Ad Here  
Call for INNOVATION, for R&D TN budget - little leeway for capex Welcome aboard President Kovind Trail-blazing Tamil Nadu Physician, cure thyself Mr. PM, bite the bullet... Between the bang and the whimper… BHEL – R&D and image building require more attention A challenge and an opportunity for OPS DMK does it again Gujarat model for port development Little for development Physician, cure thyself… Kanoon, Kovind and Kumble Repeat 1991– work on a growth budget... Cleansing a corrupt system… Take the next leap forward... LOT CAN BE DONE THROUGH THE PPP MODE... A WATERSHED YEAR Welcome euphoria over the east BJP - the unifying force (of opposition parties) ! The four DISRUPTIONS of the month Narendra Modi turns “THREE” Of judiciary and GM Fear of bankruptcy, liquidation Rahul coronated The Chinese model for rail development Has PC missed out on BIG BANG REFORMS? BJP’s one man army... Welcome continuation of the reforms thrust Corruption institutionalised; technique perfected Light at the end of the tunnel – Cauvery Management Board to be set up More lustre to leather: 70 years of CLRI An unhealthy adversarial relationship Where’s the big idea? AAP - change from street fighting to administration A 5-6 per cent growth is given… Go for a One Power India Need for more Rajini can’t or can? Imperative to take states along… BJP, shift to south IE completes 47 years... Reserve and perish State Elections: Mid-summer marathon Drive ahead, the road is well-laid... Scientists, please raise your voice for GM crops Jaya Ho Flying High? Entering the 50th year… Fast - track railways to prosperity... Open letter to citizens ‘High speed’ diplomacy... 10-point programme
Welcome continuation of the reforms thrust

Arun Jaitley has announced a new package to help recapitalise public sector banks (Rs  2.1 lakh crore)  and highway construction (Rs 6.92 lakh crore). This is in continuation of Modi government’s thrust for reforms. 

GST is a major reform. Naturally this reform involved a good deal of compromise in regard to the rates. As pointed out by Revenue Secretary Hasmukh Adhia, rejig of the GST rate structure will be required to rationalise the burden on different sections. A welcome feature is the frequent communication exertions made by Jaitley and his team after frequent meetings of the GST Council. It took over two years for a developed country like Australia with a small population of 25 million to stabilise on GST. It is not going to be quicker for India.

Declining economic growth and lukewarm interest of the private sector to invest are matters of concern. PSU banks suffering non-performing assets, estimated over Rs 9 lakh crore, are not enthusiastic to lend. Implementation of bankruptcy laws also deterred large industrial houses to borrow for new projects. Importantly, infrastructure projects have not been able to meet the repayment obligations to banks. In 2014 around Rs 800,000 crore worth of projects were stuck with environment and other clearances. Many of the projects had borrowed large sums from banks which had turned into NPAs. 

In this background the decision of the government to announce a Rs 2.11 lakh crore package to recapitablise PSBs will help them lend more resources for businesses. This support includes Rs 18,000 crore from the budget, issue of recapitalisation bonds for Rs 1.35 lakh crore, as funds to be raised by banks amounting to Rs 56,000 crore. The last item indicates going ahead with another reform touted for long: reducing the government’s share in the equity of PSUs to 50 per cent. 

IE has been pointing to the absurdity of commercial bank forced frequently to look to government for capitalisation. Large private banks like ICICI and HDFC don’t need this. Such support leads to denying spends on important social sectors like education and health. A larger share in equity to the public will also lead to greater accountability on the part of the management and employees of PSBs to operate the banks efficiently. Such a step will also help the government garner more resources through disinvestment. 

In the absence of large investments by the private sector the government has been stepping up investments on new projects by the government sector. Massive investments have been proposed on railway development (Rs 750,000 crore); on the Sagar Mala project for coastal shipping and inland waterway development; on the expansion of steel, fertilizers, coal and other PSUs. Continuing this, Jaitley had announced a Rs 6.9 lakh crore investment for road construction -  the  Bharat Mala Pariyojana.  These measures would address the issue of job creation. 

Secretary, Economic Affairs, Subash Garg, supplemented the announcement of the finance minister by pointing to strong economic fundamentals: a 7.5 per cent average annual growth during 2014-17; of fiscal deficit reduced from 4.1 per cent of GDP to 3.5 per cent and moving towards 3.2 per cent targetted for the current fiscal; inflation dropping from 6 per cent in July 2014 to 1.1 per cent in July 2017 and containing it to less than 4 per cent during the current year and current account deficit dropping from 1.3 per cent to 0.7 per cent to be maintained at less than 2 per cent for the year. 

Such major reforms are due in equal measure for the primary sector of agriculture. The thrust for liberalisation is even more urgently needed by this sector with low average annual growth of less than 3 per cent, continuous fall in the sector’s contribution to the GDP and to poor rural incomes. The major affliction relates to fragmented landholdings that deny the benefits of high productivity possible through the application of science, technology, mechanisation and management. In Tamil Nadu, the average of size of land holdings is two acres leading to poor average productivity and to farmers leaving land fallow or selling these at distress prices.  There is the imperative to agglomerate the  small land holdings permitting lease for 15 years without alienating ownership.

These changes have the potential to achieve quantum jumps in food production and make India a food bowl of the world. 

Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236