Reforms, policy decisions on track, but no smooth-sailing: DBS

With the government completing its two years in office, global financial services major DBS said the reform agenda and policy decisions "have been on track, but it's not entirely smooth sailing" despite the strong mandate.
The BJP-led NDA government assumed office on May 26, 2014, with a thumping majority, but some key Bills, including the GST, have been stuck in the Rajya Sabha due to opposition from parties, mainly the Congress.
"Approach to reforms remains gradual, broad-based and incremental. This has included key changes like deregulation of fuel prices, Make in India initiative, passage of the bankruptcy Code, financial inclusion, auction of coal mines, power sector reforms (including UDAY) and Aadhar Bill, among others," DBS said in a research note.

It added that political and legislative roadblocks, however, stalled crucial Bills like the GST, land and labour reforms.
According to the report, the ruling government's upper House tally might rise this year, but will not be enough to unilaterally push for the GST Bill, which will require it to reach consensus with the opposition teams.
DBS said GDP growth is seen at 7.6 per cent in 2016-17. However, recovery remains "uneven", with the private sector and banks on the backfoot.

It sees non-performing loans and provisions climbing over the next few quarters until the clean-up is completed by March 2017.

"Policy decisions have largely been in cohesion with the central bank, which saw key initiatives like adoption of an inflation targeting framework, formation of the policy committee and coordination on dealing with the banking sector stress," DBS said.
Going ahead, more work will be directed towards lowering agricultural sector stress and job creation is likely to emerge as the other policy priority, which will require the manufacturing sector to play a bigger part in supporting growth and absorb the growing working age population.
"Overall, the two years have been work in progress, with the window for more action to remain open until 2018 before attention shifts to the next general election," the report added.