“Policy and investment are two sides of the coin. Attracting investment will need domestic policy reform.”

BY DNA | 21 Mar 2016

This last week I spent in Delhi meeting with policy makers and company heads to gauge where we are going into the new fiscal year. The good news is most were optimistic about growth and said they were seeing incremental changes in the economy. Some of our conversations were timed with the news on strong foreign direct investment numbers, which increased by 29% for the 15-month period ended December last year. This jump came in after the launch of ‘Make in India’ initiative, something even RBI governor Raghuram Rajan eluded to.

Over the last few months more and more CEOs are admitting that ‘Delhi is at work.’ That big bang noisy reforms are no longer the order of the day, but the systems are getting oiled – bureaucrats at office on time, files are moving and decisions are being taken. The new fixes of the economy may lie in a good mix of policy and investment, says H R Srinivasan, vice chairman of Take Solutions. “Good policy is needed for investments to come through and policy execution is not possible without adequate investments.”

Rajiv Anand agrees with that but hopes for more reforms coming through in the near future. “Policy and investment are two sides of the coin. Attracting investment will need domestic policy reform,” says the head of the retail bank at Axis. “Investment and capex needs to intensify for roads, power transmission, urban infra, inland waterways, irrigation and more.” He emphasises that domestic and government investment cannot make up for infrastructure expansion. He admits aggressive FDI would be what fills the funding gaps.

In the coming months there’s expectation that GST will help tinker growth upwards. Meanwhile, there is another fundamental change underway in India and that is the rise of the states. There is a hunger to grow and attract investments. This is heartening because private sector gets improved business opportunties here. “I think the state governments have understood two things very clearly... One to get re-elected they have to deliver on a development agenda and two, the government cannot create jobs to fulfill the aspirations of their people... The jobs will be created by the private sector and this will require private investment and an investor friendly image for the state,” explains Dalmia Cement MD Puneet Dalmia.

Companies are also driving investment in business friendly states and hoping to see incremental changes to their productivity. Pawan Munjal, chairman of Hero MotoCorp also talked of making stronger investments in India with an aim to use the country as a hub. “We will continue to develop the most fuel-efficient and smart-featured bikes and scooters for India and the world… We will also push the envelope and shape the future of mobility,” Munjal said while inaugurating a new research facility in Rajasthan.

“Job creation can only happen in the private and agricultural sectors,” H R Srinivasan adds. “It is the function of adequate capital formation to fund growth and global expansion.”

There is a big chunk of voices in favour of incremental growth, that is aided by improved environment for business. Raising some of the FDI limits, introducing a bankruptcy code, reform for public sector banks, putting auctions for environmental clearances, building on Make in India, pushing ahead financial reforms are some of the on-going efforts. Could the government keep up the momentum? However slow and steady? Election season may tell.

But one hopes a robust effort towards making systems work will eventually add the proverbial drops in the ocean.

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