More Reforms Ahead, Says Chidambaram

With a poor outlook on India’s economy, owing to the lower manufacturing activity and huge outflow from the bond market, the finance minster has now assured investors that more reforms would come in by August this year. The national currency recently reached its all time low at Rs 58 against the USD worrying investors and corporate. The FM's statement was supposed to boost positivity in the market, but that has not happened. The markets have ignored the assurance as they continued to trade in negatives.

Among the major reforms, the government is set to take a call on allowing power generating companies to pass on the higher cost of imported coal to customers. The government will also revisit the sectoral FDI caps including those in the defence sector. He has asked ministries to spend the money allocated to them in activities that will increase the overall expenditure in the economy leading to job creation.

On the coal and gas front, Chidambaram said that these issues will get resolved by the end of June 2013. The divestment of Coal India is very much under consideration, he said but it first needs to negotiate with the trade unions. There would also be a meeting with the Prime Minister and key advisors to discuss the fate of the stalled projects in the country.

FIIs, which are now drawing money out of the country, may have something to cheer about as the SEBI would be meeting on June 25 to address the issues related to FII registration. It is likely that a new class of investors would be introduced - 'Foreign Portfolio Investor'.

With the rupee’s depreciation and increasing gold imports, the FM has assured that the Current Account Deficit (CAD) would not be financed by drawing external money. Earlier yesterday, the credit rating agency Fitch upgraded the outlook on the country from negative to stable with BBB- rating. The agency is happy with the earlier reforms introduced by Chidambaram. Whether there will be further upgrade in the credit rating of the country, only time will tell.