The government has relaxed foreign direct investment norms for 15 sectors in an apparent demonstration that it is willing to walk the talk on economic reforms despite electoral reverses for the ruling BJP.
The latest move comes two days after the BJP suffered a crushing defeat in the Bihar assembly polls and days before Prime Minister Narendra Modi’s visit to Britain, followed by the G-20 summit in Turkey. India’s ability to remain a consistently favoured investment destination also depends on steadiness and policy. While the broad philosophy of reforms and the development paradigm’s direction have remained largely unchanged since 1991, there have been occasions when governments have kept one eye on the election schedules while announcing key policy decisions.
Although the economy is in a much better shape than it was a year ago, experts reckon that there has yet to be a sustained revival in investment. Pressure has been building up for removing possible constraints to growth.
The government will have to move on major issues such as land acquisition, investment in human capital, the lack of regulatory consistency across states, improve manufacturing and agricultural productivity and, above all, plug India’s infrastructure deficit. From overstretched airports to heavily congested roads, power cuts and strained capacity at ports, India’s creaky infrastructure is in marked contrast to the rest of Asia. Time and cost overruns have been a major bane for infrastructure projects.
The revamped FDI norms come less than two months after the prime minister, on his second visit to the US, hardsold the India story. The government’s pitch for investment comes at a time when many global firms are seeking an alternative to China.
The ‘Make in India’ campaign is as much an invitation to domestic and foreign companies as a promise to rectify everything that has kept the country almost at the bottom — ranking 130 on the World Bank’s ‘ease of doing business’ index. It may just be the time to be more courageous and to press the foot on the growth accelerator. Right now, the mood is for anything but paralysis. While the latest measures are welcome, it is about time India found itself a way of decoupling reforms and policy-making from the electoral calendar.