The three projects to change the economic landscape of India

December 16, 2015 09:15 PM
Japanese Bullet train

These three projects represent a total commitment of $25.3 billion or Rs 1.69 lakh crore!

By Rajiv Kumar*

There has been some exceptionally good economic news in the past few days. The awfully delayed $7.6 billion TAPI gas pipeline agreement was signed at last in the ancient town of Mari, Turkmenistan last Saturday . A day earlier, visiting Japanese Prime Minister Shinzo Abe announced a virtually interest free loan to India of $12 billion for constructing the bullet train line between Ahmedabad and Mumbai.

It is a crying shame that the Congress-led opposition is hellbent on thwarting economic progress rather than promoting it. I wonder how our foreign partners must be lookin

A week earlier, GE and Alstom broke ground with plans for two plants for the manufacture of railway locomotives with total investments of $5.7 billion in Bihar. These three ultra-large greenfield projects represent a total commitment of $25.3 billion or Rs 1.69 lakh crore! The three projects, all of which have the potential to change the domestic economic landscape, have been hanging fire for long. I initiated the TAPI project, for example, 15 years ago on behalf of the Asian Development Bank. Hopefully , these three announcements represent the beginning of the much awaited de-bottlenecking of more than 60 large projects that the government inherited.While reviewing these projects, as he did with Niti Aayog on 9 November, Prime Minister Narendra Modi could benefit by enquiring about the reasons for such inordinate delays in the past.

There is other good news as well.India's economic growth at 7.2% came in higher than China's in the April-June quarter. Index of industrial production (IIP) rose by 9.8% in October raising the average growth during April-October 2015 to 4.8%, compared to 2.2% in 2014-15.

Commercial vehicles sales, a leading economic indicator, have perked up since July 2015 and passenger car sales have followed suit. Excise collections during April-October 2015 have shot up by 34% over last year and direct tax collections by 15%, providing assurance on fiscal balance despite some disinflationary concerns.

Inflationary pressures remain muted with the WPI still in negative territory at (-)3.2% for April to November and CPI at 5.4% in October and 4.7% for past seven months, well within RBI's target of 6% by March 2016. Agriculture surprised with a growth of 2.2% in the second quarter, despite two sub-normal monsoons. The Indian economy under Modi's watch seems to be on the move, steadily but surely .

This is just as well because negative news was beginning to overwhelm the green shoots of recovery . The continued decline in tractor sales for example; or anaemic growth in offtake of non-food credit from commercial banks; or weak corporate sales and net margins in the two quarters ending September were threatening to pull investment sentiment down and leave the economy in limbo.

The good news, which has been long in coming, may finally lift investors' spirits and trigger the critically needed investment recovery . It will not happen overnight because industrial units are strapped with 30% excess capacity as reported by the RBI governor. But at least downside risks have weakened.Modi and Jaitley have to now balance fiscal prudence with the need to impart greater impetus to growth by pushing up public capital expenditure. Fiscal deficit targets cannot become a dogma.

It is, therefore, disappointing that the opposition does not want to play ball by allowing the GST Bill to pass through the Rajya Sabha. Its passage will surely give a strong fillip to both domestic and foreign investors. It is a crying shame that the Congress-led opposition is hellbent on thwarting economic progress rather than promoting it. I wonder how our foreign partners must be looking at this ongoing travesty of democracy .

Rahul Gandhi and company would be well warned that this tactic could backfire. Youth constitutes at least 50% of the population and will soon lose patience if employment opportunities do not open up. Having the country descend into a morass of social and political strife will sear all political parties.

Fundamentalists of all hues, who eagerly wait for such opportunities to attract youth and convert them into cannon fodder for their cause, will thrive ­ with disastrous consequences for the country . There is still time for the opposition to rise above petty and terribly short-term partisan interest.

However, to some extent the ruling BJP is also responsible for the current impasse. Its attempts at forming working coalitions with the opposition are sullied by its unstoppable boors who insist on baiting the opposition on one count or another. First, it was the beef ban; then came the National Herald case and now CBI raids on the office of the principal secretary to chief minister Arvind Kejriwal.

To claim, as some senior ministers have done, that all these incidents happen autonomously is to presume gullibility .If it is indeed true that both government agencies and parivar affiliates are working at their own sweet will then the Modi administration, which started with a fearsome reputation of close monitoring and hands-on supervision, must get its act together before it is too late.

One would wish that in India, as in Italy of yesteryear, economic activity can be completely divorced from political shenanigans. That would allow the positive news that is now emerging to gather the necessary momentum.Unfortunately , India will never be Italy.Therefore, Mr Modi, India's political economy will need to be nurtured and handled holistically .

*The writer is Senior Fellow at the Centre for Policy Research



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