New Government, Policy, Projects and Expenditure Priorities
By: Amit Bhushan Date: 5th Jan 2014
I am sure now is the time to at least run a round of commentary on performance of the new central government basis whatever data and news has emanated from government sources. The majority government which rode upon promise to spur development has begun to take some policy initiatives at last under the ordinance route though, however which may ultimately witness some market action like one on Investment in Insurance sector although it must be admitted that various 'states' under the ruling dispensation were taking some policy measures like Labour reforms etc. towards the same goal probably. The government also seems to be in process of taking initiatives in banking sector by making noises on bad assets and also apparently in making land available for 'development', though actual ramifications is yet to be seen.
The government also seems to be in haste to prioritize investments in surface transport like Railways, Roads and Waterways and has made initial moves to mobilize resources via excise hike on fuel. It also seems to be pressing pedal on River cleanliness though we may not be sure on any positive outcome in absence of contentious (fool proof) industrial & city waste management programme across major cities with plans for management of infrastructure as well. While the government also seems to be pressing ahead on mining, its plans for ecological management and sustainable development seem to be put to some tough questions which may have potential to cloud investments in future.
One of the highlighting feature of the business friendly government it that while the project plans abound with thousands of crores of investments in each of the projects and Special Purpose Vehicles being floated/proposed on the back of such plans often preparing a precursor to government backed borrowing frenzy, however no effort is being spent on analyzing the Returns a la internal rate of return for such projects; a true hallmark of indeed very business friendly government. If so many government backed projects have indeed become so 'return friendly' that the government would not need to influence banks for funding, then why it is that private sector not being roped in to fund and own such new frontiers of growth under suitable regulatory regime. The exception seems to be the 'Make in India' program where the government seems to be making policy as well as planning Fiscal doles for private sector, however competitiveness of the regime which plans for huge export capabilities on the back of incentives would need to be gazed carefully. While keenness to have manufactured products from India is understood, the government has lacked on identifying and working with service sectors for Make in India services to be productized enmasse' and possibly exported, though it must be said that industry itself has not shown much initiative so far in this regard. A reason could be high capital entry barrier for cloud based services besides the robust infra requirements to ensure availability and on demand connectivity as well as risk-control making developed world a better host for such companies/services/products.
What we seem to be running is a charged government creating some sort of euphoria on the back of possibility of a debt fueled growth while actual investment in projects is still reluctant to come in due to unclear regulatory regime and government taking the convenient route of making investments on its own account into projects and then allowing the follow up regime to ensure the management and servicing of such investments. Our political opposition ensures that it participates in such political efforts in equal measure by ensuring that the government has an alibi for not working on creation of fair regulations and to be fair such legislation is neither priority on government list nor on the proposed private bills by any legislator. The tactics are seen to ensure that the government efforts remain under cloud with a leeway for opposition to play as per what suites them depending upon circumstances. Accordingly, we have focus on regulation to reduce barriers to business like improvement in business procedures for improved startup experience, reduction in number of hurdles for running factories/commercial outlets or land acquisition reforms or freeing up sectoral caps on FDI, however concrete effort to develop a well regulated market which ensures a producer-buyer relationship balance through suitable regulatory regime is lacking. Such a regime could have seen a spurt in private tour and travel services on Riverways and near coast (on pattern of City bus services) or renewed focus on power sector economics by curbing theft. However in keeping our culture, even foreign investors prefer to partner with government or large cronies who are believed to be active in any government so that the government is then seen to be responsible for the profitability of the venture rather than a fair regulatory regime. We may have announced FDI in Railways however our ability to identify and allocate projects in a fair manner remains suspect and this is likely to cloud or create business conflicts. In fact focus on implementation without a fair distribution regime is likely to open an even greater Pandora box in future, though a media obsessed with 'growth rate' rather than 'fair play' is unlikely to raise any issue on this count in near future.
Often our political leaders as well as businesses are convenient with such structures which seem more stubborn on the outside but the entrepreneurs are able to work out their rope to manage under the circumstances. While the leaders get a chance for 'direct action' to show off to their supporters and engaging with their 'constituency' a bit more eagerly on the back of a running project under their domain. A regulator is seen as an unnecessary hurdle which doesn't understand the changing circumstances and priorities of business by our businessmen who would otherwise swear by fair practices in any given forum. The idea of an evolving regulator on the back of interactions with various stakeholders' group has not yet seen to be successful. The regulators are seen to be lacking any bandwidth with lawmakers to argue for or against any proposed legislation or to influence policy in a politically amiable way. The story remains unchanged so far even basis declared intents.
