Modi govt completes 6 mths: Economy waiting for action trigger

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Arvind Padmanabhan | 24 Nov, 2014
An area that evoked much expectation from the people when the Narendra Modi-led majority government took the reins over six months ago was economic revival, as it was seen as spurring growth, creating jobs, stabilizing prices and boosting incomes. India was faltering on all the four counts.

As we take stock of the government's performance on these factors on the eve of its half-year in office Tuesday, what is the verdict? A cross section of the stakeholders with whom reporter spoke to was quite unanimous: Right noises, time now for action!

This action, they added, must begin immediately from Monday, when the winter session of parliament convenes, since many of the promises made by Team Narendra Modi require legislative actions to fructify, and that's where lies the proof of the pudding.

The leadership of all the three apex chambers that responded exclusively to the queries from reporter had much expectations on the government being able to push through at least three crucial legislative measures - on goods and services tax, insurance and pension.

Otherwise, they said, there has been a clear improvement in India's business climate - as is evident from the thumbs up from rating agencies that were on the verge of downgrading India not too long ago and market indices scaling new highs each passing day.

"The present government under the leadership of Prime Minister Modi promises a good economic vision, which is backed by decision-making and implementation," said FICCI president Siddharth Birla, echoing a similar response from Assocham and CII.

"We commend the proactive, fast, targeted decision-making of the government that has been one of the chief characteristics of the past six months. Major concerns over inflation and fiscal deficit have been allayed," added CII director general Chandrajit Banerjee.

The three chamber heads also made it a point to say that some other initiatives led by Modi himself also made a major impact globally, notably the campaigns like Make in India, Clean India, Zero-Defect-Zero-Effect manufacturing and Digital India.

"The many decisions to hike railway fares, raise foreign investment limits in defence, real estate and insurance, attract foreign equity in railways and reform fuel price regime, have all helped to contribute to a renewed confidence in the country," said Banerjee.

The perception of reforms and policies being on track set the markets afire:

The fact that Narendra Modi will be India's prime minister had already sent some key indices soaring, even before he was inaugurated May 26. But since then, too, the key market indices have not stopped their upward climb, hitting fresh highs many a time.

On May 23, the latest trading day prior to oath-taking, the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed at 24,693.35 points. On the latest Friday, it ended at 28,334.63 points.

This translates into an striking gain of 3,641 points or 14.7 percent. If we see the rise since May 16 when the general election results were declared and it became evident who will form the government, it is sharper at 4,212.89 points, or 17.5 percent.

Even the global investors reposed faith with foreign institutional funds pumping in over $25 billion into the country's debt and equity markets since May 26, which is nearly 60 percent of the total investments of $39 billion this year.

"India's leadership has re-generated interest worldwide. There is a renewed pride in being Indian. The confidence levels are high across all levels -- be it the common man, domestic businesses or foreign investors," said Birla.

Banerjee added: "The prime minister's visits overseas have had strong economic and commercial content, and we believe that global investors are taking stronger positions on Indian investments."

Girish Vanvari of KPMG India had a similar take. "The attempt to strengthen the foreign relations through various state visits undertaken by the prime minister and his cabinet are also expected to attract foreign direct investment into the country," he said.

As we move ahead, stakeholders say the time has come for action, now that the honeymoon period is over. Yet, there is also a sense of confidence that this government will not falter as it goes along in pursuing and fast-tracking reforms.

"Many of the reforms and steps undertaken by the new government may not get reflected in various economic indicators immediately. But if they reach their logical conclusion they should help to take the Indian economy to the next level, say two to three years down the line," said Vanvari.

"The manufacturing sector must get more attention of this government. The Make in India campaign will not result in any perceivable benefit if it is not backed by appropriate policy and process reforms," said Assocham secretary general D.S. Rawat.

"We need to give at least 18-24 months to the government to see the real impact on the economy. We are confident critical reforms will continue to evolve at an on-going basis," said Birla, adding the thrust has been on fundamental reforms for inclusive, balanced development.

Like the captains in CII and FICCI, the Assocham head also felt confident about the future.

"This government is more likely to deliver on many of its promises. The key factor helping it in this regard is the awareness that has been created among people about the seriousness of the government," said Rawat.

He also summed up as to why he felt positive.

"The best thing about this government is its absolute majority in the Lok Sabha (the lower house of parliament), and the resultant absence of compulsions of coalition. The drawback is its slow pace of action."