Five tips for Modi to take India forward in 2015

As the new year starts, it’s time to analyse what, if anything, could change the way India is perceived by the world. Under the leadership of Prime Minister Narendra Modi, a man the world expects to take India forward, here are five initiatives which could change India’s image in 2015.

Infra Spending

There are innumerable projects stuck for one reason or the other that need to be revived. This will help in many ways — job creation, better accessibility and lesser travel time between any two given places. Furthermore, we need to ensure that to cope with the growing needs of a burgeoning vehicle-owning class, we have to expand India’s road network besides convert carriageways from two- to three-lane and so on. While a lot has been done, it needs to be undertaken on a war footing. One should remember the benefits of the Golden Quadrilateral projects which were initiated 13-14 years ago.

GST

The Goods and Services Tax has been hanging fire for over four years, but it’s never been as close to implementation as today. The Bill must be cleared as soon as possible. The introduction of this Act will have two major benefits — it would increase GDP by about one point five to two per cent, besides bringing stricter tax compliance and making the unorganised sector accountable. We all know of thousands of cases where the units concerned escaped the excise net and did not contribute to the nation. With GST, more than anything else, the buyer will demand a tax receipt so that he can claim necessary benefit on tax-paid goods and thus make his purchase that much cheaper. Also, GST will ensure that interstate movement of goods takes place easily in the absence of taxes.

Make in India

This pet project of the PM is neither just three words, nor a replacement for made in India. It goes much beyond that and has serious implications for India and its masses. Manufacturing can only happen if you have the infrastructure, necessary manpower and facilities like railway, roads and port to move the raw material and finished goods. Currently, we need to do a lot in each of these activities. Manpower is available in plenty, but they lack the skills and, therefore, the matching programme of “Train the Trainer” becomes crucial. Our trainers need to be trained well and they, in turn, need to pass on the knowledge to young minds in accordance with the requirements of the job in hand. If, for starters, India can provide ten million jobs per year over the next five years through this, and successfully implement Make in India, the problems of unemployment and lack of manpower will both be taken care of.

Banking System

The banking system seems to be creaking and cracking. The non-performing assets (NPA) of banks have reached proportions which their profits cannot sustain. The RBI governor Raghuram Rajan needs to be appreciated for the proactive steps being taken to identify and punish wilful defaulters and uncooperative borrowers. A handful of borrowers have virtually held the banking system to ransom. Nowhere else in the world do borrowers have a say in the appointment of the brass at banks. The arrest of a PSU bank chairman and managing director and steps like allowing the RBI to take a call on appointments signal progress. It appears that the government is considering dilution of government stake in PSU banks to about 52 per cent. This should be reduced even further, like in the case of Maruti, where the government had a golden share and then over time sold even that. Reorganising banks by merger and consolidation is key to addressing the requirement of funds under Basel III norms over the next couple of years. Our banking system needs to be robust enough to take up the challenges.

Divestment

The government needs to get over this bogey once and for all. It is not the job of the government to be running businesses, but to be a catalyst. Divestment is undoubtedly crucial from the fiscal deficit point of view, but it is even more crucial that the right message — that the government does not plan to run business — would bring money in the form of FDI by truckloads. The lingering divestment of the government’s residual stake in Hindustan Zinc and BALCO is now more than a decade old. This government needs to wrap up all of this in a couple of months. Sending the right signals can make the markets go up and one has seen changes in perception make the markets rise by 30 per cent in one year. Much more can happen if even half of the above is achieved.

Markets End 2014 on a High

• Sensex, Nifty surge 30-31 per cent, best in five years.
• FIIs drove markets upwards, buying more than Rs 97,000 crore worth of equity shares in 2014, the biggest net purchase in four years.
• Markets moved unidirectionally, aided by Modi government’s majority win in LS elections, sharp fall in inflation and crude oil prices, and hopes of reforms and rate cut by the RBI.
• Indian markets outperformed Asian and global peers during the year.
• Experts believe the rally may continue in 2015 as well, but not as big as 2014.
• At elevated levels, analysts advise buying quality stocks on every decline as market may continue to see new highs in the year ahead.
• India remains the hot investment option.
• For Modi government, this will be the year of consolidation and reform.
• Growth is expected to continue as cyclical, rate-sensitive and investment-oriented stocks will find favour with investors.
• The dramatic fall in global crude oil prices was the game changer for India in 2014’s last quarter as we import 80 per cent of our oil requirement.
• Brent crude touched a five-and-half-year low, falling to $57 a barrel currently from $115 in June. Gold was at four-and-half-year low of around $1,200 an ounce.
• Retail inflation moderated to five to six per cent from double digits last year.
• 30-share BSE Sensex and 50-share NSE Nifty hit record high of 28,822.37 and 8,626.95, respectively in 2014.
• The CNX Midcap rallied 55 per cent and BSE Smallcap surged 68 per cent in 2014.
• Financial, consumer durables, auto, capital goods and pharma were the best performers with the Bank Nifty, Consumer Durables, Auto, Capital Goods and Healthcare indices rising 47-65 per cent.