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Modi Government Is Building India’s Future
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The government of Prime Minister Narendra Modi is completing the first year of its five-year term on May 26, 2015. It was the first government to win a single party majority in the Lok Sabha in three decades. People’s expectations have been very high due to Narendra Modi's own track record of growth and development in the state of Gujarat for over a decade, as well as the hope the entire country has placed on him as a leader who can get impossible things done.
The election was fought and won in the backdrop of high inflation, high unemployment, growing inequality, impatience and anger of the youth with the entire political and administrative elite, high fiscal deficit and trade deficit as well as allegations of corruption against the previous government.
A majority of the above problems are structural and cannot be solved within a short period of 12 months as they have been ingrained into the system over the last several decades due to a lack of planning, implementation and administrative control. The federal structure of India is also not amenable to faster decision and implementation.
Additionally, several other structural issues were pending. These include the Goods and Services Tax (GST), direct benefit transfers to beneficiaries, Direct Tax Code, Financial Sector Legislative Council (FSLRC), and foreign investments in key sector like defence, insurance and retail.
Inflation has come down from 11.16 per cent at its peak in November 2013 to 4.87 per cent in April this year – a singular achievement of the BJP government, which has allowed the Reserve Bank of India to bring down interest rates recently.
Many experts have credited the reduction in inflation to the external forces such as reduction in oil, agricultural commodities and gold prices worldwide. However, there have been instances in the past in India where despite a favourable scenario worldwide the country witnessed high inflation. The government could also contain fiscal deficit substantially despite the huge reduction in revenue such as reduction in ad valorem duty on petroleum products. One would like to think that for a stable, growing society, low and stable inflation rate is a pre-condition. India is coming closer to that objective today. Fiscal deficit, revenue deficit and trade deficit have become manageable with the highest ever foreign exchange reserves of over $352 billion being achieved recently.
Creating a conducive environment for massive job creation has to be an important priority for the new government. Infrastructure creation and industry regeneration has to be given adequate importance. Industry has to be attracted to set up plants as manufacturing has been identified to be a key success factor in this puzzle. The ease of doing business, Make in India, and several other initiatives have been initiated along with skill improvement programs. All of the foreign trips of Modi after becoming prime minister have focussed primarily on attracting foreign investment in the manufacturing sector.
Norms for investments in defence, insurance and several other sectors have been relaxed to make India attractive for foreign companies. The defence production strategy which makes military procurement conditional to making the equipment in India will not only create a large number of jobs but also make India a hub for hi- tech defence manufacturing in the future. Single window framework and project management portal is creating an enabling environment for the Prime Minister’s Office to track progress of large important projects on real-time basis, irrespective of them belonging to the private or public sector – projects worth more than Rs 600,000 crore investments are now being monitored. Mechanisms have been devised to coordinate with states and cities to expedite the projects with periodic reviews taking place and hindrances to project implementation removed in real time. Concept of Team India consisting of Prime Minister, other Ministers and Chief Ministers of various states has also been well received. Giving out larger percentage of taxes and other revenues to states is well-intentioned and provides for more flexible implementation approach on the ground.
Direct benefit transfer to beneficiaries required the government to continue the MNREGA scheme and build on the Aadhar Unique Identification project. Although they were initiated by the previous government, the new government built on them and also created a massive framework to open more than 150 million bank accounts to make direct benefit transfer a reality and at the same time bring large number of unbanked people in to financial mainstream.
Creating social security schemes like accident cover linked to bank accounts, giving micro loans to bank account holders, launching pension scheme with more than 80 million registered users and giving them life insurance have been achievements unparalleled in India's history. But these are not highlighted much in the middle-class media. Giving small loans to entrepreneurs through Mudra bank is a brilliant initiative as today most small entrepreneurs do not get any funding from formal sources like banks, markets, etc., making vulnerable to the uncertainties of informal sources of finance. The Swacch Bharat initiative has also been well received and has created awareness about much needed cleanliness in India.
India is the largest consumer of gold and gold imports account for nearly a third of the current account deficit. Announced first in the Union Budget for FY 2015-16, the government has released a draft paper for public comments on the Gold Monetisation Scheme, which allows for citizens to deposit their gold with any of the banks offering this service and earn returns in the form of gold. The minimum amount of gold that can be deposited under this scheme has been kept at 30 grams and the minimum tenure at one year, both welcome measures. Implementation and reach are crucial, but the Gold Monetisation Scheme, along with the Gold Sovereign bonds, also announced in the Union Budget, may help India’s gold demand substantially, which would significantly improve India’s current account balance.
India has witnessed significant migration from rural parts to cities in the last few decades, with the urban population now accounting for 31 per cent of the total. The migration has also resulted in increased economic activity with the urban population now contributing over 60 per cent to the GDP. However, the infrastructure required to support such a big population has not kept pace as the cities grow to accommodate the growing population. The infrastructure, thus, has proved to be the bottleneck in economic development. Also, the quality of life in cities has deteriorated. The prime minister’s vision to create 100 smart cities with modern infrastructure to support the large-scale urbanisation without compromising the quality of life is a necessity if India wants to become the global leader in the next 20 years.
