Following the government’s stance on moving ahead with its policy action regardless of the political turmoil, Praveen Chakravarty of Anand Rathi Financial Services believes that we will continue to see some bold moves in terms of reforms. According to him, the next step of reform moves would be in the form of more fundamental issues such as Telangana and power sector.
Chakravarty added, “I truly believe there is a revival of confidence in the government. Also in some sense, whatever has happened in the past few days with one of the close allies pulling out of the government is a blessing in disguise.”
Below is the edited transcript of the interview
Q: What did you make of the noises from the government yesterday; does it assure you that the government may move ahead with some policy moves regardless of the kind of political turmoil which had cropped up yesterday?
A: I remember the old bastion of the Congress that ‘Dalal Street ecstasy is not what should dictate policy making’, I guess that time has changed and we are seeing a government that is starting to believe in trickle-down economics.
You used the word ‘noise’; as far as yesterday’s announcements are concerned, I think that is a fair characterisation. It does look like we will continue to see some bold moves in terms of reforms. But I also think there will be some fundamental issues that will be tackled such as the Telangana issue. The Telangana issue or the power sector issues or the land acquisition act has far more impact on businesses than a symbolic FDI in retail or an FDI in insurance. The next step of reform moves would be in some of these more fundamental issues such as Telangana and power sector.
Q: Do you see any resolution on the land acquisition bill front over the next few weeks if the government wants to move ahead?
A: It is all about the law of eminent domain and we, as a country, will have to recognise that we have to face that upfront and get past resolving that. Contrary to perception, I don’t think the difference is between industry and what the various political party want in the bill are actually that wide. I think it’s a very solvable issue. If only we could get all of them to sit down either in parliament or outside and talk about it, that, in my view, will be a far reaching reform move than any of these other symbolic moves.
I am not sure if the government’s stance could be characterised as suddenly turning bold and I also don’t agree with the view that this is somewhat analogous to the Indo-Nuclear deal. This for the first time the issue is about economics and politics. The Indo-Nuclear deal was about power and wasn’t so much about economics. In that sense, I truly believe there is a revival of confidence in the government. Also in some sense, whatever has happened in the past few days with one of the close allies pulling out of the government is a blessing in disguise.
Q: Do you think that the government will move ahead aggressively from here because the other view is that because it is surviving on the back of outside support from the Bahujan Samaj Party (BSP) and the Samajwadi Party (SP), which looks likely it may actually want to become a bit more conservative with what it can push through and what it should not be touching?
A: I do not subscribe to that view. Politically speaking, we are missing one key component among the allies, which is the Dravida Munnetra Kazhagam (DMK). The DMK has 18 seats; it is the DMK that is somewhat unsure if there is already an anti-incumbency wave in Tamil Nadu or not. The second point we are probably missing is that the last few elections have shown that voters vote differently for assembly elections and Lok Sabha elections.
So trying to extrapolate assembly performance of political parties for Lok Sabha performance could be a mistake. If you add these two, it is not so much. I know there is a lot of focus and attention on SP but I do think with BSP and DMK in tow, the government will move ahead pretty boldly in terms of reform moves.
Q: What is next on your watch list? FDI insurance seems something they are keen to do as early as next week, what are the ones you will be watching most keenly?
A: Power sector, in terms of what will the government do for the State Electricity Boards (SEBs) will be very important. The second important part is how we allocate natural resources. That is another contentious issue; don’t forget the 3G spectrum issue is still not resolved fully. These are two big issues that I will be watching out for and that is what I would think foreign investors or domestic investors should be watching out for rather than mere big bang announcements of aviation, retail or insurance.
Q: The cabinet is scheduled to meet to take up the debt restructuring plan for the Discoms on the power sector. How much of a step would that be in your eyes to resolve the problem?
A: Let us not hide this under the carpet; power has actually been the biggest road block in terms of our GDP growth falling from the highs of 8%. The cabinet meeting this morning will be very significant in terms of what it does for the Discoms in terms of the relief package that the cabinet approves. It is not about which state gets how much in relief package, it is about which sector gets how much.