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PM Modi's Rs 16,000-cr scheme to not only light up homes but also markets

Such fiscal measures had helped the Indian economy to a large extent after Lehman crisis

G Chokkalingam 

Prime Minister Narendra Modi speaks at the launch of Sahaj Bijli Har Ghar Yojana or ‘Saubhagya’, to supply electricity to poor households, in New Delhi (Photo: PTI)

Prime Minister Narendra Modi on Monday launched a Rs 16,000-crore scheme to light up 40 million homes with power connections free for the poor and at very low cost for others by December 2018. According to reports, more fiscal incentives are being worked out by the government for exporters.
These stimulus measures are welcome developments for both the economy and the Such fiscal measures helped to a large extent the Indian economy after Lehman crisis – at that time, when many comparable economies posted de-growth in gross domestic product (GDP) on a quarterly basis, the Indian economy avoided such de-growth, thanks to inherent strength of the domestic demand and also massive stimulus measures.

Some experts attribute Monday's fall in the to these stimulus packages. Rarely is a market fall attributed to the timely exit of smart investors from equities at super-rich valuations. Mostly, such falls are attributed to political and other macro developments! Even before goods and servies tax (GST) Bill implementation and demonetisation, the growth in the Index of Industrial Production (IIP) was very low.
India, in my view, is facing structural issues of growth, which has peaked in the information technology (IT), pharma and telecom sectors, which have created jobs, income and wealth in the last two decades. A spurt in asset prices has killed growth in the construction sector. Inherited non-performing assets (NPAs) have crashed credit growth in the banking system. This is time to take help from the thoughts of John Maynard Keynes – opt for more stimulus measures and revive the industrial economy.
As regards markets, we believe that the meltdown in the small-and mid-cap space is not over yet. The overall market cap of BSE-listed stocks fell by about Rs 5 lakh crore from its peak of close to Rs 137 lakh crore. However, it is still higher than the level we had seen in early 2015, when the Sensex was around 30,000. In such times, investors should focus on stocks with appealing valuations and have a tilt towards defensive sectors, such as IT.
The author is founder & managing director, Equinomics Research & Advisory. Views expressed are personal. They do not reflect the view/s of Business Standard

First Published: Tue, September 26 2017. 10:33 IST