Eminent economist, Dr. Rakesh Mohan, has warned that people should not get carried away by the stellar performance of the stock market. He underlined that it would be an understatement to say that the Indian economy was not doing well, because in reality it was lagging China in growth. There was too much of hope built into the Indian stock markets and liquidity was doing the rest of the job. However, Mohan also clarified that this was a global phenomenon and not limited to India alone. In fact the ratio of global market cap to GDP is currently higher than the levels seen just ahead of the sub-prime crash.
In what could be a sort of game-changer for the auto industry in India, the government has proposed a green vehicle policy as well as a scrappage policy. The scrappage policy will begin with central and state government vehicles but green tax will apply to all vehicles across India. Under the green tax proposal, private vehicle older than 15 years and transport vehicles older than 8 years will be subjected to a green tax. It is obvious that the green tax will be levied on polluting vehicles to finance the cost of polluting the environment. However, it also has a larger logic. Normally, in any economic slowdown, people tend to become wary of committing fresh funds to new vehicles. However, under these circumstances, a smartly designed scrappage policy can help boost consumption demand for new vehicles in the economy.
Aadhar Housing Finance is all set to hit the stock market with a mega Rs.7,300 crore initial public offer. It may be recollected that Aadhar Housing is 98% owned by Blackstone through its managed entity, BCP Topco Pte Ltd. The IPO will be a combination of fresh share issue and offer for sale. The fresh issue will be to the tune of Rs.1500 crore. At the same time, BCP Topco Pte Ltd will also hive off its shares worth Rs.5,800 crore as part of the Offer for sale or OFS. This will reduce the stake of the Blackstone group company in Aadhar but considering the demand for low-cost homes, pricing is expected to be buoyant.
In what could be good news for the overall healthcare sector, it is reported that the government could look at doubling its allocation to healthcare in the forthcoming Union Budget on 01-Feb. It is likely to raise the allocation to healthcare from 1.30% to 2.60% of GDP, which is closer to what most of the emerging spend on healthcare. From the current level of Rs.62,000 crore, the healthcare allocation is likely to be raised to Rs.130,000 crore. This includes investments in medical hardware, software, technology and networks. India will upgrade to the EM median healthcare allocation of 4% of GDP.
India has set itself a rather steep target of doubling its renewable energy capacity to double by the end of 2022. A number of global investors have shown interest in the Indian renewable sector with the latest being Total of France picking up a 20% stake in Adani Green Energy for $2.5 billion. The idea is to double the renewable energy capacity by 2022 and then eventually raise the capacity to 450 GW by the end of this decade. This expansion plan offers investment opportunities to the tune of $20 billion each year over the next decade. However, the power distribution segment may need some drastic reforming.
The tractor rally by farmers took a violent turn on Tuesday after the government had to resort to lathi charge to quell the violence. In fact, just ahead of the Republic Day, the government had offered to postpone the implementation of the 3 Farm Bills by 18 months but the farmers did not accept anything short of total annulment of these bills. The government has already clarified that it will not retract on the farm bills, which were passed by both houses of parliament. The farm bills will allow private players to directly procure from farmers and also make the APMC an optional market. Farmers have been sceptical that such a move would eventually result in the abolition of minimum support price or MSP. For now, the government is ready to give farmers a long rope but are not willing to accept annulment of Farm Bills. The farmers want annulment of farm bills and assurance on continuation of MSP as a policy.