The 2009 general elections in India turned out to be a surprise – a pleasant one for the UPA (United Progressive Alliance) government supporters. The results established the fact that the mindset of the present Indian voter had changed and he considered factors such as stability, continuity and good governance while voting for candidates. For individuals less interested in politics, it is important to know who is running the country and by what margins the victors won the latest elections. The UPA - a coalition of Indian political parties, including the Congress Party, garnered a historic win in two decades with the Congress alone winning 206 of the 543 seats in the Lok Sabha. The victory included the party’s remarkable revival in Uttar Pradesh with 22 seats and the invasion of the communist territory - West Bengal - along with its ally, Trinamool Congress. A gist of the new government’s agenda for its second innings in power is discussed by IQ Analysts who have been following the political movements in the country.
The UPA government’s re-election was attributed to its substantial ability to live up to its promises during its previous regime. The coalition was lucky since the agricultural sector received a boost due to normal monsoon patterns last year and the robust increase in global investments led to the buoyant overall economic growth in India resulting in a nine percent growth in GDP.
The smooth ride continued unabated till the sub-prime crisis, which cooled down the Indian stock market and sectors which were bullish on foreign investments e.g. reality. This situation was managed by the government and regulators with its fiscal and monetary policies satisfactorily.
‘Bharat (rural India)’ has been the focus of the UPA government, which in its first run implemented incentives such as minimum support price of crops, loan waivers, guaranteed employment and housing as well as infrastructure development such as power for the upliftment of these regions. These initiatives have helped the government regain its position and as expected, the first item on its agenda in the new regime is rural upliftment. Although the government’s focus will be on rural growth, the policies for implementing them carry a caveat of fiscal burden – the current fiscal deficit of the central and state government combined is expected to exceed ten percent in FY09.
Fiscal Deficit
The increase in fiscal deficit is attributed to the revenue slowdown from the industrial and services sectors due to the global turmoil (revenue was INR 40,000 crore below budget estimates), forcing the government to borrow for meeting its expenses. In addition, another trigger to the increased government spending was the INR 1,75,000-crore stimulus packages given out to suffering companies due to the global slowdown prior to elections.
Thus, the government faces the challenge of balancing between rural growth and deficit. The same can be effectively met, provided government funds are effectively allocated without leakages which exist in the Indian administration structure. By being rural-centric, the UPA government will have to drastically modify the filled-with-leakages implementation process, reducing the cost burden on the government. The government’s second innings provides an opportunity to introduce a remedy for these leakages.
Infrastructure
Moving on to the next pressing need of the country: infrastructure development. With a stable government ruling now, the world is focussing on India as an investment avenue. In comparison to other developing countries, India lags behind in infrastructure. Connectivity between the urban and rural regions has always been a challenge. Almost all governments in the past have formulated policies to boost highway construction leading to higher accessibility to interior India.
However, clearance procedures and government bureaucracy have been major bottlenecks for the execution of many projects leading to drastic cost and time overrun of these projects. To overcome this, the government will have to expedite the entire process and this, besides one of the most pressing demands, is also one which will test the government’s mettle to manage the country. Another infrastructure segment tarnished with government policies is the power sector. The government will have to introduce reforms in the power sector such as distribution to realise the country’s potential of becoming a “superpower”.
India’s aspirations of becoming a superpower have been fuelled by the growth in the manufacturing and services sector in the past. The current situation is however in contrast due to the country’s dependency on the world economic situation. Known as an agrarian economy, the Indian government, will need to focus on its agriculture sector, which is largely unaffected by external environments, however impacted by internal policies. The sector which has taken a back-seat in the current growth period has resulted in a number of farmer-suicides. Here again, the UPA government will have to formulate policies which boost agriculture financing, improve rural infrastructure and overall betterment of the region and most important ensure that these facilities reach them.
