CAUTIOUS OP­TI­MISM

Though the ele­phant has started mov­ing, poor macroe­co­nomic fac­tors threaten to re­strict its pace.

India Business Journal - - CONTENTS - IBJ RE­SEARCH BUREAU

It was a big boost for the be­lea­guered In­dian econ­omy. In early July, a World Bank re­port placed In­dia as the world's sixth-largest econ­omy for 2017. In fact, In­dia had sur­passed France to oc­cupy the pres­ti­gious, sixth spot.

Weeks later fol­lowed an­other block­buster of a sur­prise that seemed to si­lence cyn­ics who were mock­ing In­dia’s as­cent on the global eco­nomic front. On Au­gust 31, the Central Statis­tics Of­fice an­nounced that the coun­try’s econ­omy had grown by a whop­ping 8.2 per cent in the first quar­ter (Q1 – April-June 2018) of 2018-19 as against 5.6 per cent growth in the Q1 of 2017-18.

By reg­is­ter­ing blis­ter­ing 8.2 per cent growth in the Q1 of FY19, In­dia had re­tained the tag of the world’s fastest-grow­ing econ­omy. The Q1 fig­ures, which were be­yond all ex­pec­ta­tions, had come on the heels of ro­bust 7.7 per cent Gross Do­mes­tic Prod­uct (GDP) growth dur­ing the Q4 of 2017-18 (Jan­uary-March 2018).

There have been more promis­ing de­vel­op­ments in the past few months which seem to in­di­cate that the In­dian econ­omy is turn­ing buoy­ant again. The Index of In­dus­trial Pro­duc­tion (IIP) for June – the lat­est avail­able of­fi­cial data that was out last month – had surged at its fastest pace in five months at 7 per cent as against 3.9 per cent in May.

The IIP data, which tracks a wide range of prod­ucts in min­ing, man­u­fac­tur­ing and elec­tric­ity sec­tors, had con­tracted by 0.3 per cent in June 2017 be­cause of de­stock­ing by busi­nesses ahead of in­tro­duc­tion of the Goods

and Ser­vices Tax (GST). The cu­mu­la­tive growth of the fac­tory out­put for the April-June 2018 quar­ter stood at 5.2 per cent over the year-ago pe­riod when it had recorded a dis­mal 1.9 per cent rise.

The vi­brant re­vival in in­dus­trial pro­duc­tion for June was led by a ro­bust pick-up in the man­u­fac­tur­ing seg­ment. Some 19 out of 23 in­dus­try groups had ended the month on a high note, with pro­duc­tion of con­sumer goods and cap­i­tal goods ex­pand­ing by 13.1 and 9.6 per cent re­spec­tively.

In­ci­den­tally, the big­gest relief for the gov­ern­ment came from the most un­ex­pected quar­ter. Gross non-per­form­ing as­sets (NPAs) of the bank­ing sec­tor, which have been giv­ing many sleep­less nights to pol­icy-mak­ers, fell by Rs 21,825 crore or 2.1 per cent to Rs 10,03,000 crore in the June 2018 quar­ter from Rs 10,24,825 crore in the March 2018 quar­ter.

This was the first time in five quar­ters that NPAs of the coun­try's banks ac­tu­ally de­clined, pro­vid­ing a sliver of hope that the vexed bad loan is­sue was fi­nally mak­ing some progress. "Fresh slip­pages have mostly been from the watch-list, and the high pro­vi­sion cov­er­age ra­tio of com­pa­nies gives con­fi­dence that by the end of FY19, banks will start re­port­ing growth in net profit," notes Vi­neeta Sharma, the head of re­search of Narno­lia Financial Ad­vi­sors.

Adding to the eu­pho­ria was the boom­ing stock mar­ket, with bench­mark in­dices Sen­sex and Nifty hit­ting their life­time highs of 38,700 and 11,600 re­spec­tively. The In­dian bourses' sec­ond-long­est and on­go­ing bull run since 2014 (the first-long­est one spanned be­tween 2003 and 2008) has seen the Sen­sex surg­ing from over 21,100 to more than 38,400 and the Nifty soar­ing from more than 6,200 to over 11,500.

