Indian Economy At Crossroads

The failure to secure a clear majority to BJP of its own raises concerns about the formation of a stable government and the continuation of economic reforms…reports Asian Lite News

The Indian economy looks well poised to move to a higher growth trajectory path in the coming years. The latest gross domestic product (GDP) growth numbers point to the inherent resilience in the economy. The main agenda points can be many for the new government. 

First, the need to boost consumption is important and here the Budget could be used as the right platform. With tax buoyancy being very high in the last few years as well as the first two months of the year, there is room to rationalise tax slabs under GST. Further lowering of income tax rates is also an option to increase disposable income and hence spending power. The biggest achievement in the last five years has been in better compliance by taxpayers as all loopholes have been plugged. This provides scope for giving concessions.

Second, private sector investment has been lagging and restricted to specific sectors. To make it broad-based, from the policy perspective five non-infra based sectors can be identified to bring about some buoyancy. These can be food processing, textiles, pharma, auto and housing. These have linkages with other sectors as well as exports and can be the focus for the next 5 years where there is potential to be leveraged.

Third, the government along with the industry associations need to get the right mix of free trade agreements that are signed to ensure that India can get integrated with global value chains in the next couple of years. Here, it would be essential to also bring in the SMEs and to begin with there has to be some initiative taken to create a pan India association for SMEs so that there is a common voice as well as targeted focus. As MSMEs contribute to 40 per cent of exports, they need to have a voice in decisions and should not be just followers.

Fourth, a nagging issue which has had socio-political implications are the farm laws which have the potential to transform the way agriculture performs. More importantly agriculture needs to be commercialised and hence a special committee needs to be set up which discusses the same with the stakeholders in a time bound manner to have a tenable solution. This will also include a firm stance on policy relating to exports and imports and futures trading. This will ensure that the sector which has been outside the purview of reforms for almost two decades gets back the vigour that is needed to make the sector stronger. India is the largest producer or consumer of almost every farm product and logically should be a price setter.

The stock market faced a significant downturn on Tuesday as the Bharatiya Janata Party (BJP) struggled to secure a decisive lead in the ongoing national election results.

By 11 AM, it has become clear that BJP on its own is unlikely to cross the half way mark, although it is certain that with allies NDA will form the government at the centre.

The idea of a coalition government lead by BJP at the centre has led to widespread market anxiety and a sharp decline in stock indices. Since the opening of trading on Tuesday, investor sentiment has been notably bearish.

The Bombay Stock Exchange’s benchmark Sensex plummeted by 3905.15 points. Similarly, the Nifty 50 index suffered a substantial drop, falling 1061.05 points at 11 am

The decline in stocks was widespread, affecting various sectors including banking, automotive, and technology. Major companies like Reliance Industries, HDFC Bank, and Infosys saw significant drops in their share prices, contributing to the overall market downturn.

Shares of Bank of Baroda, PNB, SBI, IndusInd Bank, Bandhan Bank, Axis Bank among others slipped up to 9 percent, as against 5 percent decline in the Bank Nifty index.

Market analysts attribute the steep decline to political uncertainty. The BJP, which has been the dominant force in Indian politics for the past decade, is seen as a pro-Industry party whose policies have generally favoured economic growth and market stability.

The failure to secure a clear majority to BJP of its own raises concerns about the formation of a stable government and the continuation of economic reforms.

Sunil Shah, market expert said, “Yesterday market acted on the outcome of exit polls. The early trends are showing that the gap or the lead is not that big so the market is reacting to that. The market will remain volatile throughout the day.”

In addition to political uncertainty, global market trends and domestic economic indicators have also played a role in the current market volatility.

Rising oil prices, inflation concerns, and recent global economic slowdowns have compounded the impact of election jitters on investor sentiment.

As the day progresses, the market will remain focussed on the final tally and the BJP lead NDA’s final majority figure.

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