India Inc worried over delay in key reforms

Coal, land, insurance bills have been cited as government's commitment to reforms

Top business executives say they are worried over the government’s move to withdraw three Bills they consider key and the tussle over the land acquisition Bill.

These moves, they say, can discourage investments, especially in the insurance and infrastructure sectors. The chief executives (CEOs) also say the language used by Hindu nationalist groups on minorities is also vitiating the business atmosphere.

“This is certainly a big worry. The Modi government was showcasing these three Bills as its reform agenda. But this backdown shows the government does not have the means to get these passed,” said one, asking not be identified. “What HDFC Chairman Deepak Parekh said last week is true, as nothing has changed on the ground. The government should also control the (Hindu) fringe elements, as this gives a bad impression to investors abroad.”

Last week, Parekh had said impatience was creeping in among business people, as nothing had changed on the ground in the first nine months of Narendra Modi’s rule. On Tuesday, the Modi government had to abandon the attempt to have a joint sitting of Parliament to enact three pieces of legislation, including one on liberalisation of the insurance sector, due to hostile opposition in the Rajya Sabha.

The land acquisition Bill is facing opposition from other political parties, who say it is pro-business houses and anti-farmer.

“Clearance of the land Bill is very important for infrastructure projects to pick up. The Navi Mumbai airport project is already costing Rs 5,000 crore more due to the delay in the project and higher compensation for the land owners,” said a CEO of an infrastructure firm.

The land ordinance was seen by India Inc as evidence of the government’s willingness to undertake bold reforms for development. Fast-tracking of procedures for defence investment, rural infrastructure, affordable housing, industrial corridors and public-private partnership projects is laudable. The CEOs say making land acquisition easier would have got a large number of stalled projects going, invigorating the investment and growth cycle.

In fact, soon after the ordinance was enacted in December last year, the Maharashtra government cleared the development of two industrial-cum-residential hubs in the Mumbai region.  

According to the Centre for Monitoring Indian Economy, around 70 projects worth a total of Rs 3.52 lakh- crore have been stalled over the past two years because of land acquisition problems.

Due to these uncertainties, Indian companies are not opening their purse strings. A CRISIL survey of 192 companies, which comprise about 45 per cent of the capital expenditure undertaken by all National Stock Exchange-listed companies (barring the banking, financial services and insurance sector) in 2013-14, showed 90 per cent expect a pick-up in overall capital investments by the next financial year. However, their own capital  investment plans show a four per cent decline.

A turnaround in India Inc’s investment cycle is unlikely anytime soon, warns CRISIL.