Some major power, infrastructure, metals and mining companies are planning to consciously hold back capital expenditure to “create an economic slowdown”, according to a report by Ambit Capital Research, released on Wednesday. Quoting sources close to Prime Minister Narendra Modi, the report said the move was prompted by their disappointment over the PM’s crackdown on crony capitalists.

The Ambit report also launched a spirited defence of the PM and talked about its “growing conviction that the PM is prioritising a clean-up of the system over pursuit of near-term GDP growth”. The report repeatedly quotes “sources close to the PM” as saying Modi has got multi-decadal ambitions and will not be panicked into generating short-term results which could compromise his longer-term goals.

Claiming the findings are a result of the research team’s repeated visits to Delhi and other state capitals, Ambit made other startling allegations against a section of Indian companies, without naming any. “The forthcoming black money Bill seems likely to result in an exodus of Indian businessmen seeking residentship abroad. We have already heard about promoters of several prominent small-midcap companies who have taken tax residentship abroad in the past few weeks. Also, a significant proportion of white collar professionals working in India for MNCs are contemplating leaving the country.”

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“Our sources in Delhi say the government has realised that if it hastily kicks-off major capex projects without cleaning up the ecosystem of corrupt officials and bent contractors then it will simply perpetuate the rot that had set in over the past 10 years,” Ambit said.

Asking everybody to be prepared for a short-term pain, Ambit cut its FY16 gross domestic product growth estimate to 7 per cent from 7.5 per cent estimated by it in March.

Terming it as the “PM’s detox diet for India”, Ambit said the clean-up has four facets: Pressurising crony capitalists and contractors into re-thinking their traditional approach to rigging the system; attacking the subsidy fraud through Direct Benefits Transfer and use the Aadhaar as a means of identification; pressurising civil servants and public sector company chiefs to deliver in their day job and desist from graft and attacking the “black economy”.

Macquarie Capital has come out with a note titled “Modi Meter — One year later: 7/10”. The rating is much higher than what corporate CEOs would give the government. Authored by Rakesh Arora and Arun Bhattacharya, the report on the Modi government is a study in contrast to the United Progressive Alliance government, thanks to its decisive action, transparency and development focus.

Like Ambit Capital, Macquarie’s Arora, too, says the government has done away with crony capitalism by moving all approval processes online, introducing an auction system for resources and focusing on improving ease of doing business.

Macquarie Capital says: “Corporates that are used to receiving doles and fiscal incentives are finding themselves thrown at the deep end of the pool and tackling competition to survive. However, the government’s efforts to ease land acquisition has been jeopardised by populist opposition.”



ALSO READ: Why Ambit Capital has got it wrong