Economic
Highlights
New
Delhi, 23 May 2015
High-paced Production But…
SHOW WINDOW NEEDS
SPRUCING
By Shivaji Sarkar
NDA’s production house
is full but its show window needs beefing up. It is a mixed fare. On the
plus side, the Government has passed many bills to boost investor confidence,
prices are down, FDI inflows have increased, forex reserve is at a high,
non-oil imports are rising, earnings through disinvestments have created a
record at Rs 24,277 crores, industrial production is inching and the rupee
continues to tumble.
For Prime Minister
Modi’s Government it has been a year of consolidation. But given the people’s high
expectations, the Government has the problem of breaking from the past,
changing the approach to solve problems in a transparent rule-based manner,
creating a new system and end the previous process of rent-seeking. The
political system that was keen on fast-paced changes to bring the economy on track
faces many obstacles.
Despite this, Modi has been
able to restore investors’ confidence in the Indian economy. World Bank, IMF and
rating agencies like Moody’s and Standard & Poors have indicated firm
growth through policy changes. In quantum terms, might be the NDA Government does
not have many achievements to count but the few that have happened are
indicative of a better future.
The past one year
signifies two major initiatives: Modi’s 18 countries tour which increased
dialogue, garnered billions dollars commitments of investment, new technology
and turning India into a
manufacturing hub in 25 sectors through Make in India.
Two, fall in inflation
in wholesale and retail which signifies the beginning of increasing purchasing
power, a requisite for boosting industrial production. Modi brought large investments
commitment from diverse countries like US, China, Japan, South Korea,
Australia, Canada, Mauritius,
Singapore and Netherlands along-with lukewarm
responses from France and Germany. But so far, the European Union has not
responded favourably.
Besides, falling oil
prices have wiped out the so-called under recoveries (Was it ever there?). At
least the oil companies alibi has vanished, but it has created a new problem. In
one case, oil companies had to buy petro-crude at $ 80 a barrel and sell it at
$ 60. According to the Government, this caused an outgo of Rs 30,000 crore,
resulting in the consumers being burdened with two hikes within a fortnight
which had a cascading effect on prices.
Significantly, Modi’s
move to generate solar power in a huge way might reduce dependency on import of
oil and other fossil fuels in times to come. An encouraging beginning which, if
sustained would result in every Indian house self-generating power, thereby freeing
them from horrendous power bills of monopoly companies. It should also herald an
era in energy sector research which India lacked so far.
It is debatable we
should go for nuclear energy, however, with Canada supplying 3000 tonnes uranium
over the next five years will help achieve continuous and sustained nuclear
power generation. Remember, Canada
helped set up the Rajasthan Atomic Power Plant Station (RAPS) with Candu-type
reactors in 1960s. But for current supply, the plant load factor of N-plants
was threatened to get reduced. Canada
is the third country to supply uranium to India
after Russia and Kazakhstan.
Moreover,
FDI is being viewed as a key growth developer wherein the NDA Government has
allowed FDI in railways and defence sectors, followed by labour reforms,
complete deregulation of diesel prices and easing of FDI rules in construction.
This has led FDI growth of around 40 per cent to Rs 1.76 crore in 2014-15 from
Rs 1.26 crore in 2013-14.
During
the last fiscal, the Foreign Investment Promotion Board (FIPB)) has cleared 241
of the 350 proposals it had received. This, healthy inflow of foreign
investments into the country has helped India's balance of payments (BoP)
situation.
Further, the Government
has adopted the ordinance route for coal sector reforms, increase of FDI cap in
the insurance sector from 26 to 49 per cent, auctioning of iron and other
minerals mines and amending land acquisition laws. Moving ahead on its reforms
agenda, Modi has also inched closer to its aim of rolling out the Goods and
Service tax (GST).
Several other
initiatives of the Government, including efforts to revive stalled projects,
re-scheduling of premium payouts for road ventures and relaxation of
environmental clearances have also alleviated some sector-specific concerns.
Effectively,
the NDA has allowed companies operating in regulated sectors to increase
foreign investments. This is because overseas Indians now fall outside the FDI
ceilings and the space vacated by them can be filled by foreign investors.
At
the same time, domestic companies can attract investments from NRI’s without
violating foreign investment norms. The underlying thinking is that this could
stoke a fresh round of fund flows into the country.
India's current account deficit will
"hopefully" be less than 1 per cent of gross domestic product (GDP)
in the fiscal year that begins in April, Finance Minister Arun Jaitley asserts.
The deficit narrowed to 1.5 per cent in 2015 first quarter from 2 per cent in
the earlier quarter on the back of slumping oil prices. Analysts aver India should
move into surplus for the first time in eight years.
The positives are many. Over 15 crore people have
joined the Jan Dhan Yojana, large
numbers are keen on taking recourse to Atal
and other pension schemes and 12.5 crores are getting direct subsidy on LPG. The States
are getting 48.5 per cent of the total central tax kitty from the present 37
per cent. They also have more flexibility in implementing even central schemes.
But, somehow, not all of this has touched the
hearts of the people. They want Modi to do more for labour, not just Government
servants who would reap a bonanza through the Seventh Pay Commission in 2016.
Farmers too have many apprehensions, notwithstanding
the land bill is being touted to benefit them, alongside the aam aadmi has yet to feel the fall in
statistical inflation; income tax payers want TDS abolished; and the poor, too want
freedom from it in their bank accounts.
In sum, Modi is not having an easy time. Some of
its friendly organisations want the Government to have a more pro-people look
and also come out of the bureaucratic web to serve them faster. A task, which the
Government has to address in the coming months to give a bright look to its
shop window. ----INFA
(Copyright,
India News and Feature Alliance)
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