Oct 08, 2012, 05.49 PM | Source: CNBC-TV18

Are recent reforms enough to trigger growth?

After being blamed for policy paralysis for the first three years of its tenure, UPA-II is now trying to pack all that work into four weeks. Are recent reforms enough to trigger growth? Experts answer.

After being blamed for policy paralysis for the first three years of its tenure, UPA-II is now trying to pack all that work into four weeks.

To tame the fiscal deficit, the price of diesel has been hiked by Rs 5 per litre. Also subsidised LPG cylinders have been capped to six per family per year. Fuel subsidy in every coming year is estimated to be down by 28 percent on account of this alone. For this year though, the diesel price hike and the LPG cap is likely to cut the subsidy bill by only Rs 10,000 crore.

To continue with the process of marketisation and globalisation, the government has allowed 51 percent foreign direct investment in multi-brand retail. It also hopes to raise the FDI in insurance from 26 to 49 percent, subject to parliament, which may be a big ask.

To rescue the ailing aviation sector, the government has given the green signal for 49 percent FDI. To tackle the declining savings rate and harness long-term savings into investment, the cabinet has given it okay to the pension fund regulation regulatory and development authority bill. That needs parliament’s okay.

The much-awaited Companies Bill also got the cabinet nod, but again it needs parliament's approval. The good news is the BJP has decided to back the Companies Bill.

The government has also kicked off the divestment process. Five public sector companies have been lined up for stake sale; these include Hindustan Copper, Nalco, Oil India, MMTC and Neyveli Lignite Corporation. Stake sale in these five companies will raise Rs 15,000 crore against a target of Rs 30,000 crore.

Finally, it is slowly trying to disentangle the power mess. Fuel supplies are getting arranged through Coal India for the buyers of power. The electricity distribution companies may soon get some liquidity, when the state government takes over their loans.

But can it breathe more oxygen into the slowing economy? Are these measures good enough to give a U-turn to growth? Can you really expect growth, unless you tackle the fiscal deficit?

In an interview to CNBC-TV18’s Latha Venkatesh, Pronab Sen, principal advisor at the Planning Commission, Sudipto Mundle, director general at the National Statistical Commission and member of the Technical Advisory Committee to the Reserve Bank of India, Samiran Chakraborty, head of research and chief economist at Standard Chartered Bank and Seshagiri Rao, joint managing director and group CFO of JSW Group discuss recent reforms and give their outlook going forward.

Also read: IMF cuts India growth forecast to 6% for 2013

Below is the edited transcript of the interview.

Q: A lot has been done in your space in terms of fuel supplies, State Electricity Boards (SEBs) getting cash, allowing foreign direct investment (FDI) in several areas, which in-turn has made the dollar cheap. Has the situation changed in anyway for you? Is money cheaper, foreign or domestic loans? Is industry just a little better than what it was three or six months back?

Rao: Steps, which we have seen from the last few weeks, are welcome from the industry point of view. We are seeing positive sentiment coming back into the market and also in the mindset. So, this is what is happening right now.

Is it all translating into demand pick up or investment at the ground level or foreign investment coming into India? I don't think so. But there is a clear sign of positive vibrations across. These are all very good steps, in my view, from reforms point of view. They would give a fillip to the industry.

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