Just over a year ago the mood in India was one of doom and gloom. The economy was sputtering (despite the revised figures), job generation was almost at a standstill, oil prices were increasing, inflation was coming down but still high, investments were down, the current account deficit, though down, was a concern. Parliament saw unprecedented turmoil with members more intent upon shutting it down than debating and the government was seen as weak and floundering. On top of all this mess the government was seen as corrupt and unable to deliver good governance.
The NGOs were running riot and almost controlling government action. The Supreme Court was discarding judicial restraint and encroaching on to policy on the thesis that the executive had failed in its task. The CBI was running amuck, becoming a law unto itself. The people were left feeling that there was nobody running the government.
NGOs running riot; Supreme Court encroaching on policy as executive had failed; CBI running amuck; people felt nobody was running the government.
The only hope was the next election and a new government of whatever disposition.
Today, the situation is vastly different! We have a new government with a majority in the Lok Sabha. A strong, hard working Prime Minister focused on growth and development — though sometimes distracted by some extreme elements within his own Party — and committed to eliminating corruption. A dispirited Opposition with a few bent on making Parliament dysfunctional again. Inflation is down to lower levels — luckily, oil prices are dramatically down relieving pressure on the rupee and reducing the current account deficit. There is greater talk of improved investment, though still inadequate, with a focus on manufacturing, and a Make in India strategy.
An increased focus on jobs and skill development gives hope to our young citizens. The NGOs seem to have lost their sting and credibility with decreased public sympathy. The Supreme Court, with a new Chief Justice, is more restrained in the policy area, though it expresses its unhappiness sometimes. The CBI, with a new chief, is more focused and intent on its task. We’ve seen a restoration of the balance between the Executive and the Judiciary. Citizens have much greater faith and confidence in our new PM and see him as a strong leader — focused on good governance, development and job creation.
Stepping back for a larger picture, the change is almost dramatic and the stage is set for sustained high growth. The world has also recognised the change, and is rediscovering India. Suddenly, there is a deluge of overseas delegations and leaders visiting us, talking about investments and markets with renewed hope and confidence in our future. They seem to trust us again as a good investment destination.
Among the BRIC nations, India stands alone with growth in China coming down, Russia and Brazil in the dumps. India is being seen as the lone sentinel. The stock markets are booming, seeking new high levels, driven by huge flows of funds from FIIs. The RBI Governor is seen as a global rockstar — fighting inflation, intent on destroying it, and creating conditions for sustained growth. Our foreign exchange reserves are at an all time high, with the rupee being stable and even threatening to appreciate.
A new government with a majority in Lok Sabha; strong, hard working Prime Minister focused on growth and development, and committed to eliminating corruption.
Expectations on the new Government and on our new PM are at an all time high — it’s almost frightening! The NDA, with a comfortable majority in the Lok Sabha, has swept the polls in many States and is seen as strengthening itself to deliver good governance, development and jobs.
Yes, there is a feeling of hope of a better future and the feeling of doom and gloom has receded into the past.
Cause for anxiety
However, a certain anxiety is setting in. There are not many signs of a great surge in investment. Banks are burdened with huge NPAs and restructured assets with no end in sight, with complaints of a lack of lendable proposals. Announcements by the government on Make in India, large defence contracts, approvals of stuck projects and so on, do not seem to have made an impact on the ground. Overseas investors have talked much, are positive, but have not put money into large projects because they are waiting for certain laws to be passed and for the retrospective tax amendments to be revoked.
The taxman, particularly in corporate taxes, continues to make perverse assessments driven by high unreachable targets. The tax appeals process is prolonged and almost broken. Job prospects are improving, though not fast enough to meet our needs and are still anaemic and sporadic.
Industry wants easier policies, reduced red tape, elimination of approval Raj, and a friendly, responsive government.
Barring the reduction in petrol and diesel prices, the aam aadmi has not seen an improvement in his life, with no reduction in grassroots corruption, oppressive government officials and corrupt police. Impatient and eager to experience a better life, voters have demonstrated their unhappiness at the lack of change by putting an effervescent new party into power in Delhi. This unprecedented sweep has wiped out the NDA and totally eliminated the Congress. It is clear that the honeymoon period is ending, and citizens want action.
Now, there is renewed focus on the next Budget. Investors want the revocation of the retrospective tax amendments, a stop to tax extortion and a taxpayer-friendly tax administration to start investing in a sustained manner again. Citizens want an honest Budget with achievable tax collection targets, expenses fully accounted for and reduced individual income taxes so that they get more money to spend and invest.
Industry wants easier policies, reduced red tape, elimination of the approval Raj, and a friendly and responsive government. They want much larger allocations for infrastructure, particularly roads, ports and railways, reducing of cycle-time and costs in the supply chain, elimination of bottlenecks for the power, roads and infrastructure sectors, elimination of unnecessary subsidies and reduced waste of taxpayers’ money. An enhanced allocation for capital purchases in the defence sector with a focus on Made in India to buttress the reforms in defence investment is expected.
But the aam aadmi sees no improvement in his life, no reduction in grassroots corruption, oppressive government officials and corrupt police.
They expect accelerated ease in doing business with less government controls. There is also a need to redirect government expenditure towards development and investment, large-scale job creation with a reduced fiscal deficit to make more funds available for investment. The stage is set with low oil prices, low inflation, low oil and fertiliser subsidies and lesser strain on the current account for a great Budget to unleash the entrepreneurial talent of our people for sustained growth and job creation.
Yes, hope has been restored, and now the time for action has come! Hopefully the Budget will decide the future for us and our children.
The writer is Chairman, Aarin Capital Partners.