key reforms

Source: The Hitavada      Date: 12 Jan 2018 11:16:44

WITH just one year to go for the next general elections and with the final budget of the present Union Government coming up within a month’s time, and more over to answer criticism on account of the sharp drop in the Gross Domestic Product (GDP) growth in the last some quarters, the National Democratic Alliance (NDA) Government, led by the Bharatiya Janata Party (BJP), was hard-pressed for ushering in remaining reforms that have remained untouched for the last four years of this Government’s tenure. And hence the newer reforms measures announced by the Government on Wednesday, freeing up many critical sectors of the economy for investment, including FDI (Foreign Direct Investment), should mark the direction which the Government wants the economy to take in the near and distant future. Wednesday’s announcements are being viewed as the much awaited big bang reforms. 

The case in point is that of Air India (AI) and the single brand retail sector. While the Government in its latest decision has freed up upto 49 pc for FDI investment, in the case of single brand retail it is 100 pc, besides taking similar decisions in other sectors where there is huge scope for growth, investment and employment generation like the construction sector, allowing 100 pc FDI in building townships, housing, infrastructure and real estate brokering services. Thus the new policy direction offers much incentive to foreign investors in the sectors that the Government has decided to open up.

While the Government has been trying to give a fillip to investment on its own, much of the investment was happening in the Government sector, with the Government itself taking up several infrastructure projects and trying to shore up employment so as to give push to demand. But while the Government was doing its bit on its own to give a boost to growth, the efforts were proving inadequate in the absence of private investment. Over the last few years, private investment had nearly dried up and whatever investment was taking place, especially in the manufacturing sector, hardly any created employment.

This in spite of the fact that the international rating agencies, the World Bank, International Monetary Fund and the United Nations were unanimous in their opinion about Indian economy’s growth potential and had been taking note of the plethora of economic reforms and the steps being taken for ease of doing business in the country. Obviously foreign and even domestic investors were waiting for the remaining reforms and clarity on Government’s policy making.

Wednesday’s decision shows that the Government was keen on dispelling all misgivings on policy initiatives and show clarity of purpose on economic reforms. Only a few days ago, the Parliamentary Committee on Tourism and Transport had recommended that Air India should be given some capital infusion under the ten-year restructuring plan initiated in the year 2012 for five more years to show turn-around results. Wednesday’s decision to allow 49 pc FDI in AI, however, shows that the Government is going to push for immediate private participation in Public Sector Undertakings (PSU), not only to attract FDI but also take advantage of technology that foreign investors are likely to bring in along with their management practices.

Obviously one year is too short a period for the new reforms to begin to show results. But at least the beginning is being made towards a larger goal of economic growth, infusion of private capital, latest in technological advances and creation of jobs in sectors which have huge potential. Wednesday’s announcement could be a trigger for revival of growth.