It is heartening to see the sincere effort put in by the crucial wings of the government to further economic reforms and introduce steps to tackle the roadblocks in the way of the vital sectors of the economy. The fact that investments have come down from more than 38% of the GDP in 2007-08 to a little more than 35% last year is seen as the major reason for GDP?s declining growth rate, and this has also affected the capability of the government to adopt welfare measures for its people.
The Cabinet Committee on Investment and the specially formed empowered committee have identified a few major power, road and oil & gas projects that have been stalled due to lack of clearances by the environment and forest departments. While policies relating to SEZ and PPP are being further simplified and being made investor- friendly, the DIPP is intently busy in relooking at the FDI caps in multi-brand retail and defence, in consultation with other departments concerned. The commerce ministry is vigorously working on various sops for exporters to enable them to earn more foreign exchange for the country, and the ministry of finance is regularly interacting with PSU banks on enhancing fiscal prudence. Bank?s apprehensions about inflated NPAs are being assuaged with stricter measures for loan defaulters. Banks are also being convinced to extend the full benefit of the repo rate reduction.
In case of power projects, planned fuel supply arrangements with Coal India and imports would encourage IPPs to go ahead with envisaged investments. The hike in natural gas prices is sure to prompt ONGC and other prominent investors to boost capital infusion in a sector that serves the needs of the power and fertiliser segments.
The sharp fall in the value of the rupee, exceeding 14% in the last few months, has come as a breather for a government plagued with an inflated import bill, which discourages further bookings. But it may hurt imports that are essential for a few manufacturing segments, such as coking coal for large importers like SAIL, thereby neutralising the fall in international prices. Gold imports are likely to take some beating too. But the oil import bill would rise, leading to a fresh dose of hike in petroleum prices. The push to exports due to the rupee?s devaluation is yet to reflect in changing the course of trade balance. One important reason could be the falling trend in commodity prices due to the large excess capacities created by most exporting countries.
We had predicted a marginal rise in realisation in steel in Q3 of the current fiscal. The onset of a plethora of positive steps towards encouraging investments is likely to boost market sentiment. What is needed is expeditious issuance of the MM&DR Bill to settle issues such as royalty, leasing of mines, compensation to displaced persons, exploration of new mines and environment clearances to commence production.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal