India: The Preferred Investment Destination

The monsoon session of parliament started last week and as expected, it remained stormy due to various controversies surrounding the government. The first two days of session was adjourned without conducting any meaningful business. The session is schedule to continue till August 13 and there are almost 32 bills to be passed. Out of all these pending bills two remained most important. First is the, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Re-settlement (Second) Bill, 2015 and second is The Goods and Services Tax (GST) Bill. The passing of both of these bills are important from the economic growth perspective as they will help to accelerate the economic growth. The GST bill is the most important reform in the indirect taxation since independence, which will subsume all the central and state indirect taxes and levies like excise, service tax, and other local taxes. According to various studies implementation of bill will help to boost the Indian economic growth by 1-1.5 per cent.

Now the question is that is it possible to pass this bill in this session so that it can be implemented on schedule that is from 1 April, 2016, which was announced by the Finance Minister in his budget speech. Since it is a Constitution Amendment Bill, the bill has to be approved by two-third members in the Rajya Sabha. At first glance it seems that once again there will be a washout and GST will not pass in this session. However, the Rajya Sabha select committee on GST cleared its draft report by supporting the larger points proposed by the government in the bill and by recommending a liberal compensation package for states. This will help them to win support of the regional parties such as BJD, SP, BSP and JD (U). Therefore, I am of the opinion that with certain changes the bill may be passed in this session. This may entail extension of the session by one more week, but it will be done in this session. The opposition party and especially Congress will vehemently oppose this but they should play a role of a constructive opposition and in the interest of country they should get this bill passed.

Once this bill is passed, it will act as booster dose to the market and the frontline indices will touch their life time highs sooner than expected. It’s not only the domestic investors; even the foreign investors will come in drove to take benefit of growing India. As we look around the world arena, India gives the best investment opportunity. India will be the fastest growing major economy in the world and I am not talking about this year or for next five years but I believe the growth story will run for decades. What also gives me confidence is the vision and determination of the man who is currently leading India, Prime Minister, Narendra Modi. India always had growth opportunity, nevertheless, we lacked in terms of leadership who can exploit that opportunity. Now that the vacuum is filled we may see India growing at its potential growth rate.

Major global events such as current crisis in eurozone and steep fall in Chinese equity indices may attract a temporary reaction, however, in long term I do not see these events impacting severely to Indian market. Our cover story this time elaborates how global as well as domestic events are shaping up and how are they going to impact us. The story also has eight recommendations and you can add few of them depending upon your risk profile and portfolio construction.

One of the market triggers that we are approaching is RBI’s bi-monthly policy meeting on August 4. What we can expect from this meeting is explained by J. Moses Harding, Group CEO & Chief Economist SREI Infrastructure Finance in one of our guest column.

Elsewhere we are also carrying special report on Gold, which is trading at its five year low. The report explains if it is right time to invest in gold or equity remained the preferred asset class for investment. We are carrying other special report on DVRs and how you should invest in them. Hope the issue will give you the holistic view on the future course of market and take right investment decision.