The smart cities should be able to provide good infrastructure such as water, sanitation, reliable utility services and health care. They should attract investments and have transparent processes that make it easy to run commercial activities. There should be simple and online processes for obtaining approvals, and various citizen-centric services must be made available so that people can feel safe and happy. The International Finance Centre in GIFT City in Gujarat is one such welcome initiative.
Setting up of IFC in GIFT City was a part of Modi’s vision, which was supported by the BSE by becoming the first stock exchange in the world to sign an MoU with GIFT. It would help in establishing an international finance centre in India that can compete on rules, regulations and ease of business with finance centres in places like Hong Kong, Singapore, Dubai and London. This would create high quality jobs in India and boost economic activity. The IFC would act as a gateway to attract investments to India.
India’s role as a humanitarian country was reinforced with Operation Raahat, the evacuation operation from Yemen, of nearly 5,000 Indian nationals and 1,000 foreign nationals from 41 countries. Even the US State Department advised its nationals to contact the Indian embassy for evacuation out of Yemen. While India managed to evacuate all its citizens and one thousand foreign nationals, the US has still not been able to initiate any operation to evacuate its 55,000 citizens out of the war-ravaged Yemen. India’s efforts were again needed as Nepal got hit by a 7.8 Richter scale earthquake which killed thousands of people. Operation Maitri, India’s prompt response to the Nepal earthquake, included immediate delivery of over 500 tonnes of relief material, evacuation and transportation of thousands of people of different nationalities, sending its Air Force and soldiers for helping the Nepalese government with relief work, while Indian citizens volunteered for relief work and helped with donations.
The prime minister is helping make the citizens take the onus of transforming India – be it the CSR Bill, the Swachh Bharat Abhiyan or his call to affluent Indians to give up their gas subsidy.
The support garnered by the Swachh Bharat Abhiyan among the citizens and corporates has been overwhelming. It has been particularly heartening to see citizens respond to the call to fulfil Mahatma Gandhi’s vision of Clean India by his 150th birth anniversary in 2019. The BSE Group has also supported the PM’s initiative in its own humble way. India is witnessing its first mass movement for cleanliness and hygiene, since the days of Mahatma Gandhi. If India has to cement its place in the world as a developed nation, it has to make significant strides in the areas of public health and hygiene. The Swachh Bharat Abhiyan would have far reaching effect in public health and hygiene, welfare of the poor and national growth and development.
The government has built upon the work of the previous regime on CSR for corporates with the Companies (Corporate Social Responsibility Policy) Rules, 2014. BSE, CII and IICA have collaborated to form a first-of-its-kind-in-the-world platform called Sammaan. This CSR platform enables companies to undertake effective CSR. As per recent analysis done by the BSE, there are 1294 companies listed on the BSE that are required to spend on CSR by the law. There are an estimated 20 lakh implementation agencies (IAs) registered in India. Corporates, especially the small and medium ones, will need assistance to identify an NGO that they can partner with for their CSR compliance.
Sammaan aims to provide this assistance in the role of trusted intermediary between corporate and IAs. It will provide access to credible IAs from across India, working in all the sectors mentioned in Schedule VII, Section 135 of Companies Act 2013. IAs listed on Sammaan will provide clear and defined programs, objectives, expected outcomes and budgets. Sammaan will provide corporates with a program dashboard to monitor funding and progress of the CSR programs initiated by them. IAs will have the opportunity of listing their organization on Sammaan and gain visibility on one of the largest listing of corporate donors.
The employment question is a tough one to crack. Infrastructure needs to be created for ports, airports, roads, factories, power, mining, etc. This will not only kick off employment generation instantaneously but also create conditions for job creation in the medium to long term, which would help India realise its goal of “Make in India”. SMEs are the engines of growth with some of them becoming large-cap companies at some point of time. We need to create an environment where India-based companies are able to grow and thus create more jobs, where small and medium enterprises (SMEs) find it easy to raise funds for their enterprises and where the youth is adequately trained to contribute and participate in the Indian growth story.
On March 13, 2012, the BSE became the first exchange in the country to launch a dedicated SME platform for listings. In the same way, the BSE has been synonymous with capital markets over 140 years, the emerging BSE SME segment has become the largest market of its kind in India with more than 90 per cent market share. The BSE, in the last two and a half years, has been able to get 93 SMEs to get listed, four of which have grown and successfully migrated to the main board of the exchange, while an additional 20 companies are at various stages of getting listed. Listing of SMEs enables them to raise funds from the public, while giving the investors the opportunity to become part of the success story if these ventures succeed. The SME market cap breached the Rs 10,000 crore landmark in December 2014.
The first year of Prime Minister Modi has seen tremendous energy and initiatives. Some of them have given results and some of them will give results over a period. If he continues with the same zeal and enthusiasm for result-oriented policies over the next four years of his first term, I am sure India will have progressed much further to fulfil our dream of a clean, equal and poverty free India.
The author, Ashishkumar Chauhan, is managing director and CEO of BSE