: A mandate to take much-needed hard decisions: CRISIL (A mandate to take much needed hard decisions)

May 17, 2014 Mumbai A mandate to take much-needed hard decisions: CRISIL Debottlenecking in the short-term, improving the economy's growth potential and employment generation ability in the medium term

The decisive mandate at the 2014 general elections has created the best environment in a long time to bite the bullet on government finances so as to ensure a long and healthy phase of economic growth in India.
CRISIL believes the new government's to-do list to revive the economy is a long one, but unfortunately, there is limited ability to use growth-supportive monetary and fiscal policies.
Typically, monetary (cut in interest rates) and fiscal instruments (increase in government spending) are used to prop up a sagging economy in the short run. However, India has run out of such countercyclical policy ammunition as its inflation and deficits remain high and, in fact, need to be trimmed.

Says Roopa Kudva, CEO & Managing Director, CRISIL: "The lowest-hanging fruits are fast-tracking of projects in pipeline and resolving iron ore and coal mining issues. This will improve the efficiency of capital that is now stuck, pave the way for better returns on investment, create jobs, lift income growth and spur private consumption demand."

The other five imperatives for the new government are:

1. Taming inflation: This will require better monetary and fiscal policy coordination, reducing food inflation through measures such as dismantling the APMC Act, and also bringing about a sea-change in the country's storage and distribution capacities for fruits and vegetables. This is particularly important in the current year in view of the rising risks of monsoon failure spurred by El Nino.

2. Pragmatic fiscal consolidation: CRISIL believes this will entail reducing subsidies and curbing expenditure, and ensuring that the money spent on social welfare schemes create durable assets than remain just cash handouts. It is also critical to simultaneously introduce growth and revenue-enhancing measures such as clearing the long-pending Goods & Services Tax (GST) and improving tax compliance.

3. Improving asset quality at banks and recapitalisation: The ability of banks to finance higher growth is limited because of the festering problem of bad assets and inadequate capital. We will be looking out for decisive steps on distressed assets and capital infusion.

4. Encourage debt markets: CRISIL believes India's corporate debt market needs to be fostered for growth to

be sustainably funded. Banks alone cannot deliver the large amount of capital required to build out India.

5. Booster shot for manufacturing and employment: Steps to revive the manufacturing sector will be critical. Clarity on land acquisition, environmental clearances, better infrastructure, and labour law reforms - such as shifting its purview to the states -- will be critical to improve the business climate and boost manufacturing, which is in its worst phase in the last two decades. India's manufacturing engine - represented in large measure by micro, small and medium enterprises - needs to do well if its fast-multiplying workforce has to find gainful employment.

Says Dharmakirti Joshi, Chief Economist, CRISIL: "Such an agenda will improve India's competitive

efficiencies and pave the way for its re-entry into the orbit of 6.5-7% annual GDP growth."

May 17, 2014

1 www.crisil.com

Media Contacts

Mitu Samar

Director, Communications and Brand Management
CRISIL Limited
Phone: [phone]
Mobile: [phone]
Email: [e-mail]

Tanuja Abhinandan

Communications and Brand Management
CRISIL Limited
Phone: [phone]
Mobile: [phone]
Email: [e-mail]

About CRISIL Limited, a Standard & Poor's Company (www.crisil.com)

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL's majority shareholder is Standard and Poor's(S&P). Standard & Poor's, a part of McGraw Hill Financial

(NYSE:MHFI), is the world's foremost provider of credit ratings.

CRISIL PRIVACY NOTICE

CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of McGraw Hill Financial you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view

McGraw Hill Financial's Customer Privacy Policy at http://www.mhfi.com/privacy.

Last updated: May, 2013

Disclaimers

This Press Release is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The Press release may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution of its Press Releases for consideration or otherwise through any media including websites, portals etc.

CRISIL has taken due care and caution in preparing this Press Release. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of information on which this Press Release is based and is not responsible for any errors or omissions or for the results obtained from the use of this Press Release. CRISIL, especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Press Release.

Stay Connected | CRISIL Website| Twitter | LinkedIn| YouTube| Facebook

May 17, 2014

2 www.crisil.com