Ten Commandments of Finance Minister- Will It Help?

In the last few trading sessions the streets have witnessed bloodbath creating havoc on the minds of the
stakeholders. This is caused by many reasons, starting with the depreciating rupee, inflation worries, burgeoning CAD and add to that the poor financial performance of India Inc. While all the reasons are different, the primary reason behind all of them is one - Inaction of the Government. We have constantly criticised the UPA Government which has been on the back foot in terms of taking bold steps and push the reforms processes forward.When the macroeconomic factors deteriorated to the abyss, finance minister has come out with Ten Commandments to bring the economy back on track. In this article we taken a deep dive in these commandments and analysed what it is and how will it help India Inc.First and the foremost is to bring the fiscal deficit under the target levels of 4.80% of GDP in FY14. Second is to bring down the CAD to the tune of USD 70 billion or 3.70% of GDP. We are of the opinion that, while it is true that achieving both the target would be positive for India Inc and even for the equity markets, we are a bit sceptical about it. The simple reason behind this belief is that there is no clear road map provided by the Government for the same.

The third factor is to add to foreign exchange reserves (as we have forex reserves lasting only for 7-8 months). It is planning to look for options like issuing sovereign bonds. This would be helpful if the Government manages to attract funds. But again emerging markets are least favoured markets at this juncture.

The fourth one is to revive the capex cycle, fifth is to ask the PSU companies to submit capex plan and the sixth is recapitalisation of public sector banks. Here we feel all the three factors would be helpful but again, there is no clarity on this about where to bring the funds to capitalise the PSBs. Rather rumours suggest that the re-capitalisation would be delayed. On the capex front Public Sector Companies, have own constraints to sit on cash.

Seventh one focuses on reaping benefits of good monsoon and put in better agricultural segment growth. This would be done by providing fertilisers and good farm credit. We fell it can be achieved by the Government and if this is implemented then FMCG companies would be the real beneficiaries.

The eighth is to encourage manufacturing sector (especially steel, power, metal and automobile). The ninth is to encourage exports. We feel if sops like cut in excise duty are provided, the manufacturing can bounce back. But the most important point here is to bring down the interest rates, which seems to be the remote possibility. Exports are likely to go up with INR touching the low of Rs 68.50 against the USD.

Last one is to end impasse in coal and iron-ore, environmental clearance and land acquisition. We feel the CCI has already started its efforts on the same and results would start yielding in next one quarter.

We feel while the intention is good, there is no proper roadmap is being provided indicating towards the poor will of the Government. However if it manages to Achieve even half of it, some improvement might be seen in the markets.