Sensex 27957.49 -18.37 -0.07%
Nifty 8491 -1.3 -0.02%
The budget session of parliament was adjourned yesterday, two days in advance, as the government and the opposition came to loggerheads over corruption allegations. The reform momentum, which had picked up steam since September 2012, seems to be running out of political fuel. Below we take a stock of the reforms.
1. No progress on legislative reforms: A number of important reforms such as the land acquisition bill, food security, FDI in insurance and pension among others were awaiting parliamentary approval during the budget session of parliament. With the parliament session adjourned yesterday, none of the legislative reforms were approved. Interestingly, the number of bills pending in parliament has gone up from 104 before the session to 116 after the session.
2. Government considering alternative routes to implement food security bill: A report in the Economic Times suggests that the government is considering the option of implementing the food security bill through ordinance (a constitutional provision that allows the government to implement laws when parliament is not in session). The land acquisition bill could also be considered under this route. However, even if the government decides to implement these reforms through ordinance, it will have to seek parliament’s approval once it reconvenes for the Monsoon session (in August) as the law requires the government to seek parliament’s approval within six weeks from the reassembly of parliament, else the ordinance expires.
3. Executive decisions chug along: Even though there has been no progress on the legislative reforms, the government has continued to identify investment projects that are currently stuck. According to the Cabinet Committee on Investment, the government has approved 25 oil and gas projects, 13 power projects and has considered the proposal to fast pace the environmental clearances on 12 coal mining projects. The government has also sped up the awarding of road projects.
4. Diesel price hike paused in April: After four consecutive monthly increases since December, the monthly INR0.45/litre increase in diesel prices did not happen in April. In our view, even though lower global crude oil prices have reduced the loss on the sale of diesel, the monthly diesel price hikes are an important signal of the government’s commitment to reforms. The lack of a hike in April (just before the Karnataka elections) sends the wrong signal.
5. Window for reforms is still open until September, in our view: Between now and September, we believe that the window for legislative reforms is still open. Parliament will reconvene for the Monsoon session in August and will probably be the last window for the government to seek parliament’s approval on some of the key reforms. The land acquisition bill and the food security bill are top priority because of their mass appeal. Additionally, we expect the government to address issues in the coal and power sector.
India Infoline Research Team / 15:28, Mar 13, 2015
Markets are now reinforcing the perception of an early interest rate hike by US Federal Reserve, with consensus calling for the hike taking place in June, when compared with the prior expectations of a hike in September.