Expert views: Should India open up retail, aviation sector
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vaibhav shekhar
Sep 14, 2012, 2:05:42 PM9/14/12
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Expert views: India opens up retail, aviation sector
The government also decided to allow foreign airlines to buy stakes of up to 49 per cent in local carrier.
NEW DELHI: India opened its retail sector to foreign supermarkets on Friday, a major economic reform that has been stalled for months by political gridlock in New Delhi.
The government also decided to allow foreign airlines to buy stakes of up to 49 per cent in local carrier, a much-awaited policy move that provides a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding.
Following are the experts' views:
Samiran Chakraborty, regional economist, Standard Chartered Bank, Mumbai
"These measures were pending for a long time and the government has now shown political courage to push things through. The process of clearing all these got delayed and it is just that all are coming together.
"As an immediate impact, business and consumer sentiment will improve, stock market will improve. But I don't think RBI will cut rates after these measures because the impact of these steps on supply side will only be in the medium term.
"The government's intention is to pacify rating agencies or convince them that government is taking the right steps. This should buy some time and rating agencies may wait for the final fiscal deficit number before deciding on India's rating."
Kishore Biyani, chairman, Future Group, Mumbai
"We are hoping this time the government will stick to its decision (allowing FDI in multi-brand retail) because that is absolutely essential.
"The decision to let individual states decide on whether they want it is a good decision. This should satisfy people who are opposing it. The industry is convinced once a few states implement it the others will see the benefits and definitely consider it as well."
Praveen Khandelwal, general secretary, Confederation of All India Traders
"It is unfortunate that despite opposition from their own allies they have chosen to again reopen foreign investment into the sector. It is surprising the government has again reopened the sector without announcing any solid measures to protect small traders.
"We will oppose this move even more strongly this time and are hopeful the government will roll back its decision just the way they did last time."
Sharan Lillaney, aviation analyst, Angel Broking, Mumbai
"FDI in aviation has always been approved, this is just an approval for foreign airlines. This was not something out of the extraordinary, so there is no question of it being reversed."
"I don't think there will be a flurry of investments, but airlines in better shape will definitely see interest from foreign airlines, such as SpiceJet, Indigo or Jet."
"There are a lot of people interested."
Taina Erajuuri, fund manager, Fim Asset Management, Helsinki
"This is a great news. I have been waiting for a long time and I had almost given up.
"Foreign investors were getting fed up with India because nothing was happening there. People would now feel more comfortable to see at least some of the reforms measures going through."
Harish Agarwal, bond dealer, First Rand Bank, Mumbai
"The bond market is unlikely to react much ahead of the policy. The reform moves may prevent the rating downgrade or delay that for the next 3-6 months. The market will await the second half borrowing calendar to see how much the fiscal slippage is.
"Personally, I still do not expect a rate cut on Monday but (expect) a 100 basis point cut in statutory liquidity ratio."
Subramanian Sharma, Director, Greenback Forex, Mumbai
"All the negativities on the rupee have been factored in. The diesel price hike will help address the fiscal deficit. All the negativities created will change by all this reform action.
"The rupee should breach 54 to a dollar on Monday and I expect a 2-3 percent gain in the rupee from current levels. The rupee should move towards 53.20-53.50 to a dollar in near term."
Siddhartha Sanyal, Chief India Economist, Barclays Capital, Mumbai
"This is not a coincidence but looks like a gameplan to meet some possibly internally set deadline as the government might want to go back to the rating agencies and try to convince them with these measures. The reason for the timing also could be because the political cycle is coming to a close in a few weeks time with Gujarat elections in November."
"The positive impact could be on stocks which should have a positive kickback impact on disinvestment and, therefore, fiscal consolidation. In a situation like this, improved sentiment will have a broad impact. I don't think the market will behave very negatively even if there is a marginal roll back because market will focus on the positive actions."
The government also decided to allow foreign airlines to buy stakes of up to 49 per cent in local carrier, a much-awaited policy move that provides a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding.
Following are the experts' views:
Samiran Chakraborty, regional economist, Standard Chartered Bank, Mumbai
"These measures were pending for a long time and the government has now shown political courage to push things through. The process of clearing all these got delayed and it is just that all are coming together.
"As an immediate impact, business and consumer sentiment will improve, stock market will improve. But I don't think RBI will cut rates after these measures because the impact of these steps on supply side will only be in the medium term.
"The government's intention is to pacify rating agencies or convince them that government is taking the right steps. This should buy some time and rating agencies may wait for the final fiscal deficit number before deciding on India's rating."
Kishore Biyani, chairman, Future Group, Mumbai
"We are hoping this time the government will stick to its decision (allowing FDI in multi-brand retail) because that is absolutely essential.
"The decision to let individual states decide on whether they want it is a good decision. This should satisfy people who are opposing it. The industry is convinced once a few states implement it the others will see the benefits and definitely consider it as well."
Praveen Khandelwal, general secretary, Confederation of All India Traders
"It is unfortunate that despite opposition from their own allies they have chosen to again reopen foreign investment into the sector. It is surprising the government has again reopened the sector without announcing any solid measures to protect small traders.
"We will oppose this move even more strongly this time and are hopeful the government will roll back its decision just the way they did last time."
Sharan Lillaney, aviation analyst, Angel Broking, Mumbai
"FDI in aviation has always been approved, this is just an approval for foreign airlines. This was not something out of the extraordinary, so there is no question of it being reversed."
"I don't think there will be a flurry of investments, but airlines in better shape will definitely see interest from foreign airlines, such as SpiceJet, Indigo or Jet."
"There are a lot of people interested."
Taina Erajuuri, fund manager, Fim Asset Management, Helsinki
"This is a great news. I have been waiting for a long time and I had almost given up.
"Foreign investors were getting fed up with India because nothing was happening there. People would now feel more comfortable to see at least some of the reforms measures going through."
Harish Agarwal, bond dealer, First Rand Bank, Mumbai
"The bond market is unlikely to react much ahead of the policy. The reform moves may prevent the rating downgrade or delay that for the next 3-6 months. The market will await the second half borrowing calendar to see how much the fiscal slippage is.
"Personally, I still do not expect a rate cut on Monday but (expect) a 100 basis point cut in statutory liquidity ratio."
Subramanian Sharma, Director, Greenback Forex, Mumbai
"All the negativities on the rupee have been factored in. The diesel price hike will help address the fiscal deficit. All the negativities created will change by all this reform action.
"The rupee should breach 54 to a dollar on Monday and I expect a 2-3 percent gain in the rupee from current levels. The rupee should move towards 53.20-53.50 to a dollar in near term."
Siddhartha Sanyal, Chief India Economist, Barclays Capital, Mumbai
"This is not a coincidence but looks like a gameplan to meet some possibly internally set deadline as the government might want to go back to the rating agencies and try to convince them with these measures. The reason for the timing also could be because the political cycle is coming to a close in a few weeks time with Gujarat elections in November."
"The positive impact could be on stocks which should have a positive kickback impact on disinvestment and, therefore, fiscal consolidation. In a situation like this, improved sentiment will have a broad impact. I don't think the market will behave very negatively even if there is a marginal roll back because market will focus on the positive actions."
Regards,
Vaibhav Shekhar
Faculty (Marketing & Strategy Department)
Vaibhav Shekhar
Faculty (Marketing & Strategy Department)
C-205, Academic Block
IBS - Hyderabad
Contact: +91-9010288241
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