Shaky fun­da­men­tals

On the face of it, the In­dian stock mar­ket ap­pears to be un­stop­pable in its up­ward jour­ney. The bench­mark in­dices have been bullish for the past four years - bar­ring a few brief spells of down­turn. They have con­tin­ued to surge even in the face of some of the big­gest neg­a­tive de­vel­op­ments, be they the global tar­iff war, the ris­ing crude oil price or the plung­ing ru­pee.

How­ever, a closer ex­am­i­na­tion re­veals that the mar­ket rally has been fu­elled by only a hand­ful of stocks of the 30-share Sen­sex and the 50-share Nifty. In fact, the true na­ture of the rally be­comes ev­i­dent if one com­pares the per­for­mance of the bench­mark in­dices with that of mid-cap and small­cap in­dices. Since Jan­uary this year, the Sen­sex and the Nifty have each risen by over 10 per cent. Dur­ing the same pe­riod, the BSE Mid-Cap (com­pris­ing 99 shares) and the BSE Small­Cap (con­sti­tut­ing 852 scrips) in­dices have each plunged by more than 11 per cent. "The broader mar­ket, ex­clud­ing the top 10 stocks, shows a 10 per cent fall. Over­all, the all-time high level of the Sen­sex is only an il­lu­sion as it is led only by 10 stocks," points

out G Chokkalingam, the founder and man­ag­ing di­rec­tor of Equinomics Re­search.

Sadly, the cur­rent mar­ket boom is too thinly spread and, for all prac­ti­cal pur­poses, de­vel­op­ing into a dan­ger­ous bub­ble. Money be­ing poured by for­eign port­fo­lio in­vestors (FPIs) and do­mes­tic in­sti­tu­tional in­vestors (DIIs) - es­pe­cially mu­tual funds through their sys­tem­atic in­vest­ment plans (SIPs) - is get­ting con­cen­trated into a very few blue-chip stocks, which have been sus­tain­ing the bull run. It would not be out of place to note that the bench­mark in­dices do not even re­flect the stock mar­ket, let alone rep­re­sent­ing the econ­omy. No won­der, the eq­uity mar­ket boom rages on un­abated de­spite not-so-buoy­ant cor­po­rate earn­ings and poor eco­nomic fun­da­men­tals.

In short, the cur­rent mar­ket rally ap­pears un­sus­tain­able in the long term. More­over, the few, rosy, macroe­co­nomic num­bers in re­cent months, es­pe­cially re­lated to the IIP, are tran­sient in na­ture. On the other hand, high crude oil price - hov­er­ing around $75 a bar­rel - and plung­ing ru­pee that has breached the 70 mark to a dol­lar - pose a real threat to the In­dian econ­omy.

Geopo­lit­i­cal fac­tors, such as the US' sanc­tions on Iran and Venezuela and a cold war be­tween the Or­ganzi­a­tion of Petroleum Ex­port­ing Coun­tries (OPEC) and Amer­i­can shale oil pro­duc­ers, has taken the Brent crude oil to around $75 a bar­rel from be­low $30 in 2015. The high oil price is cer­tainly bad news for In­dia, which im­ports about 80 per cent of its to­tal re­quire­ment.

In­dia had im­ported 220 mil­lion tonnes (mt) of crude oil in 2017-18 for $87.7 bil­lion at an av­er­age price of $60 per bar­rel and at an ex­change rate of Rs 60 per dol­lar. The coun­try had ear­lier set an im­port tar­get of 227 mt of oil for $108 bil­lion for 2018-19 at an av­er­age price of $65 per bar­rel and at an ex­change rate of Rs 65 per dol­lar. With the oil price ris­ing to around $75 per bar­rel and the ru­pee de­pre­ci­at­ing past Rs 70 per dol­lar, the coun­try's oil im­port bill will rise sub­stan­tially to around $115 bil­lion.