By: Amit Bhushan Date: 5th Jan 2014
I am sure now is the time to at least run a round of commentary on performance of the new central government basis whatever data and news has emanated from government sources. The majority government which rode upon promise to spur development has begun to take some policy initiatives at last under the ordinance route though, however which may ultimately witness some market action like one on Investment in Insurance sector although it must be admitted that various 'states' under the ruling dispensation were taking some policy measures like Labour reforms etc. towards the same goal probably. The government also seems to be in process of taking initiatives in banking sector by making noises on bad assets and also apparently in making land available for 'development', though actual ramifications is yet to be seen.
The government also seems to be in haste to prioritize investments in surface transport like Railways, Roads and Waterways and has made initial moves to mobilize resources via excise hike on fuel. It also seems to be pressing pedal on River cleanliness though we may not be sure on any positive outcome in absence of contentious (fool proof) industrial & city waste management programme across major cities with plans for management of infrastructure as well. While the government also seems to be pressing ahead on mining, its plans for ecological management and sustainable development seem to be put to some tough questions which may have potential to cloud investments in future.
One of the highlighting feature of the business friendly government it that while the project plans abound with thousands of crores of investments in each of the projects and Special Purpose Vehicles being floated/proposed on the back of such plans often preparing a precursor to government backed borrowing frenzy, however no effort is being spent on analyzing the Returns a la internal rate of return for such projects; a true hallmark of indeed very business friendly government. If so many government backed projects have indeed become so 'return friendly' that the government would not need to influence banks for funding, then why it is that private sector not being roped in to fund and own such new frontiers of growth under suitable regulatory regime. The exception seems to be the 'Make in India' program where the government seems to be making policy as well as planning Fiscal doles for private sector, however competitiveness of the regime which plans for huge export capabilities on the back of incentives would need to be gazed carefully. While keenness to have manufactured products from India is understood, the government has lacked on identifying and working with service sectors for Make in India services to be productized enmasse' and possibly exported, though it must be said that industry itself has not shown much initiative so far in this regard. A reason could be high capital entry barrier for cloud based services besides the robust infra requirements to ensure availability and on demand connectivity as well as risk-control making developed world a better host for such companies/services/products.
What we seem to be running is a charged government creating some sort of euphoria on the back of possibility of a debt fueled growth while actual investment in projects is still reluctant to come in due to unclear regulatory regime and government taking the convenient route of making investments on its own account into projects and then allowing the follow up regime to ensure the management and servicing of such investments. Our political opposition ensures that it participates in such political efforts in equal measure by ensuring that the government has an alibi for not working on creation of fair regulations and to be fair such legislation is neither priority on government list nor on the proposed private bills by any legislator. The tactics are seen to ensure that the government efforts remain under cloud with a leeway for opposition to play as per what suites them depending upon circumstances. Accordingly, we have focus on regulation to reduce barriers to business like improvement in business procedures for improved startup experience, reduction in number of hurdles for running factories/commercial outlets or land acquisition reforms or freeing up sectoral caps on FDI, however concrete effort to develop a well regulated market which ensures a producer-buyer relationship balance through suitable regulatory regime is lacking. Such a regime could have seen a spurt in private tour and travel services on Riverways and near coast (on pattern of City bus services) or renewed focus on power sector economics by curbing theft. However in keeping our culture, even foreign investors prefer to partner with government or large cronies who are believed to be active in any government so that the government is then seen to be responsible for the profitability of the venture rather than a fair regulatory regime. We may have announced FDI in Railways however our ability to identify and allocate projects in a fair manner remains suspect and this is likely to cloud or create business conflicts. In fact focus on implementation without a fair distribution regime is likely to open an even greater Pandora box in future, though a media obsessed with 'growth rate' rather than 'fair play' is unlikely to raise any issue on this count in near future.
Often our political leaders as well as businesses are convenient with such structures which seem more stubborn on the outside but the entrepreneurs are able to work out their rope to manage under the circumstances. While the leaders get a chance for 'direct action' to show off to their supporters and engaging with their 'constituency' a bit more eagerly on the back of a running project under their domain. A regulator is seen as an unnecessary hurdle which doesn't understand the changing circumstances and priorities of business by our businessmen who would otherwise swear by fair practices in any given forum. The idea of an evolving regulator on the back of interactions with various stakeholders' group has not yet seen to be successful. The regulators are seen to be lacking any bandwidth with lawmakers to argue for or against any proposed legislation or to influence policy in a politically amiable way. The story remains unchanged so far even basis declared intents.