Economy
Building a Better India – Part 6: Fast track clearances
While the environment is a priority for the nation, it cannot be used as a ruse to stall projects that become politically inconvenient
 
The high GDP growth from 2004 to 2010 was led by the service sector and not by agriculture and manufacturing. Such high GDP was unsustainable in the long term and that is what happened. Historically all developed nations have first witnessed long periods of high agriculture and manufacturing growth which consequently led to growth in their service sector. 
 
Hence the future restoration of GDP growth back to above 8% rate must and has to be led by increased farming, agro- related and  manufacturing activities, and exports. Hundreds of stalled and pending projects, both industrial and infrastructure related, worth crores of Rupees and in which PSU banks have high exposure, should be cleared and approved on a war footing by:-
  1. Dismantling/ removing the red tape and unnecessary formalities. Hire experienced, talented, middle-aged, highly educated experts of related fields in sufficient numbers on 5 year contract basis. Policy and implementation paralysis need urgent cure through steroid.
  2. Directing inter-ministerial cooperation and coordination with no room for ego or complacency. Restructure /consolidate/reorganise the various existing ministries.
  3. Swift executive and administrative actions/ orders. Pointless to only form committees after committees with no real follow up action.
  4. Reframing/renegotiating the stranded public-private projects to unlock the bank loans blocked in these projects and speed up infrastructure development.
  5. Increase planned expenditure which was drastically cut in the last 2 years to meet fiscal deficit target to avoid junk status threats by international rating agencies and reduce wasteful revenue expenses.
  6. Faster approval to pending economic reforms so that ruling govt cannot take refuge for its failures under this pretext. 
  7. Disband the central Ministry of environment and let the environmental clearances and permissions be decentralised to state pollution control Boards.
These quick steps have no legislative or bureaucratic impediments, and can be taken in the interest of the nation without much adieu. While the environment is a priority for the nation, it cannot be used as a ruse to stall projects that become politically inconvenient. In the context of stalling growth and what that entails for a developing economy, some environmental concerns may need to be put on the back-burner and any environmental side effects may need to be ameliorated in alternative ways.
 
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(Kolkata-based Dalbir Chhibbar practised as a CA till 1990 and later started his own buinsess) 

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Michael Schumacher out of coma, leaves French hospital

Schumacher, the seven time F1 champion, is out of coma and has left a French hospital where he had been receiving treatment since a skiing accident in December 2013

Michael Schumacher, the seven time F1 champion, is out of coma and has been discharged from hospital after six months.

 

In a statement, Sabine Kehm, manager for Schumacher, said the Formula One great is no longer in a coma and has left a French hospital where he had been receiving treatment since a skiing accident on 27 December 2013.

 

Kehm said in a statement that Schumacher has left the hospital in Grenoble "to continue his long phase of rehabilitation."

 

The statement did not say where the seven-time F1 champion was taken, nor does it give any details of his condition.

 

"For the future we ask for understanding that his further rehabilitation will take place away from the public eye," Kehm added.

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How will the Modi govt reduce India's fiscal deficit?

There is limited scope for the Modi government to undertake drastic measures to reduce expenditure to GDP ratio, and the only credible way to reduce spending is by cutting subsidies, mainly oil subsidy, says Morgan Stanley

The Narendra Modi-led National Democratic Alliance (NDA) government, in its preparation for the FY2015 fiscal accounts will need to consider adjusting the FY2014 reported fiscal deficit for one-off measures taken in March to make a better assessment of the starting point. "We believe there is limited scope for the government to undertake drastic measures to reduce expenditure to GDP. In this context, we believe the only credible way to reduce spending is by cutting subsidies (mainly oil subsidy). We expect that the government’s approach will be to maintain a moderate pace of expenditure growth at around 9.5% year-on-year (Y-o-Y) even as growth picks up to ensure sustainable fiscal consolidation," says Morgan Stanley in a research note.

 

"However," the report says, "We do not expect the new government to take drastic measures to reduce expenditure to GDP, as the present run rate at 14.2% of GDP is towards the lower end of the historical range of 13.9-16.5%. We believe the government could contain overall spending growth to around 9.5% compared with an average of 16.7% seen in 2009-2013. In other words, we see the government aiming to keep expenditure growth slightly below nominal GDP growth."
 

Source: Budget Documents, Morgan Stanley Research

* F2014 central government fiscal deficit adjusted to show underlying trend at 5% of GDP vs. government’s reported number of 4.5% of GDP

 

"We believe that the new government will need to clarify that the starting point of the underlying fiscal deficit trend as of FY2014 is 5% and not 4.5%. This, we think, would allow the government to have a credible target for FY2015," says Morgan Stanley in a research note.

 

Since the credit crisis, India’s fiscal deficit has remained high, in the range of 7.5-10% of GDP due to bad growth mix and reduced productivity in the economy. While the fiscal deficit trend has improved since FY2012, the deficit remains high at 7.6% of GDP in FY2014. This includes the central government's deficit at 5% of GDP (adjusted for underlying trend compared with 4.5% reported) and the state government's deficit at 2.4% of GDP.

 


Morgan Stanley says, it believes that reducing the fiscal deficit and increasing investment are critical steps towards improving the growth mix and raising productivity, because fiscal consolidation is one of the key elements of the reform agenda for the new government. "The state governments’ deficit is closer to the trend line, and more importantly their mix of spending is better placed with revenue in surplus. Hence, we believe that the bulk of the reduction in the fiscal deficit needs to be at the central government level," the report said.

 

By the time the new government presents the budget for FY2015, the first quarter will already be over. Morgan Stanley says, it believes there is limited room for reducing the fiscal deficit for the year. "We expect the fiscal deficit to be cut to 4.5% from 5% in FY2014. We believe the new government will maintain a gradual path towards fiscal consolidation by adopting a twofold approach: 1) maintaining a moderate pace in government expenditure and 2) improving the tax revenue to GDP ratio through an improvement in the growth outlook," it added.

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