There were some positive indicators of economic growth in India, such as the 5 per cent growth in September, in the infra sector, the highest in three months.
The Nikkei India Purchasing Manager’s index was at a 22-month high in October, signalling an expansion of industrial activity.
Sale of gold jewellery during the Dhunteras festival was up 30 per cent. October sales of commercial vehicles were up 27 per cent for Ashok Leyland and 15 per cent for Tata Motors. Car sales at Maruti were up 2 per cent and at Hyundai (#2) up 6 per cent. This was the result of a good monsoon and of the 7th Pay Commission payouts, which put spending power in the hands of government servants.
India’s ranking in the ‘Ease of Doing Business’ has remained static at 130, out of 190 countries. The two criteria in which it fares worst are ‘Dealing With Construction Permits’ (185/190) and ‘Enforcing Contracts’ (172/190). The realty sector is purportedly where political slush funds are parked. Until construction permits are made transparent, without discretionary powers to block, this ranking cannot improve.
For the latter, there is an urgent need for the government and the judiciary to cooperate in judicial reforms.
Foreign investment will be a trickle of the potential unless investors are assured that they are safe and that contracts can be enforced.
The judiciary is far too slow and is far too lenient towards fraudsters, and the punishment meted out to them is, at times, ludicrous.
The Supreme Court recently fined Financial Technologies for indulging in frivolous litigation, to deter others. The fine was ₹5,000, which is hardly any deterrent to a company accused of a ₹6,500-crore scam, the judgement day of which it has been eluding for over three years. Victims of other scams such as PACL, Sarada and Sahara are also waiting in miserable silence.
Collusive fraud, lawyer one
In the NSEL scam, the government has recently asked SEBI to investigate it and has also tasked the Serious Fraud Investigative Office (SFIO) to probe it. The question is, why was this not done three years ago? Several independent reports by government agencies have all pointed to a collusive fraud.
And despite having news that the second biggest defaulter used the NSEL money to illegally buy properties in Dubai, as reported in Mumbai Mirror, the investigation plods on with the speed of a tortoise. What’s more, both this firm and NSEL reportedly have the same lawyer.
Is the government content with producing more reports, or is it also committed to taking action? Unless we severely punish fraud, we cannot hope to improve the ranking.
Tumultuous times
Globally, there are red flags. Politically, next week we will have a new POTUS (President of the United States), likely to be Trump! Markets are already nervous. The US Fed has signalled the likelihood of an interest rate hike as early as December.
This poses a risk to US equity markets, in which US households have invested $21 trillion. Prices of other assets have also risen, thanks to low rates. This cycle will reverse.
India should concentrate on its two weakest parameters and take advantage of the coming deluge in the markets of the developed world.
(The writer is India Head, EuroMoney Conferences. The views are personal.)