No big bang reforms, Doctor is gentler, experts tell market

‘‘Expect no more hype and hoopla restricted to urban centres. A lot of problems will be tackled, but with no fanfare,’’ said Amitabh Chakraborty, head of research at Kotak Securities. ‘‘This time Dr Manmohan Singh’s primary focus will be the micro issues.’’

Translated, this means that attention is unlikely to stray too far from attempts to boost farm income, introduce a social net in labour reforms and improve rural infrastructure.

Plus there’s the rupee-dollar balancing act, key in any plan to combat the booming oil prices and the need to keep interest rates in check. So an index swing one way or another is unlikely to grab centrestage in a hurry.

The markets may read Singh’s early announcements as mixed signals—the Bombay Stock Exchange’s benchmark index has reversed its trend every day for the last four trading sessions — but economists say there is no confusion.

‘‘He’s setting the priorities clear—he wants to concentrate on developing the real economy,’’ said R Ravimohan, managing director and CEO of CRISIL. ‘‘The markets got into a big hype when they saw Arun Shourie successfully break the shackles. Now Singh has a very clear message that this is not the way it is going to happen,’’ he added.

As disinvestment minister in the previous government, Shourie raised a whopping Rs 15,000 crore from the sale of government units in less than a year. Singh, on the other hand, has already ruled out privatisation of government-run banks and state-run companies like GAIL and ONGC.

‘‘There’s clearly a change in the approach to disinvestment but one should look at the total package,’’ said Keshub Mahindra, chairman of Mahindra & Mahindra.

That package is likely to include alternative ways to make up the revenue from disinvestment. The Congress has already said in its manifesto that it is for major tax reforms including the introduction of VAT or value added tax. VAT is a uniform tax charged on business transactions, goods and some services. But that’s easier said than done.

The previous government led by the BJP also tried to introduce VAT in 2003 but had to withdraw the proposal after angry traders refused to switch over. In the coming days though, investors are likely to be on alert for other early signals.

‘‘The first task is to get the team in place,’’ said Ravimohan. ‘‘That will test the bonds of cooperation between the various parties of the new coalition and give us a sense of how stable and sustainable it is.’’

The Common Minimum Programme (CMP), a framework of the economic road the new government will follow, is also due soon. ‘‘The CMP and the Budget are the next two triggers for the stock market,’’ said Chakraborty.

Until then, all the markets have to go on, is Dr Singh’s reputation. ‘‘He will get things done the way he believes,’’ said Chakraborty. Added Mahindra: ‘‘He is the architect of our reforms and if he is true to himself, he will continue with what he started.’’