Tag Archives: Narendra Modi

Getting Back on Track

GST rate reduction from 28 per cent to 18 per cent has provided a breather to the construction equipment industry. Although 15 per cent of items would still be at 28 per cent, the major grouse has been addressed. That said, as many as 42,710 units were sold between January and September this year, against 37,346 units in the same period in the last financial year. Just this year, the number of units sold has equalled the prior record of 70,000 units sold during 2011. The industry has grown by 19 per cent in Q1 and 22 per cent in Q2 except for the 35 per cent dip in July owing to GST implementation, according to ICEMA reports. With an eye on growth of over 25 per cent, the construction equipment industry is gearing up for EXCON 2017, to be held from December 12 to 16 in Bengaluru, spread over 260,000 sq m. Although real estate has been tottering, projects like Bharatmala Pariyojana and metro-rail projects across the country are fuelling the revival alongwith irrigation and urban rejuvenation projects.
There is a move to bring real estate under the GST ambit. However, the present constitutional amendment did not cover real estate and stamp duty continues to be within the domain of state tax. Several states may not be ready to part with stamp duty and therefore legalities are being explored. Even currently, as land is an immovable asset, the industry has been given 33 per cent abatement on the 18 per cent GST. Therefore, the effective charge on the sector, for property under construction, is now 12 per cent as against the listed 18 per cent. A further effect of input credit would bring the incidence down to 9 per cent or so. There is no GST on completed projects as they are considered immovable assets.
The unsung success of the Pradhan Mantri Gram Sadak Yojana (PMGSY) needs to be highlighted too. The highest-ever construction of 130 km rural roads per day has been achieved under the PMGSY, leading to an addition of 47,400 km of PMGSY roads in 2016-17.
PM Narendra Modi is planning to spend an additional $14 billion under this scheme by March 2020; about Rs 1.4 lakh crore has already been spent under the programme. The cost will be shared in a 60-40 ratio by the federal and state governments.
Logistics has now been provided infrastructure status, allowing the growth and expansion of this sector at easier financial cost, which can help in distribution and access of goods across the country. This will compliment the rollout of the GST.
Even though the second quarter of 2017-18 has had insipid financial results with the net profit of 1,300 BSE companies declining by 3.54 per cent from the same quarter the previous year and net sales rising 7.39 per cent during the same period, the periods ahead will improve as the base effects of demonetisation and relaxation of the GST effect will trickle in.

Waiting for ´Udta´ India

On June 25, exactly a year after the Smart Cities Mission was launched, Prime Minister Narendra Modi launched 84 projects from 20 selected cities that collectively aggregate to Rs 2,000 crore. Standing on stage along with the Union Minister of Urban Development, the Chief Minister of Maharashtra, and the Union Minister for Environment, with the Chief Ministers of Andhra Pradesh, Rajasthan and Odisha on video conference, he lauded the efforts of the winning cities and thanked the citizens of these cities for their participation in the challenge that led to the selection of the cities. The PM has not just launched several schemes for the long-term development of the nation but ensured that they are on track by reviewing operations periodically. His reviews send a shiver down the spine of the ministers as he looks for progress with an eagle eye and has the memory of an elephant!

´Brexit´ has heightened the volatility of global business even while our PM has enhanced India´s engagement with global leaders such that our voice is heard over several others. The Indian economy is on the mend as stated in this column and in our previous issues; even the economic indicators are turning positive. India needs to create a million jobs while it is just managing to provide for half that figure. FDI in 2015-16 has been a record $63 billion and now nine more sectors have been opened to additional liberalisation, with up to 100 per cent under automatic route, like defence, pharma, cable networks, mobile phones, airport, air transport, broadcast carriage services, and so on. Terms have been eased for food processing and retail. This is the second major overhaul of FDI rules in seven months.

In November, the government eased norms in 15 sectors. A Rs 6,000-crore package has been passed for the textile sector, aimed at generating 10 million jobs over the next three years and improving the sector´s global competitiveness. All these measures are aimed at creation of employment opportunities and to cope with the gap in providing opportunities for our country´s youth.

India needs to fill the huge infrastructure gap, which requires over $1.5 trillion in the next 10 years. Acceleration in construction of road projects has yielded twin benefits: Injection of immediate liquidity into construction projects and the benefit of the multiplier effect caused by acceleration of trade owing to connectivity between cities, towns and villages. This is being stepped up with a target of 10,000 km for 2016-17.

