Gopal Krishna Agarwal,
National Spokesperson on Economic Affairs, BJP
Prime Minister Narendra Modi's recent trip to America has elevated Indo-US ties to new heights, especially economic partnership. The confidence exhibited at the India-US business conclave earlier this week is a case in point.
His government has recently completed
two years in office. Going by the reports of various international think tanks
and international institutions, the Modi government has set India on the fast
track to growth by introducing a raft of measures to boost the economy.
Recent data from the Central Statistical
Organisation (CSO) points towards the fact that the Centre's focused approach
over the last two years is bearing great results. Some people have expressed
their reservations on these economic growth figures. 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.
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 shambles by the previous UPA government, is on the fast track
to recovery. All fiscal parameters are on target, whether it is 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. Experts believe that the economy could grow in
the range of 8-8.2 percent in 2016-17. This would be backed by agriculture
sector growth surpassing the 3-4 percent mark depending on the monsoon.
All these achievements are the result of
the Modi government's tireless efforts. Flagship initiatives like UDAY, PAHAL,
and renegotiating Mauritius tax treaty, the revival of held-up projects in
roads and rural infrastructure, are showing extremely encouraging results.
These initiatives 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
has added more than Rs 4 lakh crore to the government treasury on account of
spectrum allocation, coal block, and mineral auctions, etc.
1 would like to highlight some of the
key areas of focus for the government. The first focus is towards dealing with
corruption and crony capitalism. Over the past 20 years, the world has been
reeling under the thumb of crony capitalists. To the uninitiated, crony
capitalism is a nexus between businessmen, 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 the careful and transparent process of transfer of government resources
into private hands, management of state-owned banks, especially 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. In its recent edition, The Economist
stated: "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. Under this system,
crony capitalists have devised a mechanism of transferring government resources
in a non-transparent manner. A case in point is the DND project in Noida.
The second important issue is the
management of overall debt. The world has been 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 Economist says that
its problem loans have doubled in two years.
Hungry for profits in a slowing economy,
plenty of Chinese banks have miscategorised risky loans as investments to dodge
scrutiny and lessen capital requirements, according to The Economist.
"These shadow loans were worth roughly 16 percent of standard loans in
mid-2015, up from just 4 percent in 2012."
There are many lessons India could learn
from China. The Modi government has learned them well. Instead of pushing the
problem under the carpet, the Modi government has tackled it head on. The
ongoing clean-up of bank balance sheets will help spur economic growth and
improve the lenders' profitability. "Prompt actions are being taken on
willful defaulters," said Jayant Sinha, Minister of State for Finance.
"One of the key considerations in a
situation like this, the banks should be empowered and consequently protected
so that they can bring about prudent settlements," said Union Finance
Minister Arun Jaitley. "The overall operational profit of public sector banks
last year was quite significant. It was in excess of Rs 1.4 lakh crore. It is
on account of provisioning that the overall the PSBs declared a net loss of Rs
18,000 crore
The government has already enacted the
Bankruptcy and Insolvency Code. Another set of amendments to the debt recovery
legislation and securitization legislation are before Parliament. 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 like held up road construction, blocked environmental
clearances, and dumping, among others.
The government is doing everything to
restart 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 like the setting up of a Bank
Board Bureau.
The third important initiative is the
ease of doing business. These initiatives have helped in catalysing private
investments. Some of the initiatives include easy exit policy for genuine
investors, repealing of about 1000 redundant laws and more to come, faster and
transparent project clearance policy and better dispute resolution mechanism in
the tax department where thousands of crores of individual and government
resources are blocked.
There has been a 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. The
government has also initiated premature retirement and the removal of
inefficient and corrupt employees from various departments. And finally,
targeted and focused approach to ending corruption and black money, giving
one-time compliance window to declare illegal foreign and domestic assets.
Some areas, which require flagging for
the future, are labor reforms, disinvestment reforms, especially for
loss-making PSUs, lowering of interest rates as demanded by business community
with inflation, particularly of food items looming large, and land acquisition
issues and above all the passage of the Goods and Services Tax Bill.
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 but
also spending this money to reach the target beneficiaries in a transparent
manner.
With the use of JAM and direct benefit
transfer (DBT), the government has plugged leakages and created additional
revenue for social security. The government has given them social security and
also generated widespread demand to boost the economy.
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The resources at the command of the
government are being utilized to build rural infrastructures like toilets in
rural areas, electricity to each and every household, housing for by 2022,
irrigation and rural roads.
Employment opportunities for the weaker
sections are being enlarged through Skill India, Startup 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 like drip irrigation,
neem coated urea and digitization 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. As a result of this focused approach, 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 its laurels.
There is much more in store.
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