In the end…
Besides the above mentioned urgent issues; some issues that the government is expected to take concrete steps on include:
• Relaxation of Foreign Direct Investment (FDI) in the insurance, telecommunication and aviation sectors
• Taxation changes, fiscal responsibility
• Judicial and police reforms
• Reforms in the education sector
• Divestments of public sector undertakings (PSUs)
The new government has just completed the formation of the new cabinet, and the onus of continuous and sustainable development of the country lies in their hands. India, along with the rest of the world is now awaiting the implementation of the government’s promised agenda.
The UPA government’s re-election was attributed to its substantial ability to live up to its promises during its previous regime. The coalition was lucky since the agricultural sector received a boost due to normal monsoon patterns last year and the robust increase in global investments led to the buoyant overall economic growth in India resulting in a nine percent growth in GDP.
The smooth ride continued unabated till the sub-prime crisis, which cooled down the Indian stock market and sectors which were bullish on foreign investments e.g. reality. This situation was managed by the government and regulators with its fiscal and monetary policies satisfactorily.
‘Bharat (rural India)’ has been the focus of the UPA government, which in its first run implemented incentives such as minimum support price of crops, loan waivers, guaranteed employment and housing as well as infrastructure development such as power for the upliftment of these regions. These initiatives have helped the government regain its position and as expected, the first item on its agenda in the new regime is rural upliftment. Although the government’s focus will be on rural growth, the policies for implementing them carry a caveat of fiscal burden – the current fiscal deficit of the central and state government combined is expected to exceed ten percent in FY09.
Fiscal Deficit
The increase in fiscal deficit is attributed to the revenue slowdown from the industrial and services sectors due to the global turmoil (revenue was INR 40,000 crore below budget estimates), forcing the government to borrow for meeting its expenses. In addition, another trigger to the increased government spending was the INR 1,75,000-crore stimulus packages given out to suffering companies due to the global slowdown prior to elections.
Thus, the government faces the challenge of balancing between rural growth and deficit. The same can be effectively met, provided government funds are effectively allocated without leakages which exist in the Indian administration structure. By being rural-centric, the UPA government will have to drastically modify the filled-with-leakages implementation process, reducing the cost burden on the government. The government’s second innings provides an opportunity to introduce a remedy for these leakages.
Infrastructure
Moving on to the next pressing need of the country: infrastructure development. With a stable government ruling now, the world is focussing on India as an investment avenue. In comparison to other developing countries, India lags behind in infrastructure. Connectivity between the urban and rural regions has always been a challenge. Almost all governments in the past have formulated policies to boost highway construction leading to higher accessibility to interior India.
However, clearance procedures and government bureaucracy have been major bottlenecks for the execution of many projects leading to drastic cost and time overrun of these projects. To overcome this, the government will have to expedite the entire process and this, besides one of the most pressing demands, is also one which will test the government’s mettle to manage the country. Another infrastructure segment tarnished with government policies is the power sector. The government will have to introduce reforms in the power sector such as distribution to realise the country’s potential of becoming a “superpower”.
India’s aspirations of becoming a superpower have been fuelled by the growth in the manufacturing and services sector in the past. The current situation is however in contrast due to the country’s dependency on the world economic situation. Known as an agrarian economy, the Indian government, will need to focus on its agriculture sector, which is largely unaffected by external environments, however impacted by internal policies. The sector which has taken a back-seat in the current growth period has resulted in a number of farmer-suicides. Here again, the UPA government will have to formulate policies which boost agriculture financing, improve rural infrastructure and overall betterment of the region and most important ensure that these facilities reach them.
In the end…
Besides the above mentioned urgent issues; some issues that the government is expected to take concrete steps on include:
• Relaxation of Foreign Direct Investment (FDI) in the insurance, telecommunication and aviation sectors
• Taxation changes, fiscal responsibility
• Judicial and police reforms
• Reforms in the education sector
• Divestments of public sector undertakings (PSUs)
The new government has just completed the formation of the new cabinet, and the onus of continuous and sustainable development of the country lies in their hands. India, along with the rest of the world is now awaiting the implementation of the government’s promised agenda.
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