The manufacturing indices, which appeared to be positive till last month, turned negative, killing all joy espoused by optimists. Loans continued to pile up. The RBI maintained its stance. And interest rates didn´t ease off enough to make an impact in a debt-burdened commercial sector. The government is still struggling to get its Land Bill and GST Bill through Parliament. Corporate results are reflecting the pain – in the financial year ended in March 2015, Corporate India is expected to drop marginally by 0.8 per cent at the aggregate level for the June 2015 quarter from a year ago. Net profit is expected to grow just 0.3 per cent. And in the March 2015 quarter, sales dropped by 5.6 per cent while net profit tanked as much as 45.3 per cent from the corresponding quarter of 2013-14.
One year into the new government´s rule and nothing has changed on the ground. While there has been a rally in Indian equities since May 2014 owing to the optimism of investors, the BJP´s lack of a majority in the 245-seat Rajya Sabha (48 seats against the INC´s 68) has led to the derailment of the reform momentum. The real-estate sector is holding an unsold inventory of 688,000 units, measuring 919 million sq ft. While commercial real estate has been languishing for long, the residential sector has lost steam too. This is likely to have a cascading effect on building material sectors. Steel is already suffering on account of large Chinese imports and cement is waiting for housing demand to rise. Poor demand is causing unemployment among labour and they are returning back to villages where an even worse scenario awaits them. The MNREGA scheme budget has been slashed, agriculture yields are soft, and rural infrastructure schemes are still struggling with environment clearances and land acquisition problems.
Despite Team Modi´s tireless work to improve structural lacunae and launch of new schemes to digitise, smarten, skill, house, power and connect India, over 55 per cent believe that the business environment is ´moderately worse´ and only 24 per cent expect the overall economic situation to improve in the next quarter.
What can the government do to correct this and restore the faith of businesses? Here are 10 suggestions:
- The PM should go easy on his international trips and focus on the economy.
- Public spending figures should be declared sector-wise every month. Targeted public spending for the forthcoming quarter should also be made public.
- PSU spending on capex should be consolidated and declared every quarter.
- The government should focus on stalled projects and give them a chance to recalibrate within a specified time.
- The FM needs to clear tax hurdles to make India an attractive destination.
- The NREGA budget must be restored with direct benefit transfer mechanism.
- Budgeted spending for roads, defence, infra and renewable energy should be accelerated.
- Timelines should be set for arbitration with the government for infra disputes and we should push forth with the Public Contracts (Settlement of Disputes) Bill.
- The Power Minister must corporatise discoms through government infusion as equity instead of grants so they can raise further capital; transfer of subsidy should be done by ´direct benefit transfer´ to the consumer.
- We need an ´ease of doing business´ challenge on the lines of the ´smart cities challenge´ between states with a quarterly ranking.
- This month, we mourn the passing of former president Dr A P J Abdul Kalam. Missile man, scientist, teacher and inspiration, his light will continue to guide us as we strive for a better tomorrow.