InvestorQ : What are the long-range reforms that the stock markets expect from the government to justify a bull rally?
Tisha Malhotra made post

What are the long-range reforms that the stock markets expect from the government to justify a bull rally?

Answer
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1 year ago


The markets are actually expecting a series of long ranging reforms from the current government. The budget has taken a step in the right direction by focusing on fiscal discipline and infrastructure spending. Also, the focus on rural spending will give a spurt to rural demand. Broadly the markets will be looking at three reform assurances from the government. Firstly, the GST Bill has been passed and implemented with a fair degree of success. Most global investors are looking at the GST Bill as a mandate on the government’s reformist credentials, notwithstanding the initial hiccups that the government faced. GST Bill is expected to add nearly 2% to the GDP growth once it is implemented. Also its simple nature will go a long way in encouraging the ease of doing business.

Secondly, the global investors are looking at the government to initiate sweeping reforms in infrastructure. Apart from the outlays on infrastructure, the government will have to move ahead on simplifying the PPP (Public-Private Partnership) mechanism. Markets also want to see how the government gets private investors like pension funds and sovereign funds to propel India’s infrastructure investments. The government needs to spend $1 trillion over the next 5 years and this will be impossible without a proper regulatory and policy framework. Lastly, markets will be also looking at the sustenance of fiscal discipline. Any laxity in fiscal discipline will invite a rating downgrade and India cannot afford that at this point of time.