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5 things that happened in 2 years of Modi government
The BJP-led National Democratic Alliance came to power with a thumping majority in the Lok Sabha two years ago. A lot of expectations were built ahead of the 2014 general election and later.
The government was expected to trigger an economic recovery. Overall, experts are not disappointed.
Here are 5 things to note about the government reforms:
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Legislative reforms:
The government managed to pass six key reforms in the Parliament. These are the Insurance Bill to increase foreign direct investment (FDI) limit; the Coal Mines Act; the Mines and Minerals (Development and Regulation) Amendment Act; the Aadhar Bill, the Undisclosed Foreign Income and Asset (Imposition of Tax) Act, and the Insolvency and Bankruptcy Code. Most of these reforms help the coal and mining sector that took a beating after the Supreme Court cancelled licences to hold coal mines. That said, work is still in the slow lane. The auction of coal mines is just partly completed. The Bankruptcy Bill is expected to help banks suffering from bad loans.
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Solving the energy crisis:
An economy cannot grow with energy. This is why one of the key focus areas for the Modi government has been the energy sector. First, and most importantly, the government has completely deregulated fuel and gas prices to reduce the subsidy burden. The government has also made meaningful progress in two key areas: implementing the new pricing formula for oil and gas blocks, and the restructuring of power distribution companies. Going forward, state governments would bear a larger share of the debt burden, which may incentivize them to reduce costs and/or increase power tariff.
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Banking reforms:
India’s banks have faced a problem of rising bad loans for quite some time. This has mainly affected public-sector banks. One of the solutions is to reduce political interference in the running of PSU banks. To this end, the government announced Project Indradhanush in August 2015 to empower the banks and improve their capital base. However, this is still in the initial stages. The actual implementation is only expected to start from the second half of 2016.
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Waiting for GST:
The biggest reform of the lot – Goods and Service Tax (GST) – is still pending, despite being passed in the Lok Sabha. Its fate depends on getting the opposition on board, which holds the majority in the Rajya Sabha. The same goes for the Land Bill too, which could bring about important changes for businesses and projects in the country.
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Governance reforms:
Cutting the red tape was one of the reforms on the BJP agenda. This, however, is still work-in-progress, be it reducing bureaucracy and streamlining decision-making or judiciary reforms. The Parliament did approve of a new system to appoint judges to the Supreme Court and the High Courts, but that was rejected by the Supreme Court. There also has been progress regarding the restructuring of regulatory bodies and the creation of a single regulator for the communication, energy and finance sectors.
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$60 billion
Prime Minister Narendra Modi has been on a travel spree during the entire 2-year duration. This is to foster trade relations with other countries and attract investments in Indian companies. Numbers seem to agree. India’s inward FDI inflows more than doubled in the calendar year 2015 to $60 billion, according to a Kotak Institutional Equities report. Compare this to a mere 15.4% increase in FDI inflows in other emerging markets in Asia.
