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Alternative Market Briefing

The Big Picture: Foreign investors might like India’s new government

Friday, June 06, 2014

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Narendra Modi
Benedicte Gravrand, Opalesque Geneva:

Narendra Modi, of the Bharatiya Janata Party (BJP), was sworn in as India’s 14th Prime Minister on May 26th. Having run the state of Gujarat for the past 12 years, he has big advantages, says The Economist — administrative competence, control over his party and a majority in Parliament — that should ease decision-making. Unlike Mr Singh, he has also campaigned and won on a platform of aspiration and economic reform. India needs "less government and more governance", he claimed.

The immediate situation is precarious, the paper continues. India suffers from stagflation. Growth is 4-5%, half the level at the peak, inflation is 9% and rising, industrial production is declining and the public finances are a mess. Although the current-account deficit has narrowed to below 2% of GDP, it is helped by a ban on gold imports and could yet come back to high levels. Much of India’s economy is primitive and infrastructure is decades behind China’s. Mr. Modi will have to, among other things, tackle a bloated fiscal deficit, trim spending on subsidies, defer rolling out of welfare schemes, draw a budget, stabilize banking and tame inflation.

BJP may help facilitate foreign investments Sudhir Kapadia is Partner and National Tax Leader at ......................

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