A number of ministries are saying subsidies should be a key focus to get the economy back on track. Do you agree with the strategy?
The government must curtail the twin deficits that pose a concern to asset allocators that deploy global capital. At the same time, the quality of fiscal consolidation is important. It is necessary to pull down the fiscal deficit without sacrificing plan expenditure. Oil subsidies need to come down. On fertilizers, my view is that we need to be careful about the timing, given the expected El Nino effect.
What the government needs to do is create a macro-economic environment that builds on the steps on fiscal and current account deficits and oil price deregulation. We need to focus on FDI and spend a lot of time in removing the anomalies in some of the laws and clarify on the tax issues. People are waiting to see what big steps will be taken in the immediate term, how to get growth back on track and create jobs.
What are the major focus areas where investors are awaiting action?
Manufacturing and infrastructure are the two most important areas. Then there are the allied areas linked to manufacturing like logistics. The Land Acquisition Act needs some changes and the tax policy needs to be transparent and predictable so that people can plan for at least the medium. Geo-politically, India looks good to investors, the strong mandate adds to the confidence and people generally think Mr Modi means business and can replicate for India what he has demonstrated in Gujarat.
You mentioned FDI should be a focus but BJP has spoken about barring FDI in multi-brand retail ...
We have taken several steps to improve FII flows and now we need to get FDI across sectors. There is technology, healthcare, defence and insurance, which would be attractive. We should focus on automobiles and make India a major hub. FDI in multi-brand retail is a relatively small issue. Moneys are waiting to be invested and if this government can clear the logjam, investors will come.
Do you think some steps should be initiated before the Budget?
The government should start dialogue with the states on implementation of goods and services tax (GST). There is a also a need to relook at some of the provisions on the Companies Act — such as those related to debenture reserve and corporate social responsibility.
Do you expect Indian markets to remain a favourite with investors?
Investors will play their bets. The US is looking good and Europe is coming back. Brazil and Russia have their own problems, so on a relative basis we stand out among other emerging markets. Many global investors I speak with feel they have missed the recent bull run — they are waiting to get in, provided the right policy measures are taken.