Industrial Slowdown Inveitable – Political Epicenter Shaken – Voices in Delhi

For the time being, Policy Makers in Europe have diffused the crisis with $1.4 trillion rescue package which is totally non-credible in my view since they don’;t detail on who would finance such a package. It is a bit alarming regarding the Governance Deficit and Policy Paralysis in India which may deteriorate further.

Voice of Delhi’s Political  & Economic Analysts
In my experience as a Sr. Analyst, I’ll say that the Top Indian Industrialists have the best information about the ongoing developments in Political and Offices of Policy Makers. The next in line are informed Political Analysts and here are the views of the same.

• It seems unlikely that the situation in Delhi will improve until the next General Election following which big ticket political changes are likely regardless of which party wins.
• A leadership vacuum of the scale that we see currently is unprecedented in India. Even the late-1980s and the late-1990s (periods which saw a series of Prime Ministers take charge) were more productive periods by way of decision making at the centre. Governance Paralysis under the Weakest Prime minister of the sort that we see today in unknown territory for India.
•  Given that India’s institutions of public governance (leaving aside the hyperactive CAG and the Supreme Court) are not particularly robust, the leadership deficit in Delhi has left the country rudderless.

How this Paralysis is Affecting Industries – Indian companies don’t seem to have any one to turn to Delhi with regards to their requests for reform. So whether it is power companies seeking coal, retailers seeking FDI, gas companies seeking price deregulation, etc – no one in Delhi can really help at present.

Inflation & Interest Rates:Unless global commodity prices correct, inflation in India is unlikely to come down meaningfully. This combination of consistently double digit food inflation and rising interest rates could pull down domestic consumption growth which was the basis of this Rally in Indian Equities de-coupled from Global shocks. Can Dr. Singh really survive and Rise amidst all Odds ?

In such a situation, Investors should focus on stocks which have been chosen due to their cash flow generation, Balance Sheet strengths and entrenched competitive positions or stick to well diversified Equity Funds and continue to invest in SIPs. Questions / Comments ?