FDI crusade blasted despite voting on FDI in retail in Parliament.The ruling hegemony succeeded to convince the investors at last as Investors became richer by over Rs 80,000 crore today as the benchmark indices rose over 1.7 per cent each on Goldman Sachs' upgrading Indian stocks and optimism that government will push through key economic reforms.
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FDI crusade blasted despite voting on FDI in retail in Parliament. Global financial major Goldman Sachs Thursday came out with a positive outlook for India saying the economy is likely to grow by 6.5 percent in 2013 within days of Moody's giving a stable outlook on the country's sovereign rating.A trial of strength over FDI in retail issue will be witnessed in Parliament next week, with the Lok Sabha deciding to have a discussion on December 4 and 5 on the issue under a rule that entails voting, a strident demand of the Opposition.While Rajya Sabha will also have a
related stories similar discussion, the date and timings for it will be decided after consultations with various political parties.The decision led to an end to the logjam in Parliament on Thursday on the issue which had paralysed proceedings for four days with the Left and the Right making a common cause. Four days after the Opposition paralysed the proceedings in both Houses of Parliament, the government relented on the issue by leaving the matter to be decided by the presiding officers.This will be the first such trial of strength in the 15th Lok Sabha. There have been very rare occasions that a discussion of this sort on executive decision has taken place.
Markets have started factoring in some further announcements on fiscal reforms with the deadlock on retail FDI issue being resolved and discussion expected to happen next week.The ruling hegemony succeeded to convince the investors at last. Goldman Sachs raised India to 'overweight' from 'market-weight', citing growth recovery and inflation moderation ahead.The investment bank pegged December 2013 Nifty target at 6,600 points.On the other hand, Investors became richer by over Rs 80,000 crore today as the benchmark indices rose over 1.7 per cent each on Goldman Sachs' upgrading Indian stocks and optimism that government will push through key economic reforms.The BSE barometer 30-share Sensex closed 328.83 points higher at 19,170.91 -- its 19-month high closing level.The wide-based 50-issue Nifty of the NSE also flared up by 97.55 points or 1.70 per cent to end at 19-month high above 5,800-mark at 5,825.00. This level was not seen since April 27, 2011 when it had settled at 5,833.90.The rupee rose the most in over two months on Thursday after the government agreed to a vote in parliament on allowing foreign investment in multi-brand retail, raising hopes it would muster a majority and push through key reforms. The rupee, which has been buffeted by concerns of fiscal deficit and a gaping current account gap, found renewed vigour as the government showed spunk and allowed a non-binding vote in parliament on foreign investment in multi-brand retail.The move raised hopes the opposition would now let parliament function smoothly, allowing the passage of key legislation such as foreign investment in pension and insurance, banking law amendment and other bills.
Congress on Thursday steered clear of questions on Samajwadi Party's mixed signals on the issue of voting on FDI in retail in Parliament.Mind you,India's parliament got down to business Thursday for the first time this winter session after both houses agreed to hold a vote on a recent government decision to allow foreign supermarket chains to set up shop in the country. In a last ditch attempt, Parliamentary Affairs Minister Kamal Nath on Wednesday met Leader of the Opposition in the Lok Sabha Sushma Swaraj and her counterpart in the Rajya Sabha Arun Jaitley here and requested them not to press for a voting motion.The government has agreed to a vote on FDI in retail in the Rajya Sabha also. The debate will take place under rule 168 that entails voting in Rajya Sabha. With the declaration that discussion on FDI in retail will be held in Parliament under rules entailing voting, BJP is hopeful of overturning the executive decision by defeating the government in the Rajya Sabha where UPA has a difficult arithmetic to bear.
The decision brought to an end fierce opposition protests which had stalled proceedings every day since the session began on Nov. 22.
Parliamentary Affairs Minister Kamal Nath said a debate on the issue of foreign direct investment, or FDI, in multi-brand retail will take place in the lower house, or Lok Sabha, Tuesday and Wednesday.
