In end May 2015, the Prime Minister Mr Narendra Modi's
Government at the Centre completed 1 year of tumultuous rule. The
term started with high-level of expectations after the near-drought
on policy initiatives by the previous Government and on the back of
large promises doled out by the new Government. The expectation of
the global and Indian business community had heightened with hope
that the mood on the ground would rapidly change. In the backdrop
of such expectations, the new Government has just about delivered
an average performance, devoid of big bang reforms but delivered on
some key initiatives coal and spectrum auctions (which were huge
success), passage of key legislations i.e. Coal Mines, Mines and
Minerals, Insurance etc.
The Annual Budget that was announced by the Finance Minister in
February 2015 was passed as law in the month of May 2015, but the
key tax reform; the introduction of Goods and Services Tax
('GST') could not pass the muster in the both the houses as
required by the Constitution of India and is now before a select
committee before it is once again tabled before the legislature.
With this delay, the introduction of this key legislation with
effect from April 1, 2016 seems daunting and is most likely to
spill over in that year for a later implementation date.
India's growth story would seem tangible when the private
investment which is still at a nascent stage of recovery returns to
a respectable level in line with the expectations. Also, such
investment needs nurturing by growth in public capital expenditure
and the pick up signs were seen in April 2015 which saw 9.1% of
annual expenditure being spent in one month as against average of
The foreign investors, specifically the Foreign Portfolio
Investors ('FPI') got entangled in dispute with the Indian
Tax Department on the applicability of Minimum Alternate Tax
['MAT'] which is currently applicable @18%. From an initial
belligerent posturing by the Finance Minister and on the defensive
in light of the backlash from the international business community,
the Minister was forced to significantly dilute the impact of the
standoff and is now gone for long haul and unlikely that would
retain its bite.
The Year-2 Agenda has leftovers from Year-1 i.e. passage of Land
Acquisition bill which is now referred also to a joint select
committee. Also unfinished is the implementation of key reforms
initiative such as Make in India, 100 Smart Cities and the promise
of delivering on ease of doing business, which is yet to be
India's infrastructure requires investment in excess of US $
1.7 trillion by 2020 according to the World Bank, but admittedly,
India is falling short by a mile. Despite the sullen and to a
degree, a realistic mood, the expectations of fast reforms still
survive and sectors such as banking, real estate and several others
await key reforms to ignite investment.
For many, as the challenges are overcome and ease of doing
business returns, the India opportunity would continue to beckon
the international business community to what is well regarded as
the next big story after China what with India slated to be 3rd
largest economy in the world by 2030.
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