Laying Foundations for a Better Tomorrow

Focus By Gopal Krishna Agrawal

PM Narendra Modi’s philosophy of economic development is growth through empowerment. The government has not only been successful in generating resources for the benefit of the weaker sections of the society like Dalits, women, farmers etc. but has also been able to spend this money to reach the target beneficiaries in a transparent manner.

The PM Narendra Modi US trip is scripting new heights in the Indo-US relationship, especially economic partnership. The confidence exhibited at the India-US business conclave on June 8th is a case in point.

His government has completed two years in office and if we go through reports of various international think tanks and international institutions such as, IMF, World Bank etc., they all agree that the Indian economy is on a fast-track growth and the government is taking all the right decisions in full earnest.

The recent release of the economic data by the Central Statistical Organization (CSO) points towards the fact that the focused approach of the Government over the last two years is bearing best results. Some people have shown reservation on these data but apart from a few well-reasoned arguments, most of the criticism is politically motivated. It should be borne in mind that the GDP now is being calculated using the globally accepted Gross Value Added (GVA) method, which is considered a better and more robust methodology.

With the growth rate nearing 8 percent in the last quarter of 2015/16, there is no doubt that the economy, which was left in complete doldrums by the UPA government due to widespread corruption and indecisiveness, is on the fast-recovery track. All fiscal parameters are on target, whether revenue collection or expenditure or fiscal deficit at 3.9 percent of GDP. Per capita income has also risen to Rs 93,293 from Rs 86,879 last year. People in the know say that India’s economic growth exceeding the eight percent mark in 2016-17, is a distinct possibility. This would be backed by growth in the agriculture sector surpassing the 3-4 percent if the monsoon turned out well as predicted.

All these are the result of tireless efforts of PM Narendra Modi and his cabinet. Flagship initiatives such as UDAY, PAHAL, and renegotiating Mauritius tax treaty, revival of held-up projects in roads, rural infrastructure etc. are showing extremely encouraging results. The initiatives being taken by the government have created the requisite infrastructure and demand in the economy to attract domestic and foreign investment. Corruption-less and transparent governance in the last two years have added more than Rs 4 lakh crore to the government treasury on account of spectrum allocation, coal block and mineral auctions etc.

I would like to highlight some important areas of government’s focus, pointing towards the visionary approach of Shri Narendra Modi.

Dealing with Corruption and Crony Capitalism

Over the past 20 years, the world has been reeling under crony capitalists. Crony capitalism is a nexus between businessmen and obliging bureaucrats and politicians. It undermines the state, distorts resource allocation and is against the spirit of equal entrepreneurship opportunities.

Through a fair judicial system, efficient regulation and transparency in political funding, one can bring positive results over a long period of time. Immediate steps to tackle this menace include careful and transparent process of transfer of government resources into private hands, management of state-owned banks; their debts and NPAs, control of parking and stashing of illegal money abroad.

On this count, government has been very focused and successful in its approach. Quoting from The Economist “Encouragingly, India seems to be cleaning up its act. In 2008, crony wealth reached 18 percent of GDP, putting it on a par with Russia. Today it stands at 3 percent, a level similar to Australia. A slump in commodity prices has obliterated the balance sheets of its wild-west mining tycoons. The government has got tough on graft, and the central bank has prodded state-owned lenders to stop giving sweetheart deals to Moghuls. The pinups of Indian capitalism are no longer the pampered scions of its business dynasties.”

A point of caution is that we have to be very careful with the Public Private Partnership model, as under this, crony capitalist have devised a mechanism of transferring government resources in a non-transparent manner, a case in point is DND project in Noida.

Debt Management and NPA

The second important issue is the management of overall debt in the country. The world is witness to China’s financial problems and its debt bust. The Chinese Debt/GDP ratio has increased to 260 percent from 150 percent in a decade. The latest issue of The Economist says that, its problem loans have doubled in two years. Many of the Chinese bank’s investments are actually risky loans and helps in dodging scrutiny and avoid capital adequacy.

