GDP rise heralding better days ahead?

GDP growth numbers for April-June, the first quarter of ficsal 2014-15, at 5.7 per cent, the strongest pace of growth in the past two years, comes on the back of good factory growth and export numbers. This could lead us to think that good days are indeed here — “achche din aa gaye”. But it’s too early to say so, and we should see if positive figures continue in the next three-four quarters.

Finance minister Arun Jaitley isn’t exaggerating when he says the country will see the long-term impact of all the decisions the government has taken — like increasing the investment cap on FDI in defence, allowing FDI in the railways, taking steps to facilitate the ease of doing business, reviewing the Land Acquisition Act to make it easier for industry to acquire land and initial steps on labour reforms.

One hopes, though, that in the process of making land acquisition easier, the government doesn’t create new zamindars as happened in the case of SEZs. The government owes a huge debt to voters who gave it an overwhelming mandate, and so it is conscious of its obligations.

It has managed to change the national sentiment, from pessimism to optimism. There is a spurt in entrepreneurial activity, mainly in sunrise sectors like e-commerce, where investors are stampeding over each other to invest in startups. E-commerce will give a boost to the logistics sector, as there will be an increasing need for warehouses, storage, and other infrastructure.

Speeding up decision-making is among the significant factors that could lead to growth in investment, and the government has succeeded here. The developments in the road sector are among areas where growth is visible.

The National Highway Builders Federation estimates that toll revenue has risen by 5-10 per cent, indicating an increase in traffic and goods movement. This week, for instance, the railways and the National Highways Authority are set to resolve the contentious issue of paying the railways for building rail overbridges on its land.

Around 160 rail overbridge projects were held up over a year, and if this is resolved it would lead to generating employment, among several other advantages. Road projects require 10 permissions from 10 different authorities, and it is learnt that the government is close to agreeing to the demand for single window clearance, that hopefully won’t just remain on paper.

The underlying factor is a change in style of government, its ability to understand what is holding up projects and its commitment to removing hurdles. In the good GDP numbers, the sector that seems to be lagging behind is agriculture.

Perhaps the government needs to understand what is going wrong in this sector, and take remedial measures swiftly.