The Government's continuous efforts to revive on-the-ground investor confidence and facilitate a turnaround in the economic cycle have received a thumping validation from several prominent organisations at the beginning of the new fiscal year. A pickup in investment intentions in the economy to a four-year high, led by the private sector, reflects the lagged impact of improving macros and easing monetary cycle on investment decisions; a confluence of all these developments will assist in further strengthening the recovery momentum hereon.
The new Government devised and put in place a number of significant measures such as the Make in India, Skill India and Digital India programs. These highly strategic programs, along with the focus on the JAM Trinity (Jan Dhan, Aadhaar and Mobile) are envisaged to be the foundation of long-term growth.
Even so, the most significant and quantifiable success of the government has been its ability to rein in price pressures. While RBI's tight monetary policy and a cyclical turnaround in global commodity prices especially crude oil, were critical enabling factors, the Government's rationalisation of Minimum Support Price adjustments, changes in the Agricultural Produce Market Committee (APMC) Act, and open market sales of food grains facilitated a slowdown in structural components of inflation.
"[T]he most significant and quantifiable success of the government has been its ability to rein in price pressures."
Further, incremental measures to ease business regulations such as the e-Biz portal, transparent allocation of natural resources especially coal, rationalisation and simplification of tax regime, initiation of labour reforms have created the right facilitators for reviving investor sentiment and thereby growth.
In a similar vein, the Modi government has pursued a proactive international engagement based on enlightened national interest, combining India's economic strength with pragmatism, to foster a doctrine of mutually beneficial global relationships. In this spirit, the pledged investment inflows from countries such as Japan, China and Germany to actualize the 'Make in India' vision is a validation of our nation's ability to transform itself into a globally competitive manufacturing hub powered by skill, scale and speed.
Despite the short-term wins, the road to true progress is a long and winding one. There are various challenges and I would like to quantify some of the key priorities areas for the Government, going into the second year.
Actualisation of the long-term vision will involve strengthening India's institutional architecture. Towards this a beginning has already been made with NITI Aayog - the ace policy think tank of the Modi government which unlike its previous avatar, the Planning Commission, will involve the participation of states. The FY16 Union Budget has incorporated most of the recommendations of the Fourteenth Finance Commission; cooperative fiscal federalism will help shape the economic contours of states in the coming years.
Regulatory approvals are slowly getting e-portalised, thereby shrinking the existing space for discretionary activism and at the same time making progress on the policy goal of digitising India. This is key as far as ease of doing business and streamlining processes are concerned. A significant overhaul in India's tax architecture is already underway with the likely introduction of the Goods and Services Tax Bill from April 2016. With the formation of the Monetary Policy Committee, an unprecedented step for India, the Modi government will formalise monetary policy decision making under flexible inflation targeting, thereby improving the credibility and accountability of the central bank.
"Regulatory approvals are slowly getting e-portalised, thereby shrinking the existing space for discretionary activism and at the same time making progress on the policy goal of digitising India."
It is also noteworthy that the vision journey of the Modi government epitomises social and financial inclusion in every possible manner. The Swachh Bharat initiative, a mass cleanliness campaign, is a unique initiative that cuts across the regional and cultural diversity of India and has found acceptance among all. After facing initial scepticism, the Jan Dhan Yojana, an avenue for furthering financial inclusion, has managed to feature in the Guinness Book of World Records for making India fully banked in a short span of time. This in my opinion is likely to be a socio-economic game-changer as it also provides the platform for Direct Benefits Transfer, which in turn will help in plugging subsidy leakages, thereby generating fiscal savings in the process. I also expect the Government's sustained focus on the JAM trinity to throw up significant opportunities and rich rewards for the country in general.
Even as we credit the government's accomplishments in its first year of office, it is imperative that we realise that structural changes to a country's socio-economic fabric do not materialise overnight. There has been some scepticism of late, but on the whole most stakeholders will need to be patient so long as the direction of change remains positive.
While the Government's devolution of fiscal powers to states is encouraging, its ability to implement crucial policies in the areas of land, food distribution, health, agriculture, etc. will be dependent upon the execution capability of states.