The ris­ing oil im­port bill, to a great ex­tent, has led to In­dia's trade deficit - dif­fer­ence be­tween mer­chan­dise im­ports and ex­ports of a coun­try - bal­loon­ing by a whop­ping 57 per cent in July 2018 to $18.02 bil­lion from $11.45 bil­lion in the year-ago month. More­over, mount­ing im­ports of elec­tronic gad­gets and gold, the other two cat­e­gories of In­dian im­ports af­ter crude oil, have fur­ther fu­elled the bur­geon­ing trade deficit.

The ex­pand­ing trade deficit is also set to up­set the coun­try's Cur­rent Ac­count Deficit (CAD) - dif­fer­ence be­tween a coun­try's im­port of goods and ser­vices and its ex­port of goods and ser­vices. Ac­cord­ing to an­a­lysts, the coun­try's CAD is ex­pected to surge to $76 bil­lion (2.8 per cent of GDP) in FY19 from $49 bil­lion (1.9 per cent of GDP) in FY18.

The in­ter­play of weak ru­pee and

"Fresh slip­pages have been mostly from the watch­list, and the high pro­vi­sion cov­er­age ra­tio of com­pa­nies gives con­fi­dence that by the end of FY19, banks will start re­port­ing growth in net profit."

VI­NEETA SHARMA Narno­lia Financial Ad­vi­sors

ris­ing im­ports is play­ing havoc on the econ­omy. It is mak­ing im­ported goods costlier and also push­ing up the coun­try's trade deficit and CAD. At the same time, ris­ing im­ports are fu­elling de­mand for the dol­lar and fur­ther weak­en­ing the ru­pee.

In fact, the ru­pee has been one of the worst-per­form­ing cur­ren­cies among emerg­ing mar­ket peers, reg­is­ter­ing a nearly 10 per cent fall this year. The weak cur­rency has prompted the Re­serve Bank of In­dia (RBI) to in­ter­vene in the for­eign ex­change (forex) mar­ket oc­ca­sion­ally - un­like fre­quently in the past - to sell dol­lars and shore up the ru­pee. This has partly brought down the coun­try's forex re­serves to just a lit­tle over $400 bil­lion from a record $424 bil­lion in April this year.

The coun­try's forex re­serves have also de­pleted as a re­sult of lower for­eign in­vest­ment into the cap­i­tal mar­ket - both stock and bond mar­kets as well as flight of cap­i­tal from In­dia to the de­vel­oped world, es­pe­cially the USA. The US Fed­eral Re­serve, the Amer­i­can central bank, has grad­u­ally be­gun hik­ing pol­icy rates with its econ­omy look­ing up again. This has re­sulted in flight of cap­i­tal from emerg­ing mar­kets, in­clud­ing In­dia, to the US as re­turns turn lu­cra­tive in the Amer­i­can mar­ket. For­eign in­vestors have pulled out $6.7 bil­lion from In­dian stocks and bonds so far this year, send­ing the ru­pee into a tail­spin and thus shav­ing off the coun­try's forex re­serves.

Mean­while, in­fla­tion - both based on Whole­sale Price Index (WPI) and Con­sumer Price Index (CPI) - has reared its ugly head again as costly oil and other im­ports stoke prices. In­ter­est­ingly, the July WPI and CPI num­bers sprung a pleas­ant sur­prise by eas­ing to 5.09 and 4.17 per cent re­spec­tively. The lower rise of in­fla­tion was mainly on ac­count of cheaper food ar­ti­cles, es­pe­cially fruits and veg­eta­bles.

How­ever, the CPI in­fla­tion, which the RBI has been man­dated to tar­get, is still above the central bank's com­fort zone of 4 per cent. More­over, the RBI is rightly alert about hard­en­ing oil price, fall­ing ru­pee and larger-thanaver­age in­crease in Min­i­mum Sup­port Price (MSP) for Kharif crops, among others. This has prompted the RBI to hike the Repo Rate - the rate at which the RBI lends money to banks for short term - twice by 25 ba­sis points each in June and Au­gust to 6.50 per cent. The rate hikes, the first since Oc­to­ber 2013, sig­nal a re­turn to hard in­ter­est rates once again.

