this storage was estimated to cover two weeks’ requirements. Now as the economy grows we need more of such reserves. We should learn something from our neighbour China that boasts of 170 million barrels of strategic reserve that has been built over a decade now and is expanding it further. What is required though is planning and shrewd execution.

As we have approached final quarter of this financial year, many of you might not have exhausted the investment under Section 80C of Income Tax Act 1961 and getting call from your HR department. To help you, our cover story this time is about the top 5 ELSS schemes, which will help you to save tax and at the same time grow your money. We have also done a special report on the companies that are most likely to announce bonus going forward. These companies can be looked as part of your portfolio. The recent reforms in mining and defense sector is going to help many companies, one of our special report covers the company that gives you good opportunity to invest.

As always, it will nice to have your feedback on this issue. Please send in your suggestions to comment@dsij.in