In an endeavour to boost investment, the finance ministry has proposed creating a single window within the central government for according faster clearances to large projects. Not fully convinced about setting up a new body, viz the National Investment Board (NIB), and with more than one other ministry not particularly enthusiastic, the Union Cabinet has withheld its approval. Rightly so, it suggested further interdepartmental deliberations both on the content and form of the new structure.
Rising and high domestic savings as well as investment rates have been the hallmarks of the Indian growth story. Four years ago, in 2007-08, before the global economic slowdown began, the investment-GDP ratio had risen to 38.1% and GDP growth rate had exceeded 9%. In 2010-11 and 2011-12, it declined to 34.7%, and economic growth slowed to 8.4% and 6.5%, respectively. Between 2004-05 and 2010-11, the average gross domestic capital formation (GDCF) increase was 14.1% per annum while GDP growth averaged 8.4%. Ever since the April-June quarter 2011, it has steadily fallen, and in the first half of current fiscal, it was an abysmal 2.3%, with growth falling to a three-and-a-half year low of 5.3%.
Kick-starting economic revival through stepping-up investment is a pre-requisite and fast tracking the approval system is certainly called for. The proposed new structure reflects the realisation within the government for initiating such action. All central projects with an investment exceeding R1,000 crore are sought to be cleared by a three-member NIB chaired by the Prime Minister (or the Cabinet Committee on Investment which has been suggested as its alternate nomenclature) in case the concerned ministries and other authorities have not approved these within the prescribed time limits.
The finance ministry has enumerated 89 such projects that have not got off the ground for want of requisite approvals. Last week, the finance minister had also informed the Rajya Sabha that such focal points for granting clearances were in place in countries such as Japan, Indonesia, Malaysia and Thailand. Hopefully, creating a single structure should help India improve its position from 132 in the list of 185 countries covered in the ‘Doing Business 2013’ report