Ceiling Act: We think the government will need to modify the Land Ceiling Act to hasten capex. We think this is unlikely over the next six-nine months. Meanwhile, the guidelines for the Act that are likely to be announced will hopefully balance the interests of land owners without hurting industry.
(e) Equity raising in buoyant markets: This would help kickstart the investment cycle by enabling debt strapped companies to repair their balance sheets. Supply of paper was very low for the last few years. Companies have raised $700m from the primary markets since the change in government. We are likely to see more of this happening.
#2: Liberalise FDI: We will probably see some positive announcements on promoting FDI and get a few majors to announce interest in investing in India. Positive sound bites have already come on FDI issues since the new government has come to power. As per the media, government is thinking of having at least 49% foreign funding in all sectors except a few strategic sectors. Some of the sectors where proposals have been put forward are:
n Defence: Proposal for FDI in defence to go up to 100% depending upon technology transfers (49% for without technology transfer, 74% for with technology transfer and 100% for state-of-the-art technology).
n Railways: The government proposes to allow foreign direct investment in several segments of railways such as high speed train systems and dedicated freight carriage lines.
n Insurance: There is a proposal to increase FDI in general insurance to 49% or hiking insurance sector FDI without voting rights or with differentiated voting rights.
n Retail e-commerce: The government may allow FDI in retail e-commerce. Currently, global online retailers are barred from selling goods directly to customers but allows them to own 100% of a marketplace business, where third party suppliers can use their platform.
#3: Vodafone case and retrospective taxation: A positive signal for FDI could be a closure of the Vodafone tax case. This could be through (i) a negotiated settlement, (ii) have an independent panel to go into the issue, or (iii) amendment to the Act so that no retrospective tax is allowed.
o Subsidy reduction—oil/gas reforms: We think the government focus on subsidy reduction will initially focus on the oil & gas sector followed by the fertiliser sector.
Fate of UPA schemes like NREGA. We think NREGA will continue but the government will try to merge some productive use with this.
Oil reforms—oil subsidies will