The new year brings a sense of anticipation on the economic policy front, especially with the Union Budget around the corner. This year is particularly critical in this regard as we have emerged from a nightmarish 2011, which saw the GDP growth slowing dramatically and new private investment grinding to a halt. All this has been made worse by a pervasive sense of policy and legislative paralysis. Revival of domestic investment is key to making 2012 a better year from an economic standpoint. What should be done to revive investments? FE decided to ask some chief ministers, corporate honchos and policy wonks to share their ideas on reviving investment and growth. In the second article in this series, Gujarat chief minister Narendra Modi shares his thoughts.

As India wakes up to a new year, the national mood is sombre. Pessimism is pervasive amidst policy paralysis and drift. The India story is at a crossroads. One path leads to serious economic crisis driven by slackening pace of investments.

The other path leads to recovery with a boost to the flagging animal spirits of India?s entrepreneurs and foreign investors. There will be faster growth. India can claim its rightful place and become an engine of global growth.

Which path will India take in 2012? One of the chief reasons behind the slowdown is that the credibility of the Centre has hit rock-bottom. It is engulfed in corruption scandals that has weakened its resolve to govern. There

is no clear road map and no reforms to correct the slowdown. Coupled with weak leadership and intellectual bankruptcy, the UPA government is a model of indecision, leading to a drop in investor confidence. Prime Minister Manmohan Singh has castigated India Inc for spreading negative sentiments that the government?s policies ? statements that merely amount to shout-

ing at the messenger for the bad news.

Why do investors flock to Gujarat? There are reports that Mukesh Ambani assured Singh that he is ready to invest R70,000 crore immediately. Where will he invest? There are no prizes for guessing that Gujarat will attract a fair chunk of those investments. MNC giants like Ford are setting up facilities in my state, making it a global auto hub. Investors need policies that inspire confidence, stability, transparency, a government that governs and reforms. Investors are enthused when a government reduces the costs of doing business. They are impressed with mechanisms to remove bottlenecks.

We recognise the significance of MSMEs, evidenced during the recent Vibrant Gujarat Global Investors’ Summit where 54% of MoUs were signed in this segment. Improving credit, skills, access to raw materials and markets and fewer regulations help MSMEs and manufacturing as a whole. We need major investments in agriculture. Farmers are switching to commercial crops, leading to grain shortages and consequent imports, threatening our goal of self-sufficiency. A solution could be spatial specialisation in agriculture to increase productivity.

In Gujarat’s farm sector, the government is a facilitator. We provide roads, electricity, soil health cards and knowledge to the farmer, who chooses farm equipment, nutrients and seeds. The state has recorded double-digit farm growth in a decade ? almost double the national average ? sparking interest from agriculturists, policy makers and agencies.

Earlier, droughts and crop failures were common. Now, one can witness newer forms of agricultural practices, cropping patterns and extensive drip irrigation. Meanwhile, an agrarian crisis is raging elsewhere due to policy neglect. The India story will be incomplete without paying adequate policy attention to our millions of farmers.

High growth has not reached all strata of the Indian society. Innovative methods of social inclusion must be devised. Modern technologies like mobile telephony will help. Some of the cost incurred on subsidies should be considered for local resources and skill-based employment.

Gujarat has pioneered innovative means through Garib Kalyan Melas in all districts. This not only provides assistance to the poorest of the poor and transform them into productive contributors to economy. These melas also cut down transaction costs and ensure convergence of schemes.

The dream of the India story is fast deteriorating into an economic and social nightmare. Steep Inflation, declining production, GDP growth at record low levels, stock market and rupee collapse, rising deficits and rising foreign debts as well as current account deficits, all happening at the same time is a perfect economic storm!

In these troubling times, industrialists prefer to invest more outside than in their own country. India?s outbound foreign investments outpaced inflows of FDI for the first time in 2010-11. This financial year continues to witness the same trend. At this rate, outflows may well exceed inflows again this financial year, affecting overall growth.

Restoring investor confidence must be our overriding priority in 2012. Is this too much to ask of the architect of India?s reforms? Our manufacturing sector is hostage to huge regulations. There is an urgent need to review them and increase flexibility in labour laws. In fact, labour should be made a state subject. We should see the global slowdown as an opportunity to attract manufacturing activity from across the world. It is also an opportunity for making investments in infrastructure, especially in energy and transportation. India needs to almost double its ports, roads, power, airports and telecom infrastructure in the next five years.

It is time India harnessed its demographic dividend. Skill formation is still poor in this country. Human resources are not adequately utilised. How our human assets are nurtured and brought into the mainstream will decide India?s competitiveness in the global arena. Government and industry associations together should assess and prepare mobile workforces with the skills and proficiencies to meet sector requirements. India?s young workforce is estimated to increase by 240 million over the next two decades, and by 2035, India will have the largest working population in the world where 65% will be of working age. By invigorating our talent pool, in one decade, our youth will be the engine of growth not just for India, but also for the world.

Gujarat?s experience in setting up the Knowledge Commission, I-create and skill upgradation could help shape the roadmap in this regard. An innovative example is the Society for Creation of Opportunity through Proficiency in English (SCOPE) set up by Gujarat to enhance English language skills for employment of the youth. These times afford us the opportunity to introspect, reorient and move to the right path. Good governance holds the key in this regard. We need to build transparent and accessible systems with a capacity to deliver and bring back the shine to India?s growth story. Focus should be on building platforms bringing people across the nation and the globe together and making them active partners in India?s development.

2012 is the year when we collectively resolve to meet the current challenges and lead India to new heights. For this, we need a strong, stable and transparent leadership with a vision for the future and the ability to take quick decisions at the Centre. There is also a need to fine tune investment regulations for FDI. Second-generation reforms must be implemented. It is only when we decide to go two steps forward instead of backwards in reform that the India story will be resurrected and become an engine of global growth. Rapid growth will enable it to meet the truly challenging agenda of inclusive growth. This calls for able leadership and strong political will.