At The Turning Point of Growth Path: India Economic Summit
Experts are indicating that Indian economy is at a turning point as positive sentiments among investors can now be witnessed. Though more efforts and strategic actions are needed to be done to maintain a strong growth momentum but entrepreneurs and industry experts are in commenting that this time is extremely crucial and careful steps are been taken by the policy makers.
On this context, experts have varied viewpoints but it is very important to examine each one of them. According to Mr. Anand Mahindra, Co-chair, India Economic Summit and Chairman and Managing Director, Mahindra and Mahindra Ltd, “It will take some time to feel the real impact of the reforms being undertaken. He was of the view that the government needed to make steady consistent reforms rather than big bang ones.”
Mr. Ajay Shriram, President, CII and Chairman and Senior Managing Director, DCM Shriram Ltd. stated that improving the ease of doing business in India was a major issue and the government has taken up this challenge very seriously. He observed that several reforms could be undertaken by simply studying the best practices of the various states in India. He stated that the action had shifted to the states and the states were now vying with each other to attract investments. Mr. Shriram was of the view that one of the ways to fuel growth was to clear the backlog of mega-projects that were held up for various reasons.
In his view the macroeconomic conditions in the country were now conducive for the Reserve Bank of India to consider reducing interest rates. He pointed out that core inflation had come down, oil prices were down and a stable government was in place at the centre – creating ideal conditions to reduce interest rates. This, he felt, would help fuel demand in the economy and spur growth. In his view, the GST needs to be implemented to help create a common market in the country.
Dr. Gita Gopinath, Professor of Economics, Harvard University stated that while the measures being taken by the government are indeed encouraging, there is still need for some caution. She was of the view that the economy needed to exhibit two to three quarters of consistent growth before one could be more confident that the recovery has taken hold.
Mr. William Danvers, Deputy Secretary General, Organisation for Economic Cooperation and Development (OECD) stated that there is a need for the government to undertake a clear and consistent communication strategy to share the economic reform measures that it is undertaking with the electorate. He also stressed on the need for patience for these policy reforms to take hold.
Infrastructure Development: Growth Story in the making
In the bid to register a decent looking growth rate in GDP, infrastructure development holds great potential. While India as a country is on track of Infrastructure development, since last few years, but there is a long way to go. While admitting that there were several issues and problems related to infrastructure, Mr Nitin Gadkari, Minister of Road Transport, Highways and Shipping of India, Government of India reassured that most problems were being addressed and that positive changes will be seen soon. He set an ambitious target for the road-building capacity to be taken up from the dismal 3 kms per day currently to 30 kms per day in the next two years.
He was speaking at a session titled ‘Mind the Trillion Dollar Gap’, focusing on India’s $1 trillion infrastructure deficit, at the India Economic Summit, organized by the CII and World Economic Forum. With ‘Redefining Public-Private Cooperation for a New Beginning’ as the theme, the Summit assumes great significance as it is the first one with a new Government at the helm and with leaders from business, government, civil society and academia from 45 countries participating.
Speaking about the issues and challenges, Mr Gadkari mentioned land acquisition, cost of capital, and environment, among others which needed to be addressed. The multiplicity of laws and policies, Ministries involved, attitudes and approaches to infrastructure development were causing bottlenecks and resulting in stalled or cancelled projects with huge economic and social costs. India needs development and everyone must understand this and facilitate it, he stressed, adding that the Government would not, for instance, push for development at the cost of environment. An “integrated” approach is required, he said, stressing that the Government was taking cognizance of the challenges and taking steps to facilitate investment in infrastructure.
Highlighting some of the challenges that industry faces, Mr Ajit Gulabchand, Chairman and Managing Director, Hindustan Construction Company, India, said that land acquisition remains the biggest hurdle and the delays and cancellations cause economic losses often as high as 50 per cent of the cost of the project. This is compounded by multiple challenges that are extraneous to the Ministry such as environmental clearances, the Companies Bill, etc all of which need to be addressed for India to be able to get the kind of infrastructure it needs and deserves. Stressing that all stakeholders need to work together, Mr Gulabchand said the focus should be on ensuring that the policies and processes are fair and transparent, and that the dispute resolution mechanism is credible and easy to implement and follow. Minister Gadkari said that the Government is working to address these issues and mentioned that they are working to change the model agreement to make it fair to all.
When people see India today, they see good prospects, said Mark Spelman, Global Managing Director, Accenture, United Kingdom; Global Agenda Council on Europe. Adding a new dimension to the discussion, he said that instead of focusing on ‘inputs’ (investments etc), we need to look at outputs – what is it that is to be achieved – and see how that can be facilitated. One critically important factor here is ‘predictability’ in order to enable people to get the output and results they are looking for. India is one among several countries with an infrastructure gap, and will have to compete for investments. Making a case for clarity in processes, he said business and Government need to speak in one language and arrive at a win-win situation that inspires confidence, especially in investors.