Yesterday, I met my friend after two months.
The first line was "Harsh, Sensex crossed 37,000 levels. I should have listened to you and not hit the panic button."
I listened silently to what he had to say.
He continued, "Harsh, I think if we see a political stability, Sensex can easily pick up another 1,000 points in next two months. But you don't look excited to me, why?"
I replied, "I am genuinely not looking at just 1,000 points. I am looking at the big picture. India has become one of the most favoured investment destinations in the world today. I am sure the reforms that the government introduced over the last 2-3 years, will significant RE-FORM my portfolio as well."
My friend looked curious now. He asked, "Which reforms are you talking about? Do you think they can drive the markets in the coming days?"
Well, if you have similar questions, you would be surprised to know that these reforms can significantly alter the performance of your portfolio.
Now, what are these reforms we're talking about? Let's take a look at them.
Implementation of GST has enabled the removal of bundled indirect taxes and reduction of manufacturing costs due to a lower burden of taxes on the manufacturing sector.
Introduction of GST and digitization of processes has made the process of tax payments simpler, effective and automated. As a result, India has improved its ranking on the Paying Taxes indicator in the World Bank Doing Business Report 2018.
Push For Digitization:
Systems from taxation to incorporating a company are now online. This means it is now possible to incorporate a company in India in just one day.
A new online system has also streamlined the process for getting construction permits, reducing both the number of procedures and the time required to get a permit. This has improved India's ranking on the Construction Permits Indicator of the World Bank Doing Business Report.
Implementation Of Insolvency Code:
The Insolvency and Bankruptcy Code 2016 consolidates the existing framework relating to insolvency and bankruptcy into single law, which in turn boosts the confidence among investors.
FDI liberalization in 87 policy areas across 21 sectors has provided a major impetus to employment and job creation. Due to this ease of doing business, India is now one of the most open economies in the world for FDI.
With a vision to enter the $5 trillion club economy by 2025, the government has adopted a multi-modal approach towards infrastructure development in the country in the last five years. This approach has not only boosted the overall economy but also provided a much-needed momentum to the real estate sector across India.
Some other significant reforms:
- The introduction of the Real Estate Regulatory Authority (RERA) Act to empower homebuyers and address pertinent issues such as project delivery delays, property pricing, quality of construction, etc.
- Improvement in terms of access to credit
- Decreased border compliance cost for export and import
- Implementation of Skill India program to equip and train the nation’s workforce with employable skills and knowledge which will enable them to contribute substantially to India’s industrialization and economic boom.
- Micro reforms like Direct Benefits Transfer, UDAY scheme, crop insurance, which will enhance sectoral efficiencies.
- Implementation of structural macro reforms such as ‘Make in India’ and ‘Fuel Price Deregulation.’
- Administrative reforms like e-biz portals and revamped online process for auction mechanism for natural resources
- Recapitalization of Public Sector Banks (PSBs) by injection of capital mainly through an equity investment by government to financially strengthen them.
So what does this mean to you as an investor?
India has seen considerable progress on the reforms front over the past five years and due to a favourable environment, private investments are on the rise.
Growth & stability: India’s growth and stability has prompted companies to expand their business in the market leading to large scale employment opportunities and creating a positive sign for investors which reflects in the performance of stock markets and generating more capital inflows.
Multiple quality investment opportunities: It is true that there has been some volatility over the last few months, however, with the implementation of revolutionary reforms, there are going to be many sectors that will grow 5-10-15 times or even more in the coming years. Infrastructure, defence, auto and technology are few sectors that are expected to mushroom along with the trajectory of India’s growth story.
It is important to identify growth opportunities that can multiply along with these development.