Editor's Note

Trial by fire

The appointment of Nirmala Sitharaman as finance minister comes at a very challenging time for India

There is always excitement when a new government is sworn in, and even heightened expectation when an existing investor-favoured regime continues to steer the ship. The appointment of Nirmala Sitharaman as finance minister comes at a very challenging time for the country. The obstacles that need to be hurdled through are many, ranging from reviving growth and funding infrastructure to generating jobs and dealing with global headwind.

The government’s ability to fund infrastructure projects may seem limited given its extended balance sheet, but managing the fiscal deficit could take a back seat as the government takes out all stops to revive growth. What is more worrying is that the consumption engine seems to be stalling as well, as is evident in falling auto sales. Earlier, during a slowdown, the loss in momentum would be more pronounced in commercial vehicles. This time around, even passenger vehicles are taking it on the windshield. The upcoming Budget, therefore, could resort to more tax sops to kick start both urban and rural consumption.

Barring the flexibility to get the RBI to lower the interest rate, what would help is crude staying benign. Right now, the fear of a trade war affecting global growth has hit crude. While falling crude is certainly beneficial, India also needs global sentiment to stay positive, for portfolio flows to continue. During a risk-off trade, emerging markets are the first to be hit, as investors prefer to pile into safe havens such as US treasury bonds or fixed income instruments.

If the market’s rise stalls from here-on, domestic investors, too, could flock to debt mutual funds than equity. Lower rates do favour equities, but in a frothy market, investors might just prefer the safety of a falling yield. The immediate concerns to be addressed by the finance minister form the subject of this issue’s cover story.

It is not just the Indian economy that is trying to make a comeback. Even Japanese major Yamaha is making an effort to regain its once-iconic status in the Indian two-wheeler market. Read about how it is pushing the throttle with a 150 cc offering. Also, we have a feature on how liquor brands have taken surrogate advertising to a new high.