The Narendra Modi government’s two years in office have proved to be steady. The exuberance generated when the government assumed office in May 2014 continues. The consistency on the reform front has held despite a difficult environment — infusing 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. Some of the key campaigns — 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 industry. Besides the government has provided a stable, predictable and an investor-friendly tax regime.
The government has not shied away from addressing 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 crucial move and will foster fair play. The passage of the bankruptcy code Bill and black money Bill are also achievements.
The liberalisation of the FDI policy continues, notably the FDI threshold for projects requiring Cabinet approval has been raised from ₹20 bn to ₹30 bn.
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 the World Bank, ‘halving the delays due to road blocks, tolls and other stoppages in India could cut freight time by about 20-30 per cent and logistics costs by around 30-40 per cent. This would result in a gain in competitiveness of some 3-4 per cent of net sales for key manufacturing sectors’.
The emphasis on increasing the share of renewable sources 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 specific areas.
Reforms on labour and capital need to be expedited. 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 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 further reduce the procedural impediments.
Harshavardhan Neotia is president, FICCI. The views expressed are personal.