Wait continues on high hopes

This year had started with high hopes of the new Aam Aadmi Party government in the city of Delhi providing a clean administration and making its mark in the general elections to the Lok Sabha. As those hopes crashed in February, the emergence of Narendra Modi as Prime Minister in May boosted fresh hope of quick and all-round development. As the year ends, those hopes, too, are getting dimmed, although the overall mood is to wait and watch.

The crash of international oil prices from a high of $115 a barrel a few months earlier to around $60 a barrel has helped bring down fuel prices, cut oil subsidies and curb the current account and fiscal deficits. Food and commodity prices have also come down, bringing the overall year-on-year inflation to near zero. That has not yet persuaded the Reserve Bank of India to cut interest rates but the expectation is that these will soon begin.

Meanwhile, export and industrial production have remained sluggish, causing a fall in revenue collections and moderation in the gross domestic product growth rate, to around the same as last year. The excise duty rate cuts for automobiles, two-wheelers and capital goods in the interim budget and additional 15 per cent investment allowances for those investing Rs 25 crore or morehave not generated enough demand for the manufacturing sector to pick up. The slowing in Europe, Japan, Russia, Brazil and many other countries continues to inhibit export growth.

The rupee had strengthened from 63 a dollar to about 58 a dollar. Declining oil prices and pro-business credentials of the new leadership that generated optimism have attracted a lot of foreign money in the stock markets. The rupee is now back at about the same rate as last year-end.

The commerce minister had promised a 'very different' Foreign Trade Policy for the period 2014-19. That policy is yet to see the light of day, a big disappointment for exporters. Even the changes that could have been brought about, based on a comprehensive review of the Special Economic Zones scheme and reports of high powered committees and task forces for reduction of transaction costs in export, have not been made.

Some progress has been made towards a comprehensive goods and services tax regime. The norms for foreign investment in select sectors have been liberalised but these haven't materialised on a large scale. This is despite the Prime Minister's visits to many important countries to market India as an attractive destination. Tangible policy action to make it easier to do business or to curb the menace of corruption at the ground level are yet to be taken.

At the World Trade Organization, the government stalled the Trade Facilitation Agreement for a while and later decided to go ahead with ratification. This was after securing a bargain that no disputes on the extent of public stockholding of foodgrain and farm subsidies would be raised till the relevant pending issues were resolved. In bilateral trade agreements, the government appears undecided on the way forward.

Overall, this year ends with hope of good days ahead but with a tinge of anxiety and disappointment.

Wish you a happy new year!
email: tncrajagopalan@gmail.com