On 26th May 2014, Narendra Modi stepped in as India’s PM with the promise of ‘achhe din’ for all. Has he delivered the promises after two and half year in the office? The answer is mixed one. But even his arch rivals would not doubt his intent and ambition to push forward economic development of the nation. A number of reforms are required to be done to enhance the development to a new heights.
Although Modi did not stepped in reforms through big bang but he took numerous tiny steps to ensure economic reforms. One can broadly categorize them into GST, land acquisition, labour laws, banking, investment liberalization, and subsidy reforms.
Subsidies reform is the major area of reforms. Most notably among it is the direct transfer of LPG subsidy to the consumers. The LG subsidy roll out through DBT indeed is great achievement of Modi govt. The roll out of LPG subsidy through DBT ,has plugged the diversion of govt funds. It has been estimated that about Rs 15000 crores were saved in fiscal year 2015 . Govt also provides subsidy in fertiliser, food, kerosene etc amounting to Rs 2.6 lakh crores which constitutes 16% of the govt expenditure. The government hopes to bring it down to 13% in fiscal year 2016. The passage of Adhaar Bill is a great enabler. The whole subsidy reform process is based on unique identification no provided in the Adhaar. Ninety seven percent adult population have already been issued Adhaar card which will help govt to sail ahead the subsidy reforms.
Liberalisation of FDI and frequent road show of Modi abroad, pushed inflow of FDI by 29% in the fiscal ending 31st of march 2016. But the absence of revival in the private investment cycle is still acting as a drag on the economy on multiple fronts. A spurt in the number of stalled projects touched a new height of Rs 11.4 lakh crores in the 4th quarter of fiscal 16 is a matter of anxiety.
Huge NPA of nationalized banks forced to shut funding channels which in turn blocked banking ability to fund economic growth. If the on going spike in banks NPA continue, it will face a serious crisis. It may be noted that the NPA of banks are contributed only by a few corporate houses. Action against such houses have been clouded as has been seen in Vijay Malia episode.
The issue of land reforms is on the table now. Soft land acquisition is one of the major factor for economic development. In past it has been misused by political parties. But we can plug the loop wholes.The govt will have to garner the support of opposition to augment the economic reforms.
Reforms of taxes in terms of GST is a great achievement of the govt. The govt has further consolidated it’s position. Labor laws in our country is very stringent which is necessary for a populous country like us .But it should be seen that the law should not hinder the inflow of fund. We can take lesson from China in this regard. Make in India is a giant step taken by the govt. But it’s success will only depend on investment friendly laws and climate.
Ease of business still is far away from its goal. Modi govt has targeted to keep the country near 50th level. But recent survey made by world bank is not encouraging which scaled us 130th rank, simply a jump by one step. It is sufficient to prove that a lot is to be done for economic reforms. Besides conducive political climate , law and order, red tapism, road, power supply etc is the factors of investment. We can fulfill the dream of PM that Make in India, only if state, central govt, bureaucracy work hand in hand and the opposition extend its support.
Some good news of economic reforms are low inflation, more then 7% growth and improvements in manufacturing sector which has touched 54.4 , 22 months high (as per PMI ). Modi’s clear vision has no doubt boosted up the economic growth. We can hope that in spite of several hurdles Modi govt will scale the height, it has promised in the remaining period of his office.
By Dinesh Mishra
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