Prime Minister Narendra Modi's moves to cut red tape and streamline the tax...
MUMBAI/BENGALURU - Prime Minister Narendra Modi’s moves to cut red tape and streamline the tax system have won him plaudits, but data shows that the Modi government’s pro-business agenda has failed to translate into earnings growth for most Indian corporations.
“Interest rates have fallen quite drastically and retail investors are left with less choice,” says Krish Subramanyam, co-head, equity advisory at Altamount Capital. “Equities have been a preferred investment, and having Modi has kept markets buoyant.” The NSE Nifty has risen about 7 percent this year, and about 63 percent since Modi took office in 2014.
The stock market has rallied without support from earnings. Aggregate data on 399 of India’s largest listed companies for which comparable data is available shows earnings have fallen in four of the five years of Modi’s tenure, whereas they rose in four out of the five years his predecessor Manmohan Singh was prime minister.
The ratio of corporate profit to gross domestic product for companies in the Nifty 500 Index was 2.8 percent in 2018, the lowest in 15 years, according to a report by Motilal Oswal Securities.Modi took office on a wave of optimism he would change India’s economic fortunes. Although India has not grown at the anticipated pace, investors remain hopeful his reforms will pay off eventually.
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