It is in a crisis that an opportunity presents itself. India?s government has the numbers in parliament to push through key reform measures, unlike in its previous tenure. How it uses this leeway will determine, if we are better equipped the next time growth comes knocking. There are several issues where the government can play a key role. Infrastructure is foremost, as the removal of bottlenecks both at the central and state government levels can expedite completion of projects. Unfinished projects mean capital being blocked in an unproductive asset. Sectors like power, roads and bridges, play a key role in the development of industries which use this infrastructure.
The telecom sector is a shining example of how foreign investment can help the development of an industry. Funding the massive upfront investment needed for the large national operators would have been difficult, but for foreign investment. The government should use this sector?s experience with foreign investment as a benchmark to liberalise FDI norms for other sectors as well.
A delayed monsoon is a concern for the farm sector It is estimated that the farm sector will grow at 3%, unless the next few weeks see the monsoon behave erratically. Any adverse impact on the sector could see the government take fiscal measures to support farmers and stock up on food. This could further affect the fiscal health. On the positive side, the nation?s food stocks are comfortable. The government needs to improve agricultural infrastructure.
India?s growth in the past decade has been despite the weaknesses of coalition governments. The present government has a strong mandate and must not lose this opportunity to make the most of it. That holds the answer to the question of whether the elephant can dance again.
?The author is regional chief executive, India & South Asia, Standard Chartered Bank, winner of FE’s Best Bank award for profitability