From doles to capex
After seven consecutive years of spending more on subsidies than capital expenditure, this year the Government is likely to spend an equal amount. This will be a big positive, particularly if the trend of lower subsidies and higher capital expenditure continues in the coming years. In the first quarter of fiscal 2015-16, capital expenditure is up 18% year on year, led by spending on road, railways and defence.
To conclude, in our opinion India will always be a two-step forward followed by one-step backward story. When markets are euphoric and extrapolate positive trends it’s time to be cautious and vice versa. As we look through some of the criticisms from the cynics on India and compare notes with our views on trends noted above we are reminded of a quote by Joan Robinson, “Whatever you can rightly say about India, the opposite is also true”. We continue to believe, amidst the skepticism, that India is on the right track.