With the 10-year, gov­ern­ment, bench­mark, bond yield inch­ing closer to 8 per cent from around 6 per cent last year, fur­ther hard­en­ing of in­ter­est rates can­not be ruled out. "Given the up­side risks to in­fla­tion, an­other pol­icy rate hike can­not be ruled out. How­ever, if there is an es­ca­la­tion in

"The State gov­ern­ments work­ing proac­tively on ease of do­ing busi­ness are get­ting bet­ter in­vest­ments and busi­ness in­ter­est, and the Central gov­ern­ment's rank­ing of States has played a good role in that."

RAKESH BHARTI MIT­TAL

Pres­i­dent, CII

trade war risks and a re­sul­tant global out­put com­pres­sion, the RBI then could be prompted to stay on a pro­longed pause," opines Ab­heek Barua, the chief econ­o­mist of HDFC Bank.

More wor­ries

The man on the street may stare ex­pres­sion­lessly at high-sound­ing terms, such as trade deficit, CAD and hard­en­ing of rates. But he cer­tainly feels the pinch­ing prices of es­sen­tials even though he may not be well versed with CPI and WPI in­fla­tion.

The dou­ble whammy of ris­ing crude oil price and rapidly-de­pre­ci­at­ing ru­pee is set to roil the econ­omy. More­over, the twin ac­tions will also have pro­found im­pact on the com­mon man. The high oil price will leave no sec­tor un­touched as it is the fuel that keeps the mod­ern world tick­ing.

As trade deficit and CAD rise, they lead to flight of for­eign in­vest­ment from the coun­try's mar­kets and busi­nesses, weaken the ru­pee and fuel in­fla­tion, thereby burn­ing a hole in the pock­ets and purses of com­mon peo­ple. More­over, the RBI's coun­ter­ac­tion to tackle both for­eign in­vest­ment out­flow as well as in­fla­tion is to hike pol­icy rates. This brings a hard in­ter­est rate regime into play and raises the cost of funds.

High bor­row­ing rates do af­fect every­one from triple-A-rated cor­po­rate houses to mi­cro, small and medium en­ter­prises (MSMEs) to farm­ers as well as home loan bor­row­ers. But bar­ring big-ticket cor­po­rate en­ti­ties which have ac­cess to mul­ti­ple sources of credit at cheaper rates - all other cat­e­gories of bor­row­ers will find it tough to ac­cess loans in the first place. Be­sides, if they do suc­ceed in se­cur­ing loans, they end up re­pay­ing them at high rates of in­ter­est.

The flip side of the high in­ter­est rate regime is that savers get to ben­e­fit from high re­turns on their sav­ings. How­ever, a sad story play­ing out in In­dia - an econ­omy that prides it­self for its high sav­ings rate - has been a de­clin­ing rate of over­all sav­ings from 34.6 per cent in 2012-13 to 30 per cent in 2016-17, the lat­est avail­able data.

And the worst dip has been seen in the house­hold sec­tor, the largest con­trib­u­tor to sav­ings in the econ­omy, from 23.6 to 16.3 per cent dur­ing the pe­riod un­der re­view, re­veals a re­port of In­dia Rat­ings and Re­search. The re­port has cited a host of fac­tors, in­clud­ing high in­fla­tion that tends to eat into dis­pos­able in­come and the re­cent de­mon­eti­sa­tion, for the coun­try's erod­ing sav­ings rate. "We need to make house­holds trust financial mar­kets so that sav­ings can move from phys­i­cal to financial as­sets which would gen­er­ate bet­ter re­turns," notes Renuka Sane, a pro­fes­sor at Na­tional In­sti­tute of Public Fi­nance and Pol­icy (NIPFP).

