The government deserves credit for somehow making Parliament run better with the result that some of the difficult legislations have been cleared. These include raising FDI limits in insurance and Defence sectors to 49 per cent, said Mr Rana Kapoor, president of The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
Likewise, investor confidence and transparency have been achieved with the successful completion of auction of coal blocks and spectrum, raking in over Rs three lakh crore for the Centre and the states, said Mr Kapoor.
The plans to improve coverage of the insurance and pensions, as announced in the Budget are also laudable, added the ASSOCHAM chief.
However, the NDA Government has to cover some ground in terms of taxation issues, particularly with regard to FIIs' problems on retrospective liabilities, taking some big-ticket infrastructure projects off the ground, while it has been well-conceded that the immediate growth stimulus has to come from the government front-loading its allocations in this area.
While the Prime Minister's flagship Make in India has been received well, the focus must remain on further improving Ease of Doing Business, as at the state levels, a lot needs to be done. Besides, the global environment for manufacturing is not conducive, as has been reflected in the downward trends in exports of merchandise goods.
The growth in industrial production is not only a function of the government policies but also a lot of domestic and global macro factors, which do not seem to be very friendly. Thus, the industry will have to be patient with seeing success in a considerable manner on the ground, since it would take some time before the corporates come out of the highly leveraged balance-sheets, and get support from the consumer demand, though some green shoots are visible in sectors like car sales, said the ASSOCHAM president.
According to ASSOCHAM, the Prime Minister's foreign visits have brought in qualitative change in the way our economic diplomacy is being pursued. Our missions abroad are much more aligned with the economic priorities while our efforts in Yemen crisis and Nepal earthquakes have come for great appreciation, he said.
The Prime Minister should continue to move forward in this regard since engaging with important powers like the US, Germany, China and in the neighbourly countries at the Summit level makes a lot of difference in India's perception. Programmes like Make in India, Smart Cities and Swachch Bharat (sanitation) have been received well overseas.
Another area which is receiving a lot of priority space is the power including non-renewable energy like solar, wind and others. This is also receiving a lot of investors' interest which is likely to materialize, maybe after, some more clarity and policy measures. With pressure from the industry and the government, the coal production has improved in the last one year. In the power sector, the reforms must be pushed fast in the area of distribution and transmission. In the absence of these reforms several discoms are not ready to buy additional power while generation has improved.
While the Prime Minister's Jan Dhan Yojna has brought in Rs 14,000 crore in the banking system by 14 crore people poor , even though it was a zero balance scheme, the challenge lies in making these accounts active and not allow them to remain dormant. Like PAHAL for LPG subsidy, more and more government schemes should be linked with the Aadhaar linked bank accounts.
The economic growth is projected to be 7.8 per cent in the current financial year while in 2014-15, the growth was 7.4 per cent, according to new CSO data series. While this sounds great, the numbers are somehow not translating into the situation on the ground as was clear from the shortfall of direct tax revenue by 14 per cent to the target in 2014-15.
The industry and the commentators must realise that an economy of two trillion dollar, well integrated with the world, cannot be catapulted into high growth, just with the change of the government. However much the government is sincere, the policy tweaking, legislative changes and revival of investment appetite to be followed by increase in consumer demand, would take time of say, 24-30 months. And then, a lot would also depend on the global markets which are subdued. But all the same the NDA Government has made a good beginning, though it now needs to move faster on things like Goods and Services Tax and send a new signal of confidence. Seven out of ten, according to ASSOCHAM, is the right score for the Narendra Modi Government on completion of first year in office."
The immediate challenge lies in dealing with the agrarian crisis with concerns of less than normal Monsoon and the damage done by unseasonal rains in February-March. The advantage of low inflation must be retained with better food management. Retail inflation has moderated significantly from 11.2 per cent in November 2013 to 5.2 per cent.
Likewise, the focus should not move away from the fiscal consolidation. In the last three years, the Gross Fiscal Deficit of the centre has declined by over 1.5 percentage points of GDP.
According to the fiscal roadmap, the fiscal deficit should reach a target of three per cent in 2017-18.
The current account deficit (CAD declined sharply by more than 3 percentage points of GDP in 2013-14 and further to 1.3 per cent in 2014-15. Excess capital flows have led to an all-time high forex reserves of US$ 343 billion, enabling the country to deal with any global crisis in a better way.
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