Push the reform agenda

Finally, the world is talking about India’s progressive economy and the rating agencies have added their flavors to the India’s sovereign rating. As former Finance Minister Chidambaram put it rightly, India lost the grip on the economy during the period 2009-12. Perhaps, a few economic reforms during that time would have placed India in a slightly better position today. Nevertheless, 2013 onwards the Indian economy’s journey towards revival is slowly yielding results. Inflation is coming down.

Investments are promised and are expected to pour in from the second quarter of the current fiscal. The Central government’s efforts to remove bottlenecks to the stalled projects shall also give good results. More devolution of funds to States from the Union Budget should lead to a healthy competition among the States to excel and contribute to the overall India’s growth story. The yearning for financial betterment among people, especially youth, should sustain the nation’s pace towards more growth milestones.

Even though PMI (purchasing managers’ index) numbers are not encouraging in respect of India, let us be happy that the PMI has not gone down below the 50 mark. Core sector growth showing negative 0.1% is not a big worry, as long as it does not repeat the poor show again. Oil prices, though, have fallen sharply and are expected to settle down between $50 and $70 a barrel. The automobile sector’s registering a growth of 19% during April also sounds good.

Though the forecast of below normal monsoon is a cause for concern, it should not, however, be duly stressed upon – the country has enough foodgrain stocks to deal with any eventuality across the country. It is good that the coal productions are going up steadily and the recent auctioning of more coal blocks will only help the nation reduce its dependence on coal imports and, hopefully, save precious forex. January 2015 has seen a fall of as much as 21 % in coal imports.

But, all said and done, the Centre needs to push its reforms agenda. Time has come for all political parties to look at the country’s growth and leave behind petty politics. As for the sustainability of projects, long-term financing should get the attention of the government, especially in key sectors like infrastructure. The RBI has talked about the complete rupee convertibility in the capital account. Perhaps it is time it thought of allowing the Indian Industry to import equipment on a 10/20 year differed payment system, backed by local banks. This practice was in use till 1970’s and later discontinued.

The rupee had hit an all-time low of 68.845 per dollar in August 2013. Let us hope such a situation does not arise. Otherwise, whatever advantage we are deriving from low oil prices will be wiped out and inflation will again rear its head. Now we have to see the impact of GST. It is argued it will help GDP go up by 1 to 1.5%, the reverse is also true if all the goods are not properly classified. But one thing is clear that the manufacturing industry will be happy to have the GST in place.

By Raghava Baba