The problems of a sector can either be solved by aggressive governmental action or by letting things take their own course. Markets will find their own level. While we have problems in several sectors, the solutions are often non-binary. It is not one way or the other.
More often, economic problems are solved by a combination of government policy efforts and market actions. This increasingly seems the norm. When both must combine, there is a definite lag in arriving at solutions. The natural mistrust between policymakers and the business community leads to cautious approaches from both sides. With the courts playing the third umpire, the wall of mistrust grows taller.
This is what is going on in one sector after another in India. Thankfully, we have completed the resolutions of most major steel sector woes. The resolution of the power sector problems are progressing gradually and we should put them behind by the end of the calendar year. The telecom sector is a tough one and we need to see more market action going forward. In the eyes of the industry, the NCLT is where the action shifts and we should see one last surge of consolidation happen. In any case, the denouncement drama is going to be racy and swift.
The government has either not acted enough or overreacted in different situations. This is the industry’s perception in most sectors. But, the government can never please industry, no matter how hard it tries. The markets seem to be more open than the industry to what the government does. It sees ground realities constantly and quickly adapting, embracing change, and simply moving on. This trend is going to further gain traction in the coming weeks.
