There are encouraging economic signals. Recent statistics seems to show signs of the economy bottoming out. The latest estimate of growth for FY16 is 7.6% which is faster than the previous year’s 7.2%. Although this was partly due to mopping up additional revenues from excise duties to take advantage of lower oil prices, even the gross value added has grown at 7.2%. More important, acceleration in growth in the last quarter to 7.9% has been impressive. There are also other indicators showing economic recovery. The core sector output growth has been positive continuously during the last five months and in April it has registered a growth of 8.5%. Similarly, the performance of infrastructure sectors like road, railways, coal and power has been quite impressive. With meteorologists forecasting a normal monsoon, there is hope of demand revival in rural areas which could help hasten the revival. Although it is too early to be definitive, there are indications that the worst is over and the economy is on the path of recovery. In particular, on the governance side, better coordination of infrastructure sectors has helped hasten the decision making process and this has helped the performance of these sectors. Indeed, the external situation has been far from being congenial, exports have been declining continuously for over 17 months, the balance sheets of the banks and corporates continue to threaten the investment and credit situation and manufacturing is yet to show signs of steady revival. Of course, there is a long way to go before the next stage of acceleration. India has always remained a country with unexploited growth potential and the gap between promise and performance can happen only when the government gets down to serious reforms in policies and institutions.

The extent and speed of recovery depends on several factors including the pace at which reforms are calibrated. The government has come to power with much promise, people’s expectations are high and a failure to fulfil them would be a great disappointment for the people. Therefore, it is important for the government to focus on the economy rather than getting distracted by other matters and confrontationist stance. It has an unprecedented mandate and the opposition is in complete disarray. If indeed, there are skeletons in the cupboard, take action against the guilty rather than indulging in muckraking. It was distinctly lucky as the sharp decline in international oil prices has helped it to control the fiscal deficit, current account deficit and the rate of inflation. Of course, the fledging international economic environment, two continuous drought years, problems with stuck projects in infrastructure sectors and the crises of twin balance sheets (of the corporates and banks) have continued to be a problem. After two years in office, the time is opportune to deliver on the promises made.

The good news is that the growth of core sector output comprising of 8 key industries (cement, coal, electricity, crude oil, natural gas, refinery products, fertiliser and steel) has shown a sharp increase of 5.7% in February and 6.4% in March. While a part of the acceleration is due to low base effect and that may continue even in April, there is no mistaking the fact that the trend shows bottoming out in these important sectors. Similarly, Arvind Panagariya, in his comprehensive review of the performance (Business Standard, May 9), has pointed out the turnaround in the infrastructure sectors. Of the R3.8 lakh crore highway projects stuck in the past, almost R3.5 lakh crore projects have been unblocked. The daily construction kilometres have increase from 8.5 during FY13 to 11.9 in FY15 and 16.5 in FY16. In railways, average daily rate of expansion of tracks has increased from 4.3 km in 2010-15 to 7 km in FY16. The numbers of air passengers carried has increased from 66.4 million in 2014 to 80.8 million in 2015. The performances of ports, coal and hydrocarbon exploration too have shown impressive improvements. Not surprisingly, the estimated growth of gross value added at 7.2% in FY16 is better than the last year’s and the last quarterly GDP growth of 7.9% indicates revival. These bode well for the economy to move onwards and upwards. Going further, the bountiful rains could end distress in rural areas and replace the feeling of despondency with hope.

The role of improved governance is immense in this turnaround. The credit for the better performance must go to the government initiating a transparent system for auctioning coal blocks, taking specific measures to unblock stuck highways projects, substantial increase in the investments in both road and railway projects, faster environmental clearances, and overall better coordination among the infrastructure ministries.

The time is opportune to speed up policy reforms to take advantage of the improved performance. This is the hard part and even after two years in office, the government has not found ways to effectively deal with its legislative businesses. Unfortunately, on the eve of a Parliament session some contentious issue or the other is brought to the fore to stall the passage of important pending bills. The passage of the bankruptcy code is significant as it will enable public sector banks to restructure their balance sheets by selling off their distressed assets. At a time when the balance sheet crisis on the banks has been a major concern, passage of this law can be a great morale booster. Indeed, the success of the Act will depend on its implementation but at least, the necessary condition has been met with its passage. Hopefully, the GST and land acquisition Bills too will be passed in the monsoon session of Parliament and there are indications that the government is willing to drop the levy of 1% tax on inter-state sales. This is important for, we cannot have a GST with this birth defect. The other contentious issue between the opposition—Congress party—and the government are specifying the dispute resolution mechanism and fixing the ceiling rate at 18% in the Bill. In fact, fixing the rate in the amendment will be retrograde as you cannot resort to amendment every time the rates need to be changed and even the Congress ruled states would oppose this. Sticking to these unreasonable demands will only bring down the credibility further and it will be in the interest of the Congress to enable its smooth passage. Surely, the government must work on its floor management better and prevent its fringe elements from derailing important legislations in their attempts to spite the opposition.

The author is emeritus professor, NIPFP and chief economic adviser, Brickwork Ratings. Views are personal