One year of Narendra Modi sarkar: A year of consolidation

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It has been a year since the NDA government came to power on the promise of inclusive growth.

One year of Narendra Modi govt: In the past year, the government remained committed to productive democratic functioning.

Source: The Financial Express

It has been a year since the NDA government came to power on the promise of inclusive growth. It is still early to draw up a report card; but interim macroeconomic statistics indicate an impressive beginning, with GDP expected to grow at a near-7.5% rate, inflation is sustainable at below 8%. Mint Street and North Block are committed to fiscal discipline, monetary stability and reforms to revive investment.

The ground covered in the past year, though, must be seen in the backdrop of tardy pace of economic growth and uninspiring policy-making over the past decade. Viewed through this prism, the Narendra Modi government fared quite well, charting out a growth agenda through two important policy statements—the rail budget and its maiden full finance budget. Most policy breakthroughs upheld co-operative federalism, especially the decision on greater revenue devolution to states as per the recommendations of the 14th Finance Commission. Allocation of royalties from coal auction to states will also go a long way in bringing prosperity to our mineral-rich states.

The progress and Parliament debate on land acquisition Bill and the insurance legislation are welcome. The amendments to the land acquisition Bill proposed are strategically aligned with the PM’s flagship Make-in-India programme. While the success in the Lower House is encouraging, wider democratic resolve in seeing the legislation through is needed. The Niti Aayog marks the beginning of new socio-economic planning with stakeholders’ participation.

In the FY16 Budget, the finance minister aligned growth imperatives with fiscal discipline and consolidation targets. Fortuitous circumstances, such as softened commodity and crude prices, and current account surplus with comfortable foreign exchange reserves, have allowed headroom to defer the deficit target by a year.

The year was significant from a tax-policy reforms standpoint. The government assuaged worried investors by reiterating that retrospective changes to the tax law would not be brought in. Burying the DTC Bill and unwavering commitment to implement GST from April 2016 are two policy statements that mark the future of tax reforms in the medium-term. While the GST Bill has been passed by the Lower House, the government still needs support in the Upper House to meet the April 2016 deadline for GST implementation.

The black money legislation is a huge step forward towards reining in the parallel economy; its adoption is now up to the will of the political class. Proposals to reduce corporate tax rate and rationalise tax exemptions will help simplify the tax regime and widen tax base through voluntary compliance.

There is a need for administrative overhaul to rein in the repeated instances of tax disputes. The recommendations of the TARC seem to have received the FM’s attention. Their implementation would ensure the best-in-class tax-administration practices.

The PM’s rigorous diplomatic style has clinched several important deals in less than a year, e.g., the resolution of the issues affecting the Indo-US nuclear deal, correction of the border with Bangladesh, etc. Other reforms, too, have followed the government’s new Foreign Trade Policy— that has a clear focus on improving the ease of doing business—the recently published revised Model Text for bilateral investment treaties does enhance protection to investments, without compromising on the sovereign’s rights.

In the past year, the government remained committed to productive democratic functioning. In the recently-concluded Budget session, both the Houses of Parliament notched near-full productivity, something unheard of in the past few years. The government’s inclusive approach helped it not to lose sight of the development needs at the grassroots level, with major programmes such as the Jan Dhan Yojana, the Pradhan Mantri Suraksha Bima Yojana aimed at providing a social security net to the vulnerable. The Swachch Bharat Abhihyan and AMRUT will make our surroundings cleaner and environmentally-sustainable.

Clearly, the first year of Modi administration was a year when the macro-economic fundamentals underwent consolidation. It is imperative now to pursue structural reforms for a sustainable growth trajectory.

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A Budget of Aspirations
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