The Narendra Modi government’s two years in office have proved to be steady and solid. The exuberance that was generated when the government assumed office in May 2014 continues. The consistency on the reform front has held despite a very difficult environment — infusing a strong hope that this momentum will only carry forward.
Amidst the whole agenda of putting India on a higher growth path, one of most important constituents has been strengthening the manufacturing sector, to create meaningful livelihood opportunities. Some of the key campaigns announced over the course of last two years — Make in India, Digital India, Skill India, Startup India, Standup India — have this as the central objective.
The measures taken towards improving the operating environment for businesses have been reassuring. The bureaucratic overhaul, simplification of procedures, setting up of the e-Biz portal and digitisation will improve the competitiveness of Indian industry. Besides the government has provided a stable, predictable and an investor-friendly tax regime.
Moreover, the government has not shied away from treading into the zone of more difficult reforms. The passage of the Mines and Minerals (Development and Regulation) Amendment Bill, 2015 and the Coal Mines (Special Provisions) Bill, 2015 was a very crucial move and will foster fair play and transparency in allocation of natural resources. The passage of the Bankruptcy Code and the Black Money Bill in Parliament are also landmark achievements.
The liberalisation of the FDI policy continues. A number of sector-specific FDI changes have been undertaken and the FDI threshold for investment projects requiring Cabinet approval has also been raised from Rs 20 billion to Rs 30 billion.
Development of roads and the railway sector has been a priority. A seamless road and rail network remains much desirable to put in place a robust supply chain system. According to a World Bank study, ‘simply halving the delays due to road blocks, tolls and other stoppages in India could cut freight time by about 20-30 percent and logistics costs by around 30-40 per cent. This would result in a gain in competitiveness of some 3-4 percent of net sales for key manufacturing sectors’.
Further, the emphasis on increasing the share of renewable sources in India’s energy mix reflects the long-term vision of doing the best to keep the environment secure.
While there has been some economic improvement, owing to a challenging global and domestic environment, a broad-based consolidation is still to take shape. The reforms agenda thus needs to continue, with focus on some specific areas.
Reforms on labour and capital need to be expedited. It is hoped that the Bills are introduced in Parliament at the earliest. Also, all states should be encouraged to amend labour laws as has been done by Rajasthan, Madhya Pradesh and Maharashtra. On the capital front, we need to strengthen the debt market to reduce over-dependence on banks.
The government is geared up to building world-class infrastructure; however what is critical is a more defined approach. The government may consider earmarking certain sectors as “focus sectors” on an annual basis under the National Investment and Infrastructure Fund (NIIF) to ensure that sufficient funding gets targeted to specific sectors.
We also need to push through the GST Bill and its successful rollout through strengthening of IT infrastructure.
Over the near term the government can look at expediting non-legislative and executive actions that could help in further reducing the procedural impediments.
Harshavardhan Neotia is president, FICCI
The views expressed are personal