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Editorial: New Modi Govt has its Task Cut Out, Time for Action

Image courtesy: http://www.youthincmag.com

Port Wings, 5 June 2019:

Though the second innings of Narendra Modi-led Union Government have just began, the thorny issues like US –India trade relationship, import of Iranian oil and Pakistan relations have taken the centre stage.

And these issues forced the new government to act swiftly than enjoying a honeymoon period of 100 days.

While NDA cruised to a historic victory in the general elections, the government has its task cut out. The new government will have to focus on reviving economic growth, which is facing headwinds on several fronts such as a slow down in consumer demand both in urban and rural areas, a liquidity crunch in the non-bank lending sector, falling investments in new projects and slow exports growth amid global trade wars.

According to Kumar Mangalam Birla, chairman, Aditya Birla Group, the historic pro-incumbency vote reflects an overwhelming desire among the electorate for stability and development.

Besides these burning issues that need immediate attention from the Government, reviving GDP growth will be the one of the important yardstick which will determine popularity of the government.

Faltering consumption growth, as seen in the worst passenger vehicle sales growth performance in five years in fiscal 2019 and a fall in sales and volume growth for FMCG companies, will be a major challenge for the new government. India Inc. expects the government to take strong steps to stimulate rural and urban demand and bring consumption growth on the fast track again.

FMCG majors believe that with the election hangover behind and with the strong mandate received by the incumbent, consumer demand should witness a revival.

Infrastructure is another sector that is expected to see a strong focus. In Narendra Modi’s first term, orders in the roads sector saw a pick-up under the hybrid annuity model, which saw several mid-tier developers bid and win national highway projects. The government also came out with new fundraising models such as the toll-operate-transfer model, with which capital can be recycled and ploughed back into new projects.

Modi’s first term also witnessed the government bring key reforms for the power sector like the Ujwal DISCOM Assurance Yojana (UDAY) scheme and a push towards renewables. Power producers hope the second term will lead to more encouragement to private sector participation in power sector, especially for troubled assets, and amendments to the Electricity Act.

India’s aviation sector, the third largest by passengers in the world, should also be a priority for the new government, feel experts. Modi’s second term could see the government reboot Air India privatisation. Tackling capacity constraints due to the collapse of Jet Airways and resulting higher fares need to be on the government’s to-do list too. The sector’s myriad troubles resulted in the number of domestic passengers carried falling to 10.9 million in April 2019, from 11.5 million in the previous year.

Industry experts expect the new government to decide on oil imports from Iran, which came under question after the US pulled back Iran sanction waivers for eight countries, including India. On 14 May, foreign minister Sushma Swaraj told Javad Zarif, her Iranian counterpart, that the government will decide on Iran oil imports post the general election.

The action has began, and let us wait and see which way the wind is blowing.

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