Narendra Modi’s ascent to power in May last year — that too in quite a spectacular fashion — was widely expected to usher in dramatic changes for business in the country. The expectations were sky high, not the least because Modi’s campaign zealously centred on economic reform and revival.
In the lead-up to the elections, it made perfect sense to focus on the apparent failings of the outgoing Government with respect to business and economy: tepid growth, stalled projects, corruption, infrastructural bottlenecks, muted demand, complex laws, and so on.
But, a year on, the business community that rooted for Modi seems to be largely underwhelmed. In recent months, a few prominent industrialists have even made their frustrations public. In February, HDFC veteran Deepak Parekh noted that nothing has changed on the ground with regard to ease of doing business. Then, Harsh Mariwala, chairman of Marico, tweeted: “Sheen is falling off Modi government in the context of promises, and gradual delivery.”
Such criticism — coming as it does at a time when the economy is showing its best numbers in recent years — might seem unwarranted. But then the question is how much credit can the Modi government take for the good tidings? Inflation is down to manageable levels after years primarily because global oil prices are at their lowest in five years. India’s growth rate has seen an upgrade after a change in measurement methodology; something not many are convinced about.
Instead, the government is criticised for not doing enough when the operating environment has been so benign. Without the requisite numbers in the Upper House, the government is struggling to pass the long-in-the-works Goods and Services Tax Bill, important to make India a single market. For the same reason, changes to the Land Acquisition Act have been made through an ordinance (which, when promulgated, is valid for six months).
Other things — like the retrospective tax demand on foreign institutional investors — have bamboozled some. This, after the government suggested there wouldn’t be any retrospective taxes. Such a volte-face is disastrous in the kind of message it sends, even without counting the fact that foreign institutional investors had pumped in billions of dollars into Indian bourses following Modi’s election.
But Modi supporters would point to the other side, where the government has successfully auctioned coal and spectrum; two resources that were hogging the national headlines not long ago for all the wrong reasons. They would also point to things like deregulation of diesel prices, increase in foreign direct investment caps in sectors such as insurance and defence, and ambitious ideas such as Make in India, Swachh Bharat and smart cities.
Sterner tests await the government. As the Budget showed, there is a great deal that needs to be done to revive private investments in infrastructure. This includes creating easy bankruptcy laws and clearance mechanisms, and making public-private partnership models more palatable to the private parties. And the devil is always in the execution, as the one-year old Government would have understood by now.
Sriram Srinivasan is Business Editor, Online & Technology, The Hindu.
