With the installation of the Narendra Modi led-government at the Centre, there is a lot of hope that things will change for the better in India. There is a clear mandate, for one, to empower the bureaucracy, which is the fulcrum of decision-making.
If we glance at the investor side, we have witnessed positive investor sentiment on both the equity as well as the debt side, particularly the bond markets. We see few foreign entities making investments in coal and thermal sectors which was unthinkable till some time ago. There’s also a slight pick-up in M&A activity in infrastructure, where assets were on sale for a long time but are being sold only now. So, first cut in market-based liquidity is coming into the sector. There is also some degree of deleveraging happening. Of course, not everybody is getting impacted, and obviously it will be the top 20 per cent who will derive its benefits. Nevertheless, this will lend sustaining power and the ability to restart some projects. For instance, if one project restart is worth `100 crores of equity, one will be able to leverage the same infrastructure project, being able to get 400 crores in funds. These funds go to the contracting space, and then to the subcontractors. So, there is a trickle-down effect at work. A pick-up in activity will lead to positive sentiments trickling down to the last man in the queue. A positive environment is hence in place, which is the right base.
Now it’s up to the government to build on this base, and to do things at a policy level, through effective decision-making.
So, what we expect is some of these policy decisions and executive decision making processes to take place over a couple of quarters, which means that the first issue is to address projects that are already either completed and not working or which are in the process of being completed. It is important to get the framework right for such projects through administrative actions, so they either start functioning effectively or get back into competition or conception mode.