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India Markets in 2013: ball is in government’s court

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

If calendar year 2012 was the year of scams in India which helped induce some much needed government reforms, the year 2013 is expected to be a year of hope and expectation for India and India Inc. There are expectations on better political governance, fall in inflation levels and hence interest rates, creation of an investment friendly business environment and lots more. It’s also the year with the last finance budget before the 2014 general elections.

Towards the fag end of 2012 the inactivity on the part of the government appeared to have been shrugged off in terms of policy action. This helped improve business confidence a shade. However, there still appears to be near total inaction on the part of corporate India to kick start the investment cycle in any major way. Are high interest rates the hurdle? Is lack of government decision making still a big hurdle? Is the business environment conducive to a larger domestic capex commitment? The answers appear to be almost obvious.

It did appear peculiar that at a time when scam after scam was being detected and there was complete policy paralysis in the government for the first nine months of the year, FIIs invested more than US $ 23 billion in the Indian capital markets in 2012. If consistently more reforms are announced by the government, one can expect close to this figure being invested again by FIIs in 2013.

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