The next three to four months will be, in a sense, most painful as while the sentiment seems to have improved, it would not be reflected in demonstrably higher sales and profits. So businesses will have to put on a happy face and yet suffer the last leg of the financial squeeze as the economy gains ground… Development and governance are the two wheels of the current government and the road is rocky but we have strong drivers: aspirations of the youngest population in the world and an unleveraged, unlimited potential.¨
This is the concluding paragraph of this column in September 2014. In October 2014, in the same column, I cited the various initiatives of the Modi sarkar. Indeed, the pains and aches of the previous government´s apathy are still hurting but the confidence that the initiatives taken by the current government will bear fruit is rising. The latest Cabinet approval permitting FDI in construction has reduced the minimum built area requirement for projects in which foreign investment is allowed to 20,000 sq m from 50,000 sq m and the minimum capital investment by foreign companies has been cut to $5 million from $10 million. The investor will be allowed to expatriate the investment on completion of the project or three years after the final investment is made provided the trunk infrastructure is complete for those plots. The new rules will encourage development of smaller plots in urban areas, where availability of land is limited. This will complement the initiative to build 100 smart cities. In fact, India received $1.2 billion of FDI in the financial year ended March 31 compared to $1.3 billion the previous year. Between April and August this year, it has received foreign investment worth $446 million. Now, this is likely to get a shot in the arm.
In the forthcoming winter session of Parliament commencing on November 24, 67 pending bills awaiting clearance can help ward off the lag effect of the turnaround. The Real Estate Regulation & Development Bill, Coal Mines Amendment Bill, Prevention of Corruption Act, revised Goods and Services Tax (GST) Constitution Amendment Bill, Land Acquisition Bill and Motor Vehicles Bill are just some important initiatives awaiting clearance that carry potent rocket fuel for the economy. Also, the proposed new Motor Vehicles Bill lays great emphasis on road safety and traffic management through new agencies specifically dedicated to forming and implementing new laws. It also proposes to create a National Road Transport and Multimodal Coordination Authority for coordination on road and other transport issues.
Although the road sector has lost much of its interest for Indian bidders, the Construction Industry Development Board (CIDB) of Malaysia has offered to bid for five such projects costing over Rs 9,000 crore, giving PPP a new lease of life. New investors such as NGI and Tata Realty are bucking the trend and entering the sector as it offers better returns with most project risks already weathered by erstwhile promoters. Another development that would boost industrial production by simplifying the need for regulation and administration for SMEs, which account for over 30 per cent of industrial production, is the Small Factories Bill, in line with the amendments to the Factories Act. This Act will reduce the number of forms required for compliance with rules; allow SMEs to employ women in night shifts based on the fulfilment of certain conditions; and change the inspection system to one based on self-certification and inspections based on computer lots as announced by the government earlier this month.
Evidently, across the board, a huge, orbit shifting change is in the offing. And with a new set of investors and buyers having entered the markets, CW has issued a ´vendor alert´ in its cover story. Go get them.
Watch out for the 12th CW Annual Awards on November 21 at Four Seasons, Mumbai