(Shefali Malik tracks macroeconomics and banking and oil & gas sectors for NDTV Profit. She is based in New Delhi.)
The story of India's new government under the stewardship of Prime Minister Narendra Modi is one of hope after crisis.
The crisis resulted from the reckless spending by the UPA government, which launched populist schemes without adequate monitoring of returns. Now, there's hope that the new government will be able to control wasteful spending and focus on planned expenditure to boost India's growth.
Soon after taking over Prime Minister Narendra Modi met top officials responsible for executing government's policies. And the message was clear. "You take bold decisions and the government will back you."
In the meantime, the prime minister has started taking bold decision to rejuvenate the economy. His government announced a record hike in rail fares and let oil companies raise diesel prices.
To tackle persistently high food inflation, which has burnt a hole in household budgets over the last five years, the new government has decided to take fruits and vegetables out of the purview of the Agriculture Produce Marketing Committee (APMC) Act. The move will allow farmers to sell their produce directly in the open market and may bring short-term relief to prices.
The new government is also meeting food ministers from all states to formalise plans to combat hike in prices of essential food items. Both Prime Minister Narendra Modi and Finance Minister Arun Jaitley have repeatedly vowed to crack down on hoarders and black marketers to check price rise.
Mr Modi has postponed the decision to hike prices of natural gas by three months because the new government wants time to study the issue, which has a wider ramification on India's economy.
On foreign policy, Mr Modi's actions have been much appreciated. In a surprise move, he invited SAARC countries to his swearing-in. The move is aimed at boosting India's relationship with its neighbours. He has also accepted an invitation from the US government to visit the country despite being at the receiving end of a visa ban for over a decade.
The prime minister expected to visit the US in September, where he is likely to address potential investors, who are taking a fresh look at India in the aftermath of the regime change.
Good politics must be good economics. Mr Modi is counting on good economics to show the way for good politics. The sentiment around India has seen a definite change; fundamentals should change if policy decisions show the way. There is little doubt that capital is on the sidelines, waiting to chase growth.
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