Amid concerns over a perceived policy paralysis in India, a leading domestic research firm has expressed hope that the much-criticised recent actions of the executive, judiciary and regulators would actually prove to be a ‘clean-up’ job and help economy’s revival in long run.
“Investors may worry about a bigger role of the Indian executive, judiciary and regulators in business affairs and find it retrograde and interventionist.
“We view this in a positive light, as necessary cleaning up of an archaic system that thrived on contacts, corruption and cronyism,” senior analysts of Kotak Institutional Equities said in a new report.
While admitting that the current state of policy inaction could make India pay a price for past excesses through lower GDP growth over the next 1-2 years, the analysts said they “see this as a cross to bear to get rid of a system that fostered corruption in all facets of economic activity.”
The strongly-worded report by Kotak Institutional Equities, one of the largest equity research firms in the country, has come at a time when most analysts and financial market research firms are criticising the so-called policy inaction in the country in the strongest possible manner.
Incidentally, Kotak Institutional Equities is one of the few domestic entities among the top institutional equity research firms in the country, which mostly includes foreign players, and would be probably be the first to have seen some silver lining in the prevailing situation.
Besides, overseas financial services sector entities and consultancies, a host of local corporate giants as well as industry leaders and economists have also been criticising the slow pace of reforms in the country.
The issues like retrospective amendments to some tax rules and decisions like cancellations of telecom licenses have faced strong criticism by many, who have termed them as steps that are ‘retrograde’ in nature and as detrimental to the country’s economic growth.
Taking a contrarian view, Kotak Institutional Equities termed the scenario as “a brave new India” and said it sees some of recent actions of the “Indian executive, judiciary and regulators as an attempt to restore the primacy of law and democratic institutions in India.”
“We hope for an equitable, inclusive and transparent development model after eradication of a system based on corruption, cronyism and dysfunctional systems. It may have resulted in strong economic activity but it also extracted very high invisible costs from the Indian economy and society,” the report said.
Many of the recent decisions, no matter how retrograde they may appear, were vital to restore the credibility of India as a serious investment destination and should be seen as measures for rectification of past mistakes, Kotak analysts noted.