TIME TO TAKE STOCK

The Narendra Modi-led government completed its one year in power last week. I believe one year is a very short period to judge the performance of this government, which I think is here to stay longer than many one of us expect. Nevertheless, there are murmurs in many corner of society that aspirations created are not being fulfilled and there is more talk than action by this government. This cynicism has gained prominence in the last couple of months when the equity market got into a correction phase. To assuage these concerns I would like to quote John Heywood, an English playwright, “Rome wasn’t built in a day, but they were laying bricks every hour.”  This quote very aptly sums up the current stance of the government.

To put things in the right context, you need to understand the circumstances under which the new government assumed power at the centre. There was complete policy paralysis, everyday new scams were cropping up, and even the Prime Minister’s Office was not aloof to that. The mood of India Inc. was one of pessimism so that doing business was becoming difficult with every passing day. The economic slowdown and policy inaction even started hurting the country’s reputation in the international arena. Therefore, the new government has had to start taking action on various fronts simultaneously and it has been left to PM Modi to lead from the front. Improving things on any front consumes its own time, energy and cost.

Therefore, it will take some time before the efforts taken by this government start showing results and as such one year is a very short period to gauge performance. Moreover, there are various reforms the government has undertaken that will improve the fundamental structure of the economy, and these will surely have long-lasting implications. For example, the government has been successful in pushing through some key reforms such as passing of the Insurance Bill, the Coal Bill and MMDR. Besides this the government has taken various administrative steps which will improve the overall business environment in the country.

I am confident that this government has the ability to transform the country into one of the best performing economies of the world and actions taken in the last 12 months will definitely help to achieve that. However, there is no denying the fact that a section of the society is not very happy with the current achievements of this government. There are two reasons that explain this. First is their sky-high expectations that wanted the new government to dramatically change the situation in a year. Secondly, I believe somewhere the government has not communicated its achievements in the right way. At the completion of the first year they should have come out with a white paper detailing the actions taken so far and how these decisions will yield a positive result in years to come. In one of our special reports in this issue we have carried in detail the hits and misses of Modi’s one year at the centre.

The recent choppiness in the equity market has raised concerns about its direction in the near future. There are various factors weighing heavily on the market as of now such as MAT, unseasonal rain, rise of US bond yields, etc. The cover story of this issue takes these concerns head on and explains how these things are going to pan out in both short as well as long-term. In addition to the fundamental reasons, one of our special reports talks about how the frontline index and banking index are looking from a technical perspective. I hope that the analysis from both fundamental and technical sides will help you to take better investment decisions.

In a tragic incident on May 3, Parag Parikh, chief executive officer of PPFAS Asset Management, died in a car crash in the US. He was one of India’s best known value investors and a pioneer and authority on behavioural finance in India. He was at Omaha, Nebraska, to attend Warren Buffett’s talk as part of Berkshire Hathaway Inc.’s 2015 annual meeting. We at DSIJ are deeply hurt by his untimely passing away and pray to god for his soul to rest in peace.