Time to get back to business

The holiday season is over. After all those smses wishing each other a better 2011 than 2010 was, its time to get back to business.

Reports in the papers indicate that 2011 is going to be a challenging year. Many of the factors that helped India grow at 9% in 2010 are likely to work in the opposite direction this year. Unless we get our act together, our growth trajectory may be dented.

There are two primary hurdles stopping India from growing faster. One is the availability of monetary resources and the 2nd is governance issues. Lets focus on these.

With a recovery around the corner in the US, its likely global funds may prefer to go back to the US. The flight of capital that the US saw in the last 2 years may stop. India got 45 billion $ in the last 2 years in the form of investment in the stock market. That led to strong gains at the stock markets in India. The BSE is today the costliest market in the world today. Forward P/E earnings on the BSE are at some 19 times v/s 16 in China and lesser in Brazil. If equity in-flows slow down, it will affect the funding needs of corporates. THe government plans to allow infrastructure debt funds to start this year....with the intention of allowing foreigners to lend directly to Indian corporates and fund houses. Its critical we manage this well. We simply cannot afford to have a funds shortage during the 12th plan period (2012-2017).

The 2nd major constraint is governance. I have written about this earlier. Its time the opposition allowed the government to get back to business. Parliament must be allowed to function. Important bills need to be passed. The BJP and the Left parties must shun their political agendas and let the country function. They have made their point.....the government is going to be wary of corruption and corrupt practices. A lot of cleansing has already happened. There is no further gains in stalling the working of Parliament. Media must put pressure on the opposition on this matter.

There are many challenges globally. Commodity prices are rising. Oil is likely to hit $100 a barrel shortly. Europe remains in crisis mode. If a few more European nations go through a debt crisis, it could raise the cost of funds globally. Within India, infrastructure remains a major bottleneck. We need all hands on the deck to handle the situation at this stage.

Its a competitive world out there. No one is going to take care of India's interests if we dont do it ourselves. Its time we got our focus back. Its the only way to ensure 2011 is better than 2010!