There are many lessons to be learnt from China and surely we have learnt them well. The Modi government has done well; instead of pushing the problem under the carpet, it has tackled it head on. It has not only identified the bad loans but working towards its provisioning in bank’s balance sheets and also helping them by increasing their capital. “Prompt actions are being taken on wilful defaulters”, says Shri Jayant Sinha. Finance Minister Shri Arun Jaitley also stated, “One of the key considerations in a situation such as these, [is that] the banks should be empowered and consequently protected so that they can bring about prudent settlements.” The government is well aware that; the overall operational profits of all Public sector banks is about Rs 1,40,000 but the net loss is of Rs 18,000 crore after provisioning of bad debts.

The government has already enacted the Bankruptcy and Insolvency Code. The new Debt Recovery Legislation & Securitisation legislation is already in public domain for comment and will see the light of the day very soon. The government is also considering setting up of Stressed Asset Management Funds. The focused approach is not limited to empowering and supporting banks to deal with NPA menace, but the government agrees that the bad loan situation has also arisen on account of certain sectoral stresses such as held-up road construction, blocked environmental clearances, dumping etc. and therefore government is doing everything to restart the held-up projects, clearances, anti-dumping measures and do away with policy paralysis. The Government has gone even further ahead and implemented the recommendations of the Nayak Committee Report such as setting up of Bank Board Bureau and complete independence to the banks.

Ease of Doing Business

These initiatives have also helped in catalysing private investments. Some of the initiatives are: easy exit policy for genuine investors, repealing of about 1000 redundant laws, faster and transparent project clearance policy, better dispute-resolution mechanism in the tax department, where thousands of crores of individual and government resources are blocked. Others are reduction in the cost of collection of direct taxes from 1.36 percent in the year 2001-2 to 0.59 percent in 2014-15, and reducing pendency in completing assessment of tax payers. The government has also started premature retirement and removal of inefficient and corrupt employees from various departments. And finally, targeted and focused approach to end corruption and black money, giving one time compliance window to declare illegal foreign and domestic assets.

Flagging for the Future

Some areas, which require special attention for the future are: labour reforms and stand on hire and fire policy; PSU reforms regarding policy of disinvestment, especially loss-making units; lowering of interest rates as demanded by business community; land acquisition issues; and above all passing of GST bill, with the sword of inflation, particularly food items, looming large.

Social, Rural and Youth Empowerment

PM Narendra Modi’s philosophy of economic development is ‘growth through empowerment’. The government has not only been successful in generating resources for the benefit of the weaker sections of society like Dalits, women, farmers etc. but has also been able to spend this money to reach the target beneficiaries in a transparent manner. With the use of Jan-Dhan Yojna, Aadhar and Mobiles (JAM) and Direct Benefit Transfer (DBT) through it, government has plugged leakages and created additional revenues for social security. At one end, it has given them social security and on the other hand generated widespread demand to boost the economy. The resources at the command of the government are being utilised to build rural infrastructure such as toilets in rural areas, electricity to each and every household, housing for all by 2022, irrigation and rural roads.

Employment opportunities for the weaker sections are being enlarged through Skill India, Start-up India Stand-up India and by easy access to loans under MUDRA Bank. The real game changer in the near future will be the doubling of farmers’ income through reduced cost, better national market access facilities, risk mitigation through user-friendly crop-insurance cover, soil health card, efficient irrigation such as drip irrigation, neem-coated urea and, digitisation and reforms of land records etc. Truly, this government is focusing on the development of all sections of the society across cast, creed, religion and geography.

Summing Up

Because of all these focused approaches, India has become one of the fastest-growing major economies in the world and has been able to attract largest Foreign Direct investment (FDI). We are sure that the government will not sit on these laurels and there is much more in store for all.

Go to Content Page

Author

Back to Top

Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

Search