Further, NHAI has prepared a grid of 27 horizontal and vertical national highway corridors at a distance of every 250 km crisscrossing the country. All these stretches will be of four lanes. The total length of these corridors, including ones such as Kanyakumari to Srinagar, Porbandar to Kolkata, Surat to Paradip Port, Rameswaram to Dehradun, and Mangalore Port to Chennai Port, is about 36,600 km. Out of this, about 30,100 km are already national highways but only 18,800 km of them are four lanes. The proposed NH grid shall not only improve connectivity in each region and state capital but provide a highway link to 12 major ports, 45 out of 53 million-plus cities and 26 state capitals besides providing connectivity to major tourist and religious places. The recently announced aviation policy also plans to increase the number of airports as part of the ´Regional Connectivity Scheme´ servicing commercial flights from the current 77 to 127 by 2019.

Our institutional capacity needs to keep pace with our aspirations. And if our courts, which are already groaning under the pressure of pending cases, now have to intervene in censorship of movies, like in the Udta Punjab case, then it is a blatant abuse of strained capacity. Only if we hold institutions like ISRO, which recently earned millions of dollars by becoming only the third nation after Russia and the USA to launch the largest number of satellites in one rocket launch, as an example, will our soaring dreams fructify.

Bure din gaye

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.

Wake India, make India

The Modi sarkar’s 100-day report card indicated that the PM has to work much harder at the process of integration of state governments with the Centre so local issues see quicker resolution. This can very well happen in states with NDA rule; states such as Rajasthan and Madhya Pradesh have been quick to leverage this advantage. The assembly poll drubbing has effectively warned Team Modi that there is no margin for error or complacency. Here are some observations on his 130-plus days in the driver’s seat:

  • The government administration is working: The mood is ‘get work done’ than ‘who cares?’. Ministers, bureaucrats and government officers are being pulled up for dragging their feet.
  • Crony capitalism is out: Touts are barred at ministries and ministers hesitate to meet businessmen unnecessarily. Most processes are being laid out transparently.
  • Transparency is being encouraged: All processes are up on websites. Online updates of information are being encouraged. Even tracking files for clearances is a click away.
  • Core issues are being dealt with head on:
    • Coal, the biggest bane for power, is being addressed to enhance production and resolve fuel-starved plants.
    • Women’s safety is being addressed by enhancing the availability of toilets.
    • Rather than gloat over indications of Chinese interests in investing, President Xi Jinping was asked to prioritise the resolution of the border dispute.
    • Railway productivity is being improved by enhancing speed of trains from current levels—from 50 km per hour to over 160 km per hour for express trains and from the abysmal current levels of 25 km per hour for goods trains
  • Improvement in India’s international image: Modi’s visits from Bhutan, South America, Japan and now the US, not to mention the visit by the Chinese president, have enhanced India’s image and standing in the minds of international investors. Japan has committed $ 35 billion and China $ 20 billion over the next five years. International investors are eyeing infrastructure projects in India and several funds have already formed JVs with Indian companies and banks.
  • Divestment plans on the anvil: The Government is all set to cash out after liquidating its holdings on the stock market, thereby giving its kitty a boost.
  • Jandhan scheme launched to provide for social security and financial inclusion: Banks have opened 4 crore accounts so far and mobilised about Rs 3,700 crore as deposits in these accounts. Under the scheme, account holders will get an overdraft facility of Rs 5,000. They will also be provided RuPay debit cards and Rs 1 lakh accident insurance cover.
  • Expediting projects: Anil Swarup, who heads the Project Monitoring Group (PMG), has an expanded role & now tasked with following up on timelines set for ministries and states. The PMG had been set up to clear Rs 2.20 lakh crore worth of 463 projects. While 176 proposals have been approved so far, only 60 have begun construction.
  • Improving ease of business conditions: India ranked 134 of 189 economies in the World Bank’s Ease of Doing Business 2013 index. The Department of Industrial Policy and Promotion, which is driving the campaign, has set up an eight-member expert panel for quick grievance redress and to answer queries. The team will try to resolve issues within 48 hours. And in case they are unable to do so, the matter will go to a designated officer of the department concerned who will try to respond within 72 hours.
  • Focused approach: The Government is targeting investment in nearly two dozen sectors, including electronics, automobiles, civil aviation, defence, railways, tourism, hospitality and wellness. Special emphasis is being given to FDI, manufacturing policy, industrial corridors and intellectual property rights.

Evidently, the current PM believes in action, discipline and accountability, all of which were overlooked during the previous regime. But there is an inevitable time lag for the results to show. We must first awaken the system and then build confidence—assuring the system and all of us that we are ready to take on the world.