Privatisation, exports to be top priority for new govt: Goldman Sachs

Land and labour reforms will also take precedence regardless of who forms the government

Land and labour reforms, privatisation and export promotion would be at the top of agenda of the new government irrespective of which party or coalition takes charge after the poll results on May 23, a report has said.

Most exit polls have predicted a sweeping victory for the BJP-led National Democratic Alliance (NDA), which is expected to win over 300 seats in the election.

Irrespective of which party or combination of parties form the new government after the results of the Lok Sabha election announced on May 23, the priority is likely to be on reforms on land, labour, privatisation and export promotion, Goldman Sachs said in its report on Tuesday.

"We see potential reforms (by the new government) to focus on land transparent auctions, and digitisation of records; labour creating an enabling regulatory environment and privatisation in areas such as agriculture and banking," it said.

The promotion of exports through targeting new markets such as Eastern Europe and Central Asia; and creating a credible system of grading and certification will also be a area of priority for the new government, it said.

The report sees three possible scenarios of reform -- acceleration, status quo, and regression, and has analysed the effect these might have on GDP growth.

It estimates a 2.5 percentage points boost or drag to its base case of 7.5 per cent for average real GDP growth during FY2020-2025.

"We see baseline growth rising up to 10 per cent in our acceleration scenario of effectively enforced major reforms; or narrowing to 5 per cent in our regression scenario of stalled reforms," the report said.

The accelerated reform scenario assumes the new government would have a sufficient majority to introduce important legislative reforms, and the will to implement reforms, it said.

If the official election outcome is in line with the exit poll projections, dollar/rupee will continue to grind lower in coming days. The three-month forecast was Rs 69 per US dollar, it said.     

It remains neutral on the rupee on a medium-term horizon, expecting Rs 71 per US dollar on a 12-month horizon.

The report anticipates the banking system liquidity situation to normalise as currency in circulation reduces from its high post elections, and with potential liquidity operations by the RBI.

In the event of a decisive mandate which enables further progress on structural reforms, the report expects a faster recovery in the corporate earnings over the medium term.