On the completion of his first year in office, Prime Minister Narendra Modi reached out to all citizens and presented his case. The media extensively assessed the Government´s performance too. Generally, the verdict was that ´not enough has been done´ - yet everyone recognised that the fruits for such labour take a while to ripen. One of my favourites: ´Would you have preferred the UPA government to continue for one more year instead of the Modi Government?´
This one is a no-brainer. Yet, we seem to have forgotten how bad the situation had turned with an inactive government saddling its finances with burdens of ill-planned social schemes with an eye on the elections while keeping the economy at a standstill. As CW reported in its cover stories in March with Union Minister Nitin Gadkari, April with Maharashtra Chief Minister Devendra Fadnavis, and ´Report Card´ last month, the Government´s momentum is strong but the lag in process is holding back impact on the ground. Corporate results for the year ended March 2015 conclusively prove that the corporate sector is reeling under an almost negative demand and virtually nil margins with a debt overhang. The consumer sector, which was buoyant, is now not likely to throw up good numbers too, going ahead. The fall in inflation will see improvement in demand, albeit gradually, over the next six months.
The roads sector would be the first to get into higher gear with loads of EPC projects being awarded in the second quarter this fiscal. Fortunately, this sector has been the quickest to fall in line and the most visible statement on infrastructure. Its track record too shows that the pace of construction has been over 12 km per day for the past seven years as given below:
I have seen many speakers at conferences compare regimes and quote incorrect figures on road construction per day, trying to ridicule the previous regime´s quest to build 20 km per day. As we can see in the table, in 2012-13 we were doing close to 16 km per day. If the NDA Government awards 10,000 km this year as intended and follows this up with a similar figure for 2016-17, we could move very close to 30 km per day as stated by Union Minister Nitin Gadkari.
Railways, too, is likely to see activity with 94,000 km of doubling and third line on choked routes receiving sanctions to decongest the rail network. To overcome the cycle of chronic underinvestment, the Railways is approaching the markets to finance revenue generating projects. Further, among urban infrastructure, metro projects are on course while projects under smart cities will take some more time to benefit from the allocation and provision of Rs 200,000 crore.
Energy is upbeat, which is good news for a country in growth mode. There is a sharp increase of 8.4 per cent in electricity generation, the highest in the past 20 years. The country has added 22,566 mw of generation capacity in the past year with some contribution from enhanced coal production, which is up by 12 per cent. The Supreme Court has breathed new life into the renewable sector with a landmark judgement enforcing renewable energy purchase obligations. This will help boost renewable power generation manifold.
Given all the developments, it is likely that an interest rate cut could come sooner than later, unless there are global pressures. The year 2015-16 will be the prep year for the boom year that is to come.