WITH NO BIG ELECTIONS TILL NEXT YEAREND - Modi Sarkar can Cast Its Vote for Big Reforms Fresh from its success in Maharashtra and Haryana and with no major electoral contests due in more than a year, the Narendra Modi government has room to press forward with reforms, beginning with the winter session of Parliament and the FY16 budget thereafter to deliver better economic growth and more jobs. The Modi administration put some decisions on the backburner in the run-up to the crucial assembly elections in which BJP fared well. But with just the Jammu & Kashmir and Jharkhand assembly elections due in early 2015, the government now has the room to take tough policy measures. The next crucial state election will be towards the end of next year, in Bihar, where BJP will make a bid to wrest power from JD(U). A start was made on Saturday evening itself, with the government announcing reforms on fuel pricing -decontrol of diesel and a higher natural gas price to incentivise exploration and production.A senior BJP leader told ET that there could be more big announcements in the coming days, a point that was affirmed by senior government officials. “There is a clear signal by the government that it will press ahead with all long-pending reforms,” said a top official involved in policy making. “Whatever reforms are needed will be carried out and it is prepared for it.” Siddhartha Sanyal, chief India economist at Barclays Capital, said, “There is a clear window till towards the end of 2015 where there are very few state elections.” The next move could well be a political one with the expansion of the union cabinet and reshuffle of some portfolios. Major changes were effected in the bureaucracy last week just after the state elections were held, signaling that a team was being put in place for a burst of action aimed at reviving growth that looks to be losing momentum after a strong start amid an adverse global economic climate. The government has also appointed a new chief economic adviser, Arvind Subramanian, besides naming Rajiv Mehrishi as economic affairs secretary.The economy expanded at a nine-quarter high of 5.7% in the April-June quarter but industrial production rose only 0.4% each in July and August.On the Modi government’s agenda are a revival in investments, the auction of coal blocks cancelled by the Supreme Court, financial sector reforms based on the recommendations of the Financial Sector Legislative Reforms Commission (FSLRC), insurance legislation, implementation of the goods and services tax (GST), a coherent strategy on inflation, more labour reforms and administrative measures to make it easier to do business. “Fertiliser subsidy is another key area where some action could be expected,” said the official cited above. Leading economist Rajiv Kumar said the government will have its plate full. “They need to do a lot between now and next budget to retain their credibility. If they do not, then investors will lose hope and it doesnt take much time in sentiment turning negative. Top of the list of reforms is GST and come what may they should get going with it,” he said. “Second is following up on the business environment — the whole focus should be on kickstarting investment,” he added. “They also need to come out clean on the banking sector as there are a lot of misconceptions floating on NPAs (nonperforming assets) so that lending and borrowing can start,” Kumar said. “The coal sector needs a thorough examination, not a knee-jerk reaction. (The government) needs to roll back nationalisation and put in place a robust regulation.” It will help that the Sunday results will mean a boost of as many as seven seats in the Rajya Sabha, where the government currently lacks a majority. To be sure, elections to the Upper House will only be held next in 2016 but the government numbers could get a quick immediate boost if parties formerly inimical to it lend their support. One of these is the Nationalist Congress Party, which has six seats in the house. Sanyal expects the government to continue to focus on the administrative side of things.“This government’s style has been to focus on fixing the nuts and bolts of the economy and executing developmental activities rather than making big-bang announcements. For example, they remain focused on ensuring that interministerial conflicts don’t hold up development,” he said. The approach has good support even though analysts have pointed to the absence of so-called big-ticket reforms.“Given that the lack of a well-functioning executive under the previous administration was a key driver of the slowdown in investment, this focus is critical for a revival of the ‘right’ kind of growth in India, in our view,” Morgan Stanley said in a recent report listing it as three things the government needs to fix urgently. The other two are capitalisation of state-run banks and need to curb inflation. The government is already talking with the Reserve Bank of India on financial sector reforms and a new monetary policy framework. It is also expected to quickly auction coal blocks that were cancelled by the Supreme Court recently so that the power situation is not disrupted further. The legislation to facilitate GST is likely to be moved in the winter session of parliament and the disinvestment programme is likely to begin soon. Following on from Subramanian’s appointment, more could follow, including to the think tank that will replace the Planning Commission. Aditi Nayar of ICRA is looking to a further reduction in subsidies to free up resources for infrastructure spending besides a reduction in LPG subsidies.“Various structural issues constraining project implementation could be addressed, such as the ease of land acquisition, which may require legislative changes,” she added. Other possible measures include a revamp of the rural employment guarantee scheme, changes in land acquisition rules, greater emphasis on the roads sector, direct benefits transfer and an on-the-ground push to the Make in India initiative. Source Et - 20/10/2014
Posted on: Tue, 21 Oct 2014 08:19:28 +0000
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