As Prime Minister Narendra Modi-led government steps into its second year, it leaves behind a cacophony of claps and boos over the hits and misses in the first 12 months in power. While a section of observers points to a lack of big bang reforms despite the huge euphoria surrounding the new government, others say Modi has initiated a series of small steps which would throw up more concrete changes in the ground in the coming years.
VCCircle lists out a few important deliverables on which the PM and his government would be judged in the coming year.
Land acquisition bill
One of the major hurdles for the government has been passing of key reforms. The land acquisition bill still remains a bone of contention between the government and the Opposition. While Modi had temporarily pushed through the changes through the ordinance route, lack of political support in the upper house of the Parliament Rajya Sabha meant it is yet to get a legislative green signal.
Goods and Services Tax
Another major area on which the government needs to show concrete action is tax reforms with the long pending implementation of a uniform national Goods and Services Tax (GST). While Finance Minister Arun Jaitley has increased the share of states in the quantum of taxes to be divided from GST receipts, the government has not been able to muster support for passing the legislation. With the government setting a target for April 1, 2016 for the implementation of tax regime, it has set a tough task for itself to show the world its resolve when it comes to crucial reforms.
One of the weakest links and impediments to India's growth story is infrastructure. The government has sought to clear pending projects and passed norms for various enablers for the sector but the real test lies in implementing those reforms. A key step ahead would be to restructure the PPP model of infrastructure development. The second year of the government would be a good period to judge whether the government's promise of rekindling infrastructure projects is showing any on-the-ground activity.
The PM had boldly pronounced moves to revive the manufacturing sector with his ‘Make in India’ programme. However, one year down the line it is yet to show up with manufacturing sector still in a soft state. Economists say the problem is three pronged—lack of major activity in infrastructure, high cost of capital to set up plants and zero talk of labour reforms which can boost the sector. With gradual cuts in lending rates, everyone is eager to know whether the big talk on boosting manufacturing in the country gets a leg up especially as the government trumpets its moves of ease of doing business in the country. A lot would depend on whether the government remains on track to meet its deadline of implementing GST by next April.
The banking sector has been riddled with the problem of rising bad loans with no end in sight. All the major public sector banks have high rate of non-performing assets (NPAs) on their balance sheet. While the government, in confluence with RBI and SEBI, has taken steps to curb the problem of rising debt by restructuring debt and other measures, the banking sector is yet to see a recovery. The NPA problem has also constrained lending at large in the economy. The government will have to do more to adequately capitalise the banking sector to curb the menace of NPAs.
Education and health
While the government tasted success with million of bank accounts being opened as part of financial inclusion and in implementing life and accident insurance schemes and a social security network, not enough has been said or done about improving the education or the healthcare systems in the country. The government's initiatives in the social infrastructure space would be keenly watched this year.
The government has maintained its stance of fiscal prudence by bettering its own target for fiscal deficit for 2014-15. On the positive side, it has set the tone for around-the-year disinvestments, breaking away from the stop-gap arrangements of the past, it would now be measured against its aggressive target of garnering Rs 69,500 crore ($11 billion) in the current year.
Labour market reforms
This is another key issue that foreign investors and economists are looking forward to see not just as a standalone economic reform but also to support the grandiose plan to boost manufacturing within the country. With the government already facing heat over the land acquisition bill, Modi will have to bring a consensus on this much needed reform. India's labour laws are archaic and makes hiring and firing difficult for companies. In order to attract more investment, the government will have to work towards labour reforms while ensuring that no part of society becomes worse off.