The state of in­vest­ments in projects and busi­nesses, in the mean­while, is not en­cour­ag­ing ei­ther. Ac­cord­ing to re­cent data re­leased by think-tank Cen­tre for Mon­i­tor­ing In­dian Econ­omy (CMIE), In­dian com­pa­nies an­nounced new projects worth Rs 2,05,000 crore in the quar­ter ended June 2018. The fig­ures are 35 per cent lower from Rs 3,15,000 crore of new projects an­nounced in the quar­ter that ended March 2018 and 22 per cent lower than those in the June 2017 quar­ter.

Be­sides, Gross Fixed Cap­i­tal For­ma­tion, a mea­sure of in­vest­ment spend­ing, has fallen to 28.5 per cent of GDP in FY18 from 34.3 per cent in FY12. As a re­sult, av­er­age ca­pac­ity util­i­sa­tion in the man­u­fac­tur­ing sec­tor has slipped to around 70 per cent from above 80 per cent four years ago. A com­bi­na­tion of lower de­mand, highly-lever­aged bal­ance sheets of In­dia Inc as well as bad debt-bat­tered bank­ing sec­tor has led to pri­vate sec­tor in­vest­ments slid­ing year af­ter year. More­over, the in­ter­est rate cy­cle turn­ing high again fur­ther damp­en­ing the out­look on in­vest­ments.

Lower in­vest­ments tend to ham­per job cre­ation. How­ever, jobs are an area where there is a se­ri­ous lack of re­li­able data. Ac­cord­ing to the gov­ern­ment's first-ever es­ti­mate of pay­roll count based on Em­ploy­ees' Prov­i­dent Fund Or­gan­i­sa­tion (EPFO) sub­scrip­tion and data from the Em­ploy­ees' State In­sur­ance Cor­po­ra­tion and the Pen­sion Fund Reg­u­la­tory and De­vel­op­ment Author­ity, over 35 lakh jobs were added in the for­mal econ­omy in the six months be­tween Septem­ber 2017 and March 2018.

How­ever, the sixth and the sev­enth Quar­terly Em­ploy­ment Sur­veys (QES), con­ducted by the Union Labour Min­istry, show that only 2 lakh jobs were cre­ated be­tween April and Septem­ber 2017. Al­though the two sets of data are from dif­fer­ent pe­ri­ods of time, a huge vari­a­tion in the num­ber of new jobs cre­ated only fur­ther mud­dles a mat­ter as vi­tal as job cre­ation. The num­ber of new EPFO ac­counts could be a re­flec­tion of the em­ploy­ment sit­u­a­tion. How­ever, it does not take into con­sid­er­a­tion du­pli­ca­tion of ac­counts and those com-

"The broader mar­ket, ex­clud­ing the top 10 stocks, shows a 10 per cent fall. Over­all, the all-time high level of the Sen­sex is only an il­lu­sion as it is led only by 10 stocks."

G CHOKKALINGAM

MD, Equinomics Re­search

pa­nies not reg­is­tered with the pen­sion fund body.

"What the EPFO fig­ures can tell us at best is if jobs are be­ing added in the for­mal sec­tor. It is dif­fi­cult to draw short-term con­clu­sions from EPFO data be­cause em­ploy­ers file their EPFO re­turns spo­rad­i­cally," notes Ravi Sri­vas­tava, a pro­fes­sor at JNU's School of So­cial Sciences. Whether it is the EPFO data or data culled from the QES, it is time that In­dia had a re­li­able source of job cre­ation data. More­over, In­dia will have to has­ten the process of job cre­ation to ac­com­mo­date 1.2 crore peo­ple en­ter­ing the job mar­ket ev­ery year.

If there is so much of di­ver­gence with re­gard to jobs data in the for­mal sec­tor, there is lit­tle that can be ex­pected from the in­for­mal sec­tor. The state of farm and other al­lied sec­tors does not paint a very rosy pic­ture. Un­for­tu­nately, un­rest in farms across the coun­try­side stands out more promi­nently than agri­cul­tural pros­per­ity.

Agriculture and al­lied sec­tors grew by 3.4 per cent in 2017-18 as against 6.3 per cent growth clocked in 201617. Bar­ring FY17, the farm sec­tor has had a bleak show in re­cent times, ex­pand­ing by 1.2 per cent in 2015-16 and grow­ing by mea­gre 0.2 per cent in 2014-15.

