Highways, tax reforms, land acquisition top Modi's reform agenda

The Narendra Modi-led BJP government is set to take a string of steps that would not require legislative approval including a time-bound implementation plan for infrastructure projects with highway building accorded the topmost priority.

A target of building about 25 kilometre a day of new highways is likely to be set, while the full-budget for 2014-15 in the first week of July, is expected to set the roadmap for tax reforms.

The government is expected to set a target of implementing Direct Taxes Code (DTC) and Goods and Services Tax (GST) by April 1, 2015. While the DTC plans to overhaul India’s archaic income tax laws, the GST seeks to stitch together a common national market by replacing India’s multi-layered indirect taxes with a single tax.

Both the DTC and the GST Bills were introduced in Parliament by the UPA in 2011, but have since lapsed with the dissolution of the 15th Lok Sabha.

Some of these plans could also be outlined in the President’s speech in the first week of June.

The full budget, in July, may contain proposals to roll-back retrospective tax laws, which had hit investor sentiments.

The government is also expected to announce its intent to change the recently-enacted new Land Acquisition Act, and could propose amendments in the legislation or in the Act’s rules to make it easier and less costly for industry to acquire land.

These changes could be announced in the first full session of Parliament — the budget-cum-Monsoon session in July-August.

Changes are also likely in the design of the UPA government’s flagship rural job scheme, MGNREGA, with focus on creation of infrastructure assets rather than just handing out wages to labourers.

In the first few months, the government is likely to propose changes in the NREGA Act to tweak the programme’s design and implementation.

Economists, however, said the speed of implementation of many infrastructure projects will depend on state governments.

“Optimism that the new administration can immediately fire up the capital expenditure cycle and rekindle growth is misplaced. Many infrastructure projects are under the purview of states, not the central government, so cannot easily be kick-started,” said Richard Iley, chief Asia economist, BNP Paribas.

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Strong reforms must to pull economy out of morass: India Ratings

The economy is 'delicately' balanced and to return to a higher growth trajectory, it needs strong policy reforms, according to India Ratings.

The agency has kept its FY15 growth forecast unchanged at 5.6 per cent.

The agency also rules out any drastic drop in farm productivity saying the reservoirs are a decadal high already and it is too early to assess the impact of possible El Nino.

"The economy, at this point of time, is delicately balanced and requires a serious policy push to return on the high growth path," India Ratings said in a report today.

According to the report, although the worst appears to be over, it is unlikely that the economy will migrate to a high growth phase of around 9 per cent over next 2 to 3 years.

Finance secretary Arvind Mayaram over the weekend had said the economy is likely to grow at 5.5 per cent in the current fiscal.

On the likelihood of an El Nino incident, the report said it is too early to assess the impact of the phenomenon on agriculture.

"Adequate water storage in major reservoirs, 25 per cent higher than last year and 37 per cent higher than the average of last 10 years, as of  April 3, 2014, will cushion the adverse impact of a rainfall shortage, if any," it said.

This will also help in alleviating some pressures which are likely to emanate from the lower-than-average
seasonal rainfall, at 95 per cent of long period average.

Last week, the India Meteorological Department (IMD) had said the monsoon was expected to be below normal because of the El-Nino effect. The seasonal rainfall is likely to be 95 per cent of the long period average with an error of plus or minus 5 per cent, it said.

The rating agency expects seasonal factors, mainly rainfall, to continue to exert pressure on inflation.

However, it expects both the WPI and the CPI based inflations to fall and average out at 5.5 per cent and 8 per cent, respectively, in FY15.

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