Most of them will centre around infrastructure and agriculture, thinks Nomura
Last month, Prime Minister Narendra Modi completed one year in the office. Different ministries have already chalked out their plans of action for the second year and most plans appear to be a step forward along the path adopted in year one. The government also appears to be sending a message that economics will triumph politics, says Nomura.
In a research report, it says, "Overall, if implemented, the direction of reforms in the second year will continue to be positive. At the same time, we expect the pace of reforms to be gradual, given the political hurdles around big bang reforms. Cumulatively, though, the reforms should aid in improving the medium-term fundamentals of the economy".
The government also appears to be sending a message that economics will triumph politics. Therefore, rural financial stress will be countered through measures that raise rural productivity and prosperity sustainably, and not through populism. According to Nomura, there are the top 10 priorities for the Modi government, like progression the goods and services tax (GST) and passing of the Land Acquisition Bill.
After completing one year in the office, several ministers from the union government highlighted their achievements and also shared their plans for the second year. Here is the plan of action from the ministers...
Finance & Corporate Affairs (Minister: Arun Jaitley)
• GST implementation: The GST Constitutional Amendment Bill, which has already been passed by the Lok Sabha (lower house) and is pending in the Rajya Sabha (upper house), is likely to be passed in the monsoon session (likely from end-July to end-August). The Minister has stuck to 1 April 2016 as the GST implementation date.
• Companies Act: The government is likely to set up a committee to look into the Companies Act and suggest changes to help improve the ease of doing business.
Railways (Suresh Prabhu):
• Regulator: The government is likely to set up a Railways Regulator, which will monitor railways and help improve its efficiency.
• Financing: The railway is likely to tap into global financial markets and supranational institutions to raise funds for infrastructure upgrading.
• Collaboration with PSUs and states: The railways have already signed MoUs with the state governments and public sector units (PSUs) to provide last mile connectivity. More such state-level collaborations are likely to be announced.
• Bullet trains: Feasibility study reports for the Mumbai-Ahmedabad and Delhi-Chennai corridors are expected during the year.
Highways, Ports and Surface Transport (Nitin Gadkari):
• Financing: The government is working on a mechanism to allow private equity firms and sovereign wealth funds to buy stakes in highway projects. Further, the government is firming up plans for a $1.6 trillion financing institution that will fund highway projects with a 26% stake held by Japanese companies.
• Reinvigorating the PPP model: The government has set up a panel to look into the public private partnership (PPP) model and suggest ways to make the model more effective.
• Land acquisition: Passing the land acquisition amendment bill (pending in the Rajya Sabha) is a priority.
• Ports: To develop 12 ports into mini smart cities under the Sagarmala project.
• Waterways: To develop inland waterways in India (development of the Ganges as an inland waterway is already underway). Also, boost the sector by passing the inland waterways bill in parliament.
Power (Piyush Goyal):
• Transmission: After generation, transmission is the next big focus area. In the next year, at least INR1trn worth of transmission capacity will be put out for bidding, as per the Minister.
• Renewable power generation: To announce incentives to boost solar power generation during the year.
Agriculture (Radha Mohan Singh):
• National Agriculture Policy: According to the Times of India, the government is working on a comprehensive National Agriculture Policy, which aims to increase agriculture productivity using measures such as soil health cards, micro irrigation, introducing new technology and crop insurance schemes.
• Agricultural Marketing Reforms: Central and state governments together are likely to identify 50 wholesale agriculture markets across 10 states and initiate reforms towards reducing levies, breaking the oligopoly of traders, etc.
• Irrigation: To present the road map for the Pradhan Mantri Sinchai Yojana (Prime Minister Irrigation Scheme) in a few months.
• Low MSP: The Commission of Agriculture Costs and Prices (CACP) has recommended a marginal (<5%) increase in minimum support prices (MSP) for the summer crop in FY16. The government is likely to keep the MSP increase in check.
• Against debt waiver program: The government is not in favour of debt waiver schemes and will instead rely on other more productive means to improve farm incomes and reduce farmer’s financial distress.
Petroleum and Natural Gas (Dharmendra Pradhan):
• Kerosene subsidy: After LPG, kerosene is in focus. The government is starting a pilot project to plug leakage and has asked state governments to digitize household records and set out a criterion to identify beneficiaries.
• Subsidy sharing formula: Upstream firms do not have to bear the FY16 subsidy burden and the same is expected to be codified soon.
• Increase in exploration activity: The government plans to launch the 10th round of auctions of oil and gas exploration blocks under the New Exploration Licensing Policy (NELP) in the next 6-12 months. Under this, it proposes a shift to the open acreage licensing policy, where the bidding and award of acreages will be a continuous, demand-based process.
Commerce and Industry (Nirmala Sitharaman):
• State-level ease of doing business ranking: The government is likely to launch a state-level ease of doing business ranking in the coming months to foster more competition between states to improve the business climate.
• Industrial Corridors: To setup a National Industrial Corridor Development Authority (NICDA) to help expedite work on industrial corridors.