Reforms on track

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Bikky Khosla | 17 Nov, 2015
In a big reforms push, the Centre last week eased FDI norms for 15 sectors, including construction, banking, defence, broadcasting and retail. The decision came on the heels of the Bihar election results, raising question from some quarters about the timing of the announcement, but there is not an iota of doubt that the move is a welcome one. It gives a clear and strong message, allying concerns over reforms slowing down after NDA's Bihar defeat. I think this new series of reforms, together with an earlier announced plan to restore the financial viability of the discoms, will give a big boost to the economy.

It has also been reported that some more reform measures are on the cards. These measures may include a new bankruptcy law, a new monetary policy framework, single-window clearance for multi-storey buildings and LPG subsidy reforms. However, it is very unlikely that the Winter Session, which is set to commence from November 26 and end on December 23, will be a smooth sailing for the government. Major reforms like the GST and the bankruptcy law are crucial for the country's growth going further, and I hope the government would do its best to engage with the Opposition and ensure passage of these bills. On the other hand, the Opposition should, on its part, stop being obstructionist.

Meanwhile, a top minister has said that the government is looking to set up a special fund to tackle the issue of banks' stressed assets. Recently, Moody's Investors Service had upgraded its outlook for India's banking system to 'stable' from 'negative' on expectation of a better operating environment for lenders. It is also expected that the RBI' accommodative monetary policy stance since January 2015 will help the recovery. But concerns still abound. According to an estimate, Indian banks' stressed assets ratio will improve to around 10.9 percent in FY16, after reaching a high of 11.1 percent in FY15. In other words, only a gradual recovery is expected, and in this scenario, the Centre's decision sounds reasonable.

Amid these efforts to prop up the sagging economy, latest data sets on wholesale inflation and exports are disheartening, however. According to official data released on Monday, annual rate of inflation rose, even while remaining in negative, to (-)3.81 percent for October mainly on account of costlier pulses and vegetables. Export figures present even a grimmer picture, showing a fall for the eleventh straight month in October. Merchandise exports fell by 17.53 percent y-o-y, falling to $21.35 billion from $25.89 billion. This prolonged period of decline, which is much worse than the decline for 9 months in a row during 2008-09, is a big worry.

I Invite your opinions.