The Organisation for Economic Cooperation & Development (OECD) has raised India’s GDP forecast for the year to 7.4 per cent, even as it lowers those for other large economies. There are expectations that Moody’s may re-rate India, which would be a positive for the country. In a global environment otherwise filled with dark clouds, India is a silver lining.

What’s good?

There are several positive factors that can make us optimistic about our growth prospects. There are also several areas which we need to focus on, in order to gild those prospects. The drop in the price of crude oil from a peak of $140/barrel to around $33 now has resulted in a huge saving since India imports over 75 per cent of its crude oil.

Another good development is that, due to higher domestic production of coal, the import of coal has come down, resulting in a saving of ₹30,000 crore in 2015-16. Indian coal is 40 per cent cheaper. There will be higher savings in the future, as Coal India is set to double its production by 2020. About 55 per cent of India’s power is produced from coal and 30 per cent from oil.

The Dedicated Freight Corridor (DFC) is slated for completion by 2019. If this can be brought forward, it would help introduce high-speed trains.

As of now, both passenger and freight trains run on the same line. The DFC is meant to provide a dedicated rail track for cargo, connecting Delhi to Mumbai. The government is to run Spanish Talgo trains, which would cut travel time between Mumbai and Delhi to 10-12 hours, from the current 16 hours. If scheduled properly, the Talgo trains would compete with airlines.

The burden

On the flip side, the Finance Minister faces the challenge of paying for the additional burden resulting from the Seventh Pay Commission hikes and the introduction of the One Rank One Pension plan. The Finance Minister has to provide for the above and also try to contain fiscal deficit to 3.6 per cent of GDP, under pressure from rating agencies and the RBI.

The RBI Governor has his eye on inflation. But China has built an enormous mountain of various commodities, including food grains, the sale of which would result in an export of deflation. It has, for example, stockpiled on ‘early season rice’ (a second crop introduced under a government programme, but consumers don’t like the rice) and bought 5.4 million tonnes which is now unsalable.

Also, it is unable to sell the American wheat and vegetable oil it had imported. So perhaps we should worry less about inflation and in the coming Budget, the government may increase infrastructure spending.

The Government has to start seriously to act against defaulters and scamsters. Defaulters of loans are threatening the existence of banks, and judicial delays add to the problem.

Crime and punishment

So the government and the Judiciary have to sit together and discuss the causes of delay. The government has rightly invoked section 396 of the Companies Act to compel the merger of the scam-tainted NSEL with its parent, sending a signal of its intent to punish white-collar crime. Each unpunished scam gets progressively bigger; the PACL scam is now ₹49,000 crore.

Global stock markets rose, strangely, on hopes that crude oil would rise after Saudi Arabia and Russia agreed to freeze production to January levels.

They then fell off when Iran and Iraq objected. Iran’s production was affected by sanctions and a deal to cut production is unlikely.

Globally, things are worrying, especially if China lands hard. But the India story is good and can be made even better with the right steps.

The writer is India Head, Euromoney Conferences

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