India deserves praise for being a “bright spot in an otherwise gloomy global economy”. As we look forward to 2016, it’s time to seize the opportunity.

India’s top priorities should include passage of the GST, rationalising direct taxes further and introducing key structural reforms in terms of infrastructure, real estate, labour, finance and MSMEs, among others.

A stronger cyclical pick-up in public and private investment, and a broader revival in consumption demand should be able to more than offset any external headwinds in 2016. Growth will also benefit from a lagged impact of structural policy reforms undertaken in 2014-15.

The big question is whether the Centre will need to dilute the pace of fiscal consolidation envisaged given the additional payouts recommended by the 7th Pay Commission. Commitment to lowering fiscal deficit is critical, but not at the cost of spurring investments or growth. If productive public investments are stepped up across different infrastructure sectors to counter the additional public consumption, it will be a fine balancing act.

Inflexion year 2015 was an exceptional year as the pace of decline in global commodity prices was unusually steep. Further, despite less than normal monsoon, domestic food prices remained in check owing to several proactive and remedial government actions.

This munificence is however unlikely to continue. While oil prices may continue to remain subdued, the incremental decline and thereby the pace of further disinflation will be limited.

Even as the overall domestic macro situation improved in 2015, the banking sector continued to face challenges due to lack of meaningful recovery in asset quality, growth-oriented capital constraints and sluggish profitability. Still, 2016 will be the inflexion year for the banking and finance sector with support from the policy and regulatory environment, as improvement in macros starts to manifest in corporate balance sheets.

Revitalising public sector banks was a key focus area for policymakers in 2015. The Reserve Bank of India and the Centre are working in unison for an expeditious resolution of distressed assets, clean up of balance sheets of PSBs, improvement of overall operational efficiency and adequate capital in banks for growth and expansion within Budget constraints.

A monetary policy committee with representation from the RBI and the finance ministry will be set up to ensure continuity of the monetary and credit policy of the central bank.

The RBI has been systematically reducing its tolerance for regulatory forbearance. While strict guidelines on NPA recognition are in place, the RBI and the Centre have been taking micro measures to alleviate sectoral stress. Implementation of the 5/25 rule and the UDAY scheme are likely to start lowering infrastructure-related stress.

Structural reforms While micro measures will help, the banking and finance sector also needs the next generation of reforms to meet the aspiration of 9-10 per cent GDP growth on a sustainable basis. GST, once it sees the light of the day, will truly enhance India’s growth potential in the medium term; the Bankruptcy Bill could turn out to be a game-changing reform in the near term.

2015 saw India becoming an active incubation centre for e-commerce. The thrust on digitisation and startup programmes, we are seeing an entrepreneurial economy characterised by DICE — design, innovation and creativity-led entrepreneurship.

The technological penetration of the banking and finance sector will improve further in 2016 in order to support this new age commercial requirement.

The advent of the JAM trinity is a silent revolution. While Jan Dhan Yojana will further the objective of financial inclusion, the Aadhaar platform will furnish the basic digital intelligence and mobile phones will leverage this through innovative payment systems. The market for e-finance will provide a huge opportunity for banking and finance.

The primacy of economic development in governance and progressive reforms to facilitate investments has been the hallmark of the Narendra Modi-led government. The right mix of fiscal and monetary policy action, coupled with the turnaround in the global economy, will boost India’s economic and industrial growth to the next level, and make 2016 India’s year.

The writer is the MD and CEO of YES Bank

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