The wave of transformation that has swept our country this year is remarkable. Against the backdrop of two years of weak economic performance, the country voted for a change, from which ensued the formation of a stable government that came to power with a complete majority, a feat achieved after thirty years. The other major transition that the country is witnessing is the style of governance. The entire bureaucratic and regulatory structure is being revamped, which is a revolution in itself as a change in the administrative mindset is critical to bring efficiency and transparency in decision-making and to build the trust and confidence of investors.
The economic vision set by the country’s leadership is not limited to achieving high economic growth for the next year but extends to a global vision of taking India to the league of leading nations over the next five years. This includes vision of being ranked amongst the top 50 nations in ease of doing business, becoming the leading global manufacturing hub, and making ‘Brand India’ synonymous with quality.
The new government’s sound economic vision and desire to introduce and execute critical reforms has escalated hopes of all and brought about a complete turnaround in the sentiment. Obviously, there are high expectations. This is clearly visible in the mounting anxiety that surrounds the completion of six months of the new government at the Centre. However, there is a need to calibrate these expectations with basic reality.
Bringing the economy back to high growth trajectory is a challenging task. While big-ticket reforms are important, ground level issues also need to be addressed meaningfully for achieving sustained high economic growth that ensures inclusive and balanced development. To see a complete turnaround in the investment cycle and the real impact on growth, we must give another 9-12 months, as several pending reforms are likely to be implemented in the coming months. The conviction and commitment of the Centre to usher in fundamental reforms is highly encouraging.
A review of government actions in the past six months shows that reforms have been initiated in most of the areas that require improvement. There has been considerable progress on starting the stalled projects. With Project Monitoring Group being the single authority co-ordinating approvals and environmental norms being relaxed, many more stalled projects are expected to be revived soon. Efforts are being made towards easing the conduct of business through greater use of technology, facilitating labour law improvements and developing world-class infrastructure. E-biz platform and the Digital India campaign are going to play a vital role in integrating all government department and services. The development of industrial corridors, 100 smart cities, opening up of Railways infrastructure to FDI, plans for bullet trains, the Sagarmala project for development of ports, development of low-cost airports, etc, will play a critical role in enhancing business competitiveness, triggering economic activity and generating huge employment.
With the ‘Make in India’ campaign, the government is set to make India a manufacturing hub. The decisions on coal mining auctions and deregulation of diesel prices are important steps towards market-based reforms in energy.
We are hopeful that the government would resolve some of the pending critical issues. We are confident that the policymakers will take a holistic view of the on-ground issues and bring about structural reforms ensuring sustained high growth.
Foremost, the industry is eagerly awaiting implementation of the Goods and Services Tax (GST) as it will not only streamline tax administration, but accelerate the economic activity and ensure higher revenue collection for the government. Estimates show that implementation of GST can increase GDP growth by 2 percentage points. We are optimistic that the issues surrounding GST will be resolved and an optimal solution will be found quickly.
A key element in reviving the capex is to lower the cost of capital. Given that inflation has moderated and there are no upside risk to prices in the near future, we believe RBI should adopt an accommodative stance its forthcoming policies.
Keeping fiscal deficit under check is also critical to reduce inflationary pressures and enable lowering of interest rates for private investments. Some of the steps towards fiscal consolidation are noteworthy, especially the deregulation of diesel prices, and announcement of various austerity measures for government departments. We also look forward to the report of Expenditure Reforms Commission for specific suggestions on effective management of subsidies and hope these would be taken up by the government in the right earnest.
While procuring land, industry faces severe challenges and the problem has accentuated since the Land Acquisition Rehabilitation and Resettlement Act was passed in the beginning of this year. Ficci has asked for amendments in this Act and we hope that the same would be duly considered by the government. Besides considering legislative changes, we expect the government to encourage states to undertake digitisation of land records and creation of land bank corporations to ease the process of land procurement.
We firmly believe that the government would address these and other critical issues in a timely manner. We expect a lot more reforms in the coming months, especially from the on-going session of Parliament and the forthcoming Union Budget in February 2015. I believe it is only a matter of time when we will see expectations and realities meet the same track.
A Didar Singh