Mean­while, a re­cent re­port of the Com­mit­tee on Real Sec­tor Statis­tics put out in the public do­main last month need­lessly gen­er­ated more heat than light. The re­port con­tained the much-an­tic­i­pated GDP back se­ries data, which was cal­cu­lated by tak­ing into ac­count the new GDP method­ol­ogy. The data showed that the In­dian econ­omy had twice grown by over 10 per cent, and the years of growth hap­pened to be in the UPA regime. As ex­pected, there was more po­lit­i­cal noise be­tween the rul­ing NDA gov­ern­ment and the Op­po­si­tion Congress Party. Un­for­tu­nately, po­lit­i­cal one­up­man­ship will take the coun­try and the econ­omy nowhere. In­stead, the need of the hour is more struc­tural re­forms.

The way out

To be fair, the Naren­dra Modi gov­ern­ment has rolled out many bold and far-reach­ing re­forms in its ten­ure so far. The big­gest of them, of course, is the GST, which fi­nally saw the light of day last July af­ter al­most two decades of many missed dead­lines. The roll­out of GST, one of the big­gest tax re­forms in independent In­dia, did dis­rupt the econ­omy dur­ing the ini­tial months. But a se­ries of changes in pro­ce­dures and tax re­turns has made the GST more busi­ness-friendly and brought a large num­ber of traders into the tax net.

En­act­ment of the In­sol­vency and Bankruptcy Code (IBC) of 2016 is yet an­other struc­tural re­form that has re­placed sev­eral, dis­persed and out­dated bankruptcy statutes into a sin­gle Act and at­tuned it to the mod­ern, com­plex and ever-chang­ing world. The new bankruptcy law has cre­ated a def­i­nite frame­work for res­o­lu­tion of banks' NPAs.

Around 5,000 cases re­lat­ing to debt res­o­lu­tion have been re­ferred to the Na­tional Com­pany Law Tri­bunal (NCLT). The agency des­ig­nated for cor­po­rate debt res­o­lu­tion has dis­posed of 2,750 cases, while 1,988 cases are pend­ing be­fore it. More­over, the bankruptcy law has helped re­solve three of the coun­try's first, 12, largest NPAs by hand­ing them over to new pro­mot­ers.

The gov­ern­ment has breathed new life into the econ­omy by pro­vid­ing a ma­jor thrust to a new, in­te­grated, in­fra­struc­ture pro­gramme, in­volv­ing

"What the EPFO fig­ures can tell us at best is if jobs are be­ing added in the for­mal sec­tor. It is dif­fi­cult to draw short-term con­clu­sions from EPFO data be­cause em­ploy­ers file their EPFO re­turns spo­rad­i­cally."

RAVI SRI­VAS­TAVA

Pro­fes­sor, JNU "We need to make house­holds trust financial mar­kets so that sav­ings can move from phys­i­cal to financial as­sets which would gen­er­ate bet­ter re­turns."

RENUKA SANE

Pro­fes­sor, NIPFP

build­ing of roads, rail­ways, wa­ter­ways and air­ports. More than 400 stalled road projects have been restarted. The am­bi­tious Rs 6.92-lakh crore Bharat Mala, in­volv­ing 24,800 km of high­ways run­ning through eco­nomic cor­ri­dors, bor­der and coastal ar­eas and ex­press­ways - has been set in mo­tion.

There has been progress on the Sa­gar­mala project, aimed at ex­pand­ing ca­pac­ity of ports. Be­sides, the gov­ern­ment is fo­cus­ing on in­land wa­ter­ways to har­ness the mighty rivers of the coun­try for ef­fi­cient and eco­nom­i­cal trans­port so­lu­tion, apart from boost­ing rail and air in­fra­struc­ture.

