The stock market is a lead indicator. It means the trend today indicates developments tomorrow. The S&P BSE Sensex and NSE Nifty are hovering around the same level as May 2014 when prime minister Narendra Modi won a landslide victory.
Here are 9 reforms that you need to know that could help change sentiments:
1. High-quality GST: India does not just need one single Goods and Services Tax or GST. The country needs a high-quality GST that will unify the nation into a single market. Goods will move freely and it will save time and money for all of us. Effectively, it will enhance productivity and add to the overall GDP growth. In today’s context, a faster GDP growth would make India a magnet for much-needed investment.
2. Predictable tax rules: Arun Jaitley, India’s finance minister, announced a decision to exempt FIIs from retrospective minimum Alternate Tax or MAT. This is the minimum rate at which companies are taxed when their income is too low to be taxed at the regular rate. Earlier in the year when the government exempted FIIs from MAT, they were asked to pay tax due in previous years worth over $6bn. Investors want a predictable tax regime.
3. Ease of doing business: India wants to be among the top 50 companies in the ease of doing business. It is currently at 142 out of 182 countries. While some government services have been integrated, India needs to really create a true single window for clearances, according to a report by HSBC, a global bank.
4. New bankruptcy rules: Unlike the West, bankruptcy rules are not well defined in India. Investors want a simpler process to restructure businesses under bankruptcy protection. This will pull a lot of companies out of financial distress and add to growth and create jobs.
5. New law for land acquisition: India needs a strong land acquisition law. It has been debated and held back. For businesses to set up new facilities or cities to plan expansion, clear land acquisition rules are needed. This step will trigger development and create jobs.
6. Global mining for coal: The shortage of coal in a country that relies on thermal power cannot be understated. India has abundant reserves of coal. Yet, a lot needed is imported. Allowing private sector to mine would bring modern mining technology to the coal sector. This is needed for power tariff for us to go down.
7. Power distribution and states: Power supply and distribution has to be tackled by states by separating the free supply to farmers and urban users. Gujarat and many other states have successfully managed to make power supply efficient. This helps states control finances better and not tax ordinary people.
8. Public-private partnership: The government has allocated resources for infrastructure spending in roads and railways earlier in the budget. According to experts, to make this effective, the government needs to revamp the existing public-private partnership agreements. There are differences over concessions and compensation. This is responsible for stalling significant infrastructure projects in your cities.
9. Disinvestment: The government needs to bring about efficiencies in the functioning of public sector companies. At the same time, enhance the public shareholding of public sector banks and other large oil companies. An independent body of experts could create opportunities for timely decisions on disinvestment, the HSBC analyst added.