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Markets Weekahead: A decisive mandate for equities

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Not even exit polls could have predicted the landslide election victory that ‎has put the BJP’s Narendra Modi in the driver’s seat for India.

The Nifty, after the initial euphoria of a 6 percent upswing, ended Friday at 7203, merely 80 points higher than the previous day. It was a typical “sell on news” phenomenon.

Hindu nationalist Modi gestures to his supporters during a road show in New DelhiThe clean sweep for the BJP has increased expectations from the new government and  does not leave room for excuses. The prime minister’s chair will test Modi’s ability to deliver on a national platform.

The next few days would be the honeymoon period and after the initial revelry,  people would closely watch the process of government formation and the new ministers who will take up portfolios such as finance, home, defence and external affairs. We would also need to see how Modi sets the framework for the revival of fast-paced economic development. It’s easier for him because of the decimation of various ruling governments at the state level.

Rajan panel proposals not a cure for disparity among states

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The report of a committee headed by Raghuram Rajan on backward states has drawn attention to development disparities among states in India. Not that these were not known or assessed before. The report offers an index for identification of states according to the degree of backwardness and their share of financial assistance from the central government.

The committee’s recommendations, even if efficiently implemented, are not likely to show results soon. The per capita income in Bihar, for example, is a fourth of the per capita income of Goa and half that of Gujarat. But it is encouraging that GDP growth in backward states has recently accelerated and, to some extent, reduced the income gap. It took place because state governments realized that growth counts politically, not because of any additional assistance from the central government.

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