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January 4, 2015: As the year 2014 slipped into the pages of history, a feeling of restlessness has already begun to embrace the nation. There was heightened optimism all around when Narendra Modi-led BJP government captured power at the Centre.
Seven months have gone by since then. And, the frustration is palpable. Not surprisingly, a worried India Inc went into a huddle early last month for a stock-taking of the situation. An in-camera session of the Confederation of India Industry (CII) reportedly saw big-wigs in the Indian corporate world freely venting their views. Is the government doing enough to kick-start the economy, spur investment and beef up the infrastructure? The closed-door discussion reportedly turned into a worry-sharing session by industry captains.
Expectations were very high when people voted for the BJP government. But the Modi-led government has one too many imponderables to contend with at the moment.
And, it is now discovering that it has no magic wand to fulfil expectations in such a short period. Inadequate numbers in the Upper House, hawkish stand on interest rate by the Reserve Bank of India, and inability to perfect politics of consensus, among others, have combined to put the Modi government in a bit of a bother.
This predicament is not peculiar to the present government. The previous UPA rulers too were done in by the increasing unwillingness among political parties to adopt the accommodative path. There is, however, a difference. The BJP is a majority government. That has, perhaps, emboldened it to follow the Ordinance route to push in its reform agenda. The Ordinance route as a normal course is undesirable to say the least, and is fraught with serious consequences in a democratic set-up. The recourse to Ordinance also reflects a new emerging aggressive interface between the ruling and opposition class. In a way, BJP is only getting a taste of its own medicine. As the main Opposition party, it had no qualms in blocking many a reform initiative of the Manmohan Singh government of the UPA. Their narrow approach has hurt and is hurting the cause of the Indian economy.
Some of the recent actions of the government such as the raise in excise duty on diesel and petrol, withdrawal of excise relief to the automobile sector and the like, if read in the context of an inevitable overshooting of fiscal deficit target, also suggest a sense of ambivalence in the minds of the authorities in the government. And, this has cast doubts over the much-orchestrated growth priority of the government.
In a country like India where infrastructure is in a pathetic state, the role of government can never be minimal. The lead-role has to come from it. With several such projects stuck in the middle, the least one could expect from this government is to re-activate and put them on fast-lane.
In a way, the universal banking concept has done little in supporting the infrastructure development.
The long-gestation nature of these projects has also proved a dissuading factor for banks to look at them seriously. Perhaps the tighter provisioning norms and the near-term worries to keep the balance sheet healthy have all conspired to force banks to adopt a not-so-benign approach to infrastructure lending. Not surprisingly, a view is now increasingly gaining ground for the resurrection of exclusive development banks of former times.
Rid of compulsory ‘quarter watch’, such development banks can freely fund infrastructure project without near-term worries. With crude oil going below $60 and inflation moderating, time is tailor-made for the government to act just now to put the economy on higher growth orbit. With the restlessness growing by the day, the honeymoon period is fast approaching the expiry date. Expectations are running high as Finance Minister Arun Jaitely is getting set to present the BJP government’s first full budget. It is now or never situation, it appears.