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 6-7%.
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 delivered substantially.
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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