Towards a secure future

Kumar Mangalam Birla
Business World
15 May 2015

When one looks back on the first 365 days, the first thought that comes to the fore is that Prime Minister Narendra Modi has indeed rebooted India. The PM has managed to bring a fa;ltering and hesitant economy back on track with renewed confidence. The bureaucracy is empowered and foot-dragging is not an option any more. One year ago, this government swept into office, with an unprecedented electoral mandate. The people were euphoric and expectations stratospheric. The forward indicators like the stock market were running miles ahead of the ground reality. But we cannot deny that the economic facts and data that time were rather grim. As pointed out then by the Reserve Bank of India, the economy was at a trough, having experienced an investment drought. The turmoil in exchange rates, inflation and the twin deficits pulled us down.

A year down the line, on the economic front, there is plenty of good news. The current account deficit is comfortably low. The country has a war chest of foreign exchange — the highest ever. The fiscal deficit is on a declining path, causing international rating agencies to give a thumbs up, and an outlook upgrade. The currency has been remarkably stable, the credit for which should also go to the RBI. Inflation is on the wane, and indeed negative on the wholesale price index side. Consumer inflation is moderate.

There are several decisions on the economic front that are worth highlighting and complimenting. The allocation of coal mines through transparent auctions was done with great speed and brought good cheer to all stakeholders. In fact, it will add substantially to the fiscal resources of the states where the mines reside. Indeed, Prime Minister Modi is committed to what he calls "cooperative federalism", and his policies have significantly enhanced the resources of the states.

Similarly, the auction of spectrum also sets the stage for further progress in the telecom revolution. The pooled pricing of natural gas is a bold decision which cuts through unnecessary tangles. In the banking sector too, there have been proactive and concerted efforts toward restructuring of distressed assets, so that funds can be unlocked for future growth.

Move over to the economic policy arena and you see very impressive milestones. These have sown the seeds of sustainable economic growth. The first and most prominent of these is the Jan Dhan Yojana. In record time, the government has connected almost all households to bank accounts. The payoff from this will be huge in the times to come. Welfare and subsidy payments will reach beneficiaries, and reduce leakages. Similarly, the setting up of MUDRA bank will be a big boost for funding of small and medium enterprises (SMEs). After all, SMEs provide a bulk of employment and industrial output, but face difficulty in accessing bank finance. The imminent passage of the nationwide Goods and Services Tax (GST) regime would be one of the most significant economic reforms of this decade.

Campaigns like Make in India, Swachh Bharat, Digital India and Smart Cities, to cite a few, have set the tenor and direction of policy for years to come. These are actually to be seen as mission mode initiatives. The Make in India campaign is now recognised even outside the country. Its main objective is to make India a global manufacturing hub, and provide an industry- and investor-friendly climate in the country. The Prime Minister has codified it into a concrete metric, namely, increasing India's rank to be among top 50 in the global 'Ease of Doing Business' index ranking.

Similarly, the sanitation campaign has concrete targets and date lines. 'Digital India' envisages the whole country to be linked to the information highway. These initiatives along with other infrastructure-related measures on highways and waterways, will bear fruit over several years. In the social arena, the Prime Minister has personally set the tone on issues that cry out for action. Sanitation, toilets and hygiene are on the radar of public policy. Universal Social Security is an articulated goal. The first steps have already been implemented. The rights and status of the girl child have been repeatedly emphasised by the PM himself. The first year anniversary then is an occasion to reiterate commitment to these missions.

One of the most spectacular achievements of the government has been on the external front. India's diplomatic push in the past year has extended across a wide swathe of the globe — our South Asian neighbours, the US, China, Japan, Australia, Korea, France, Germany and Canada.

Key breakthroughs have been in areas such as nuclear energy, defence and attracting foreign direct investments. India has played a lead role in establishing a multilateral financial institution that rivals the existing World Bank and IMF. Special efforts to build bridges with the Indian diaspora spread across need a mention. India's successful initiatives in rescue and evacuation efforts in Yemen and Nepal have raised its diplomatic profile and standing immensely. Overall, in foreign policy, the NDA government has hit the ground running and broken new ground. I believe that the economic and business fallout from the foreign policy initiatives will unfold in the coming years.

As we commend the various economic, social and external initiatives undertaken during the first year, we must not lose sight of the unfinished task before us. Private investment spending is still tepid. This is the building block of future and sustainable growth. So, it needs to rise substantially. For that, we need appropriate monetary and tax policies. The quick implementation of the nationwide GST is an absolute must. Export of both goods and services must be increased substantially. In agriculture too, much needs to be done. Increasing productivity and investment, providing off-farm employment opportunities, and increasing the linkage of farm and the city are imperatives.

The challenges ahead cannot be downplayed. The first year saw a lot of policy initiatives that have sown the seeds of future growth. The coming years should see the harvesting of the fruits of these initiatives, and the economy in full bloom.

The author is the chairman of the Aditya Birla Group.