The Modi gov­ern­ment has also un­veiled a num­ber of so­cial wel­fare schemes to up­lift the weak sec­tions of so­ci­ety. Surge in Jan Dhan ac­counts from 12.50 crore in 2015 to 31.60 crore in 2018 and the num­ber of di­rect ben­e­fit trans­fers (DBT) from 62,000 in 2015-16 to 1,90,000 crore in 2017-18 has put financial in­clu­sion on a fast track of ex­pan­sion. The Prad­han Mantri Ujjwala Yo­jana, aimed at en­abling poor house­holds ac­cess to LPG, ranks among the gov­ern­ment's best so­cial schemes with 3.87 crore sub­sidised cook­ing gas con­nec­tions.

In fact, it would not be wrong to say that the Union gov­ern­ment has largely ex­e­cuted most of the re­forms that are un­der its am­bit. It is now time for the States to ex­pe­dite their part of re­form mea­sures to ini­ti­ate the much­needed struc­tural changes in the econ­omy.

The Cen­tre has set a laud­able goal of dou­bling farm­ers' in­come. But this tar­get will only re­main on pa­per if the States do not join hands with the Union gov­ern­ment. Higher MSP and farm loan waivers are more like bandaid so­lu­tions. The States must whole­heart­edly push forth e-NAM - a na­tional on­line mar­ket plat­form - and the new APMC (Agriculture Pro­duce Mar­ket Com­mit­tee) Act to pro­vide farm­ers with greater mar­ket ac­cess. Be­sides, har­ness­ing tech­nol­ogy for farm­ing, strength­en­ing and ex­tend­ing ir­ri­ga­tion in­fra­struc­ture, adop­tion of con­tract farm­ing and en­cour­ag­ing food pro­cess­ing in­dus­try will go a long way in en­rich­ing the farm­ing community.

Ease of do­ing busi­ness (EoDB) is an­other area that needs im­me­di­ate at­ten­tion of States. In­dia has been mov­ing up the EoDB rank­ing in re­cent years. Be­sides, the Cen­tre has be­gun a good prac­tice of get­ting States to com­pete among them­selves for ex­celling in EoDB. At he Sate level, there is a need to re­duce the num­ber of per­mits re­quired and has­ten var­i­ous ap­provals needed to start projects. "The State gov­ern­ments work­ing proac­tively on ease of do­ing busi­ness are get­ting bet­ter in­vest­ments and busi­ness in­ter­est, and the Central gov­ern­ment's rank­ing of States has played a good role in that," opines CII Pres­i­dent Rakesh Bharti Mit­tal.

Mean­while, the Cen­tre and the States should also col­lab­o­rate in a mean­ing­ful man­ner to get the grand schemes and projects, like Smart City, Dig­i­tal In­dia and Start-Up In­dia, among others, rolling on the ground. This can in­fuse new life into the econ­omy as well as help gen­er­ate large-scale em­ploy­ment op­por­tu­ni­ties. The Cen­tre should es­pe­cially de­sign new financial prod­ucts for in­vestors who are mov­ing to­wards stocks and mu­tual funds from gold and land. This can spur sav­ings rate which has been on the de­cline in re­cent years.

Cit­ing a re­cent IMF re­port in his In­de­pen­dence Day speech last month, Prime Min­is­ter Modi had noted that the In­dian econ­omy was now like a sleep­ing ele­phant that had wo­ken up and started run­ning. The ele­phant has in­deed wo­ken up and be­gun walk­ing. But the Cen­tre and the States must now join hands to en­sure that the ele­phan­tine In­dian econ­omy sus­tains a high growth rate for the fruits of growth to reach down to the last man.

IN­DIAN ECON­OMY

Prime Min­is­ter Naren­dra Modi: Get­ting the ele­phan­tine In­dian econ­omy up and run­ning

Bench­mark in­dices do not even re­flect the stock mar­ket, let alone rep­re­sent­ing the econ­omy.

Struc­tural re­forms, like GST and bankruptcy code, have helped in has­ten­ing eco­nomic growth.

Gov­ern­ment has breathed new life into the econ­omy by pro­vid­ing a ma­jor thrust to in­fra­struc­ture de­vel­op­ment.

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