If the Assembly elections in the four States are an indicator, the Congress-led UPA Government, in its remaining six months in power, is likely to adopt a cautious approach on economic reforms, according to those closely associated with the Government.
However, stock brokers and research agencies feel that the stock market will see big rallies not only on Monday but in the following days too.
Top Government officials and economists whom
Will the Government bite the bullet on diesel pricing, which has inflationary implications? Most say that the Government may not like to go for bigger hike in diesel prices to cut the fuel subsidy and to keep the fiscal deficit under budgeted target.
The Congress leadership will not want to anything that would further dent their prospects in next year’s General Elections. There is also a feeling that more populist measures are expected, although the Finance Ministry had clarified that no new schemes will be announced now.
But worries on the fiscal deficit front and no action on reforms will irk the rating agencies which have already hinted about reviewing the country’s ratings. Neither the officials nor the economists are sure how the Finance Minister will face this challenge.
However, there was an agreement among the opinion makers that disinvestment will get a big push as this will help control deficit. After PowerGrid, Coal India is next on the agenda while the decks are almost cleared for residual stake sale in Hindustan Zinc and Balco. All these are expected to bring Rs 30,000 crore to the exchequer.
Economists also feel that one of the big challenges for the Government will be to prepare for the tapering of US quantitative easing. They are hopeful that the easier norms for FII investment especially in the debt market and participation in global index bond will boost dollar inflows.
Stock Market Along with the strong showing of BJP and positive international news, the market is now very bullish. Market leaders feel that the Assembly election results have boosted the chance of BJP emerging strong in next year’s general elections.
Jagannadham Thunuguntla, Head of Research, SMC Global, said although it was difficult to extrapolate the latest Assembly poll outcomes into the general elections 2014.
“But one thing is clear. Markets don’t like coalitions. It would like to have a party with majority come up in 2014 so that decisions are to be taken quickly.” The benchmark Sensex has gone up by nearly 8 per cent this year.