Parliamentary affairs minister Kamal Nath chose to ignore questions from reporters on the issue while at the AICC briefing, party spokesperson Rashid Alvi said Congres hopes that both in the Rajya Sabha and the Lok Sabha the "majority" will support the stand taken by Congress on FDI.
"SP is supporting the government from outside. You ask this question to Samajwadi Party. They will answer it," he said when asked whether SP was playing a double game by taking conflicting stands on the issue.
A senior party leader, speaking on condition of anonymity, indicated Congress could reiterate its support to the proposal to provide quota in promotion in government jobs to keep BSP, which is keen for the passage of a bill in this regard, happy
The leader indicated the effort will be to bring the bill for passage during the on-going winter session.
"We and BSP both support the bill," the leader said adding even SP understands that the bill will sail through and its opposition aims at only sending a message to its voters.
Congress is hopeful BSP will vote for the government on FDI in both the houses if there is some forward movement on quota in promotion bill.
Reform initiatives and changes in government leadership this fall have created a sense of optimism among the domestic investor base for the first time in over a year, and the risk of policy missteps in 2013 has been lowered," said Goldman Sachs in a report.
The investment bank added that MSCI India's valuation was well below the 5-year average of 14.9 times, affording an attractive entry point into one of the stronger structural growth markets in the region.
Goldman in its report also said that country's economic growth is likely to accelerate to 6.5 per cent in 2013 backed by favourable external sector demand outlook and a pick-up in domestic reforms.
The Indian economy is likely to grow at 7.2 percent in 2014, compared with 5.4 percent in 2012, the report said.
Earlier this week, International credit rating agency Moody's said the outlook on India rating was stable, providing some relief to the embattled government that faces heightened risk of downgrade from other ratings agencies following renewed fiscal slippage concerns.
Moody's said the stable outlook on the country's Baa3 rating was based on its structural strengths of a high household savings rate and relatively competitive private sector, which could help raise growth in coming years.
The rating agency expects the economy to expand 5.4 per cent in FY 2013 to 6 per cent or higher in FY 2014.
Even after the reforms blitz since mid-September, S&P had last month reiterated that India still faced a one-in-three chance of a credit rating downgrade over the next 24 months. Fitch has also put India's rating on watch.
The government is facing renewed fiscal concerns because of the tardy progress of disinvestment and poor response to the spectrum auction that are together budgeted to fetch Rs 70,000 crore this fiscal.
Disinvestement has netted only Rs 800 crore so far while the first round of auction had yielded Rs 9,407 crore. P Chidambaram has revised the deficit target to 5.3 per cent of GDP from 5.1 per cent, but most experts feel it is likely to be closer to 5.6 per cent.
The country's economy is likely to grow by an average of 7.7 per cent during 2012-16, a report by leading financial services firm ING said today.
"We expect the economy to grow in 2012-16 by 7.7 per cent on average. On the demand side, private consumption and investment will be the main drivers of growth," the report said
It added that on the production side, the main contribution to growth will come from the expanding labour force, increase in capital stocks and improved productivity.
From a high over 9 per cent GDP growth for many years prior to the 2008 crisis, the economy grew 6.5 per cent last year and is projected to slow down further to a decadal low 5.5 per cent or even lower this fiscal.
In the first quarter the GDP clipped at 5.5 per cent and the second quarter numbers will be announced on Friday, which is also expected to be as tepid as the June quarter.
It, however, said that lack of coordinated government policies along with rise in commodity prices may endanger the favourable growth prospects.
The report also said it would take at least another year to bring the economy back to its potential output growth rate of 7.5 per cent per year.
Talking about short-term growth prospects, the report said investment activity will pick up later this year on the back of easing inflation and the resultant lowering of interest rates.
It also said due to lack of policy measures, the fiscal deficit is likely to end up at 5.5 per cent of GDP this fiscal and current account deficit at 4.5 per cent during this period.
Despite the structural issues faced by the economy, the report said the country will become the world's fourth largest economy by 2030.
"We still expect India to become the world's fourth largest economy by 2030, as Goldman Sachs forecast in 2003. This will largely be achieved the Indian way, based on domestic strengths with some help from outside," the report said.