Nomura sees only gradual reforms in Modi's 2nd year as well

With a section of the industry voicing unhappiness over the "sluggish" pace of reforms in the first year of the Modi government, Japanese brokerage Nomura today said it sees no chance of any accelerated reform process in the second year as well due to political compulsions.
"We expect the pace of reforms to be gradual, given the political hurdles around big bang reforms," Nomura said in a note.
The brokerage, however, said the broad direction for the reform process will continue to be "positive" in the second year as well.
It can be noted that some of the key states like Bihar, Bengal and Tamil Nadu will be going to polls over the next year, limiting the reform appetite as Modi needs to win handsomely in these states to shore up his party's numbers in the Rajya Sabha, where the ruling front is in minority.

Modi came to power last May in a landslide victory secured on a pro-growth mandate. However, as the government approached its first anniversary, some constituents have been voicing displeasure saying not enough has been done, leading to suggestions of tempering expectations.
Through the work done in the first year and the signals for future, the Modi government appears to be sending a message that "economics will triumph politics," Nomura said.

Specifically, the report said we should expect completion of the pending reforms like the GST and on the indirect taxes front and a new land acquisition law, both of which are stuck due to hard posturing by the Opposition.

The brokerage said that it expects Parliament to pass the new land acquisition law by September and GST by December.
The government will also try to replicate the successes achieved on lowering cooking gas subsidy for kerosene, it said.
Restarting investment is a key and the administration will focus on resolving current issues plaguing existing frameworks such as PPPs model or existing investors such as in road projects, it added.
Giving key ministers' plan of action, it said Arun Jaitley, who handles the critical finance and corporate affairs portfolios, will be driving GST implementation and also set up a committee to suggest changes to Companies Act.

Railway Minister Suresh Prabhu is expected to have a busy year with works like setting up a regulator for the Railways, tapping newer areas across the globe to finance rail projects, state level collaborations for projects and work on the dream of having high-speed bullet trains, it added.