American brokerage Morgan Stanley has said the first budget of the Narendra Modi government, slated for July 10, is expected to kick-start the government's reform agenda.
"Policy reforms are much needed to ensure that the country transitions out from stagflation to an environment of higher growth and lower inflation. The decisive election outcome suggests that the new government should be able to implement reforms that improve business sentiment and boost private investment," the brokerage said.
The first area on which the new government will focus is improvement in the business environment, which has remained challenging since the credit crisis. Policy uncertainty, corruption-related probes and regulatory hurdles have led the business environment to deteriorate, it said.
Given the weak growth driven by sluggish investment and consumption coupled with high inflation, it is pertinent for the government to come up with a holistic roadmap to improve the growth outlook, Morgan Stanley said.
"The government needs to cut back on less effective redistributive polices and implement reforms that will boost productive investment and job growth," it added.
The Budget is likely to stress the need for improving business environment apart from providing a framework to streamline project approvals and providing clarity on the retrospective taxation issue which has dented the investor confidence, it added.
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