If one compares the economic reforms in China and India we can find the following difference in approaches-
China focused on core/hard infrastructure development and stepping up the manufacturing on large scale to capture the global market.
India primarily focused on institutional reforms and building effective regulators in various sectors. As a spin off benefit of post liberalization India's private sector made rapid strides in information technology. Though the Indian government recognized the need to develop core/hard infrastructure (like- power, roads, sea ports, air ports, water etc..) it is constrained by the financial resources. Hence, the govt., took a conscious decision to shift from EPC (Engineering, Procurement and Construction) Models to PPP (Public Private Partnerships) Models to build the core infrastructure in various sectors. However, due to factors like aggressive biddings by contractors with less or negative margins, delay in execution of projects due to want of govt., approvals, legal hurdles in land acquisition, delay/ shortage of bank finance – we are witnessing problems in infrastructure industry. This in turn has impacted the banks, who have lent money to various infra projects, in the form of mounting NPAs (Non Performing Assets/ bad loans) and huge losses. In my opinion if this problem continues then in next 18 months this will snow ball into not only a crisis situation to the banking sector but has the potential to cripple the overall economic growth since banks will shy away from lending in order to clean their balance sheets and set their house in order.
The positives are- significant decline in our crude oil imports bill thanks to the declining oil prices, inflation being under control, foreign debt at a manageable level by global standards, stable growth in GDP while most of the countries are experiencing decline in GDP growth or having negative growth.
The issues to be addressed are- containing the fiscal deficit, which is much easier said than done in the Indian context. Food subsidy and fertilizer subsidies continue to be a big challenge though the Govt., has tactfully contained the oil and gas subsidies in the last two years. OROP, wage revision to govt., employees are going to pose a serious challenge to the Finance Minister in his endeavours to contain the fiscal deficit. The need for infusing additional capital into banks will add fuel to the fire. Disinvestment of stake in PSBs (Public Sector Banks) will pose a challenge as the capital markets do not appear to be positive with optimistic outlook (i.e., bullish in the stock market language).
The silver lining is that JAM ( Jan Dhan Yojna, Aadhar and Mobile) has the potential to bridge the gaps in financial inclusion, improve the PDS ( Public Distribution System) by plugging the leakages and ensure the welfare schemes directly reach the genuine beneficiaries through DBT ( Direct Benefit Transfer) schemes.
Railway Minister has managed to present his budget for 2016-17 without increasing the passenger or freight fares yesterday.
Let us wait and see how the Finance Minister will do a balancing act between development and welfare in a tight rope walk when he presents his budget 2016-17 on 29th February, 2016.
Railway Minister has managed to present his budget for 2016-17 without increasing the passenger or freight fares yesterday.
Let us wait and see how the Finance Minister will do a balancing act between development and welfare in a tight rope walk when he presents his budget 2016-17 on 29th February, 2016.
Regards,
Ex- Vice President and Branch Head,
Bank of Bahrain and Kuwiat,
Hyderabad.
Mobile- 09885064644.
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