The NDA Government completed its three year term on 26th May 2017 and now has become much stronger after the massive victory in the State Assembly elections, especially in UP, to drive economic reforms, viz., ease of doing business, macro-economic stability, infrastructure and urban development, inflation control, fiscal deficit, trade deficit, job creation, manufacturing revival, etc.

The major reforms during the three year tenure of the Modi Government have been the demonetisation of large currency notes, which was later termed 'the single most economic reform in the history of independent India' and the GST bill, (scheduled to be effective from 1st July) the biggest tax reform being undertaken since Independence. In fact, the international authorities also appreciated India's effort to reform the country's economic system. It has been stated by them that “The government has made significant progress on important economic reforms that will support a strong and sustainable growth, going forward.”

In an ambitious drive to step up infrastructure investment and speed up execution, the Government has set targets for key ministries which will now be regularly monitored by NITI Aayog and reviewed by the Prime Minister. Some big-ticket interventions include raising long-term funding for road projects, developing a contractor rating system that would incentivise early project completion, bringing about organisational reforms in the Indian Railways, improvement in governance structure by setting up an independent regulator to correct tariff imbalance in railways.

Rising NPAs in the banking industry has been the major concern/issue that needs to be tackled efficiently. Various initiatives/steps have been undertaken by the RBI and the Government to curb NPA, viz., Launch of Mission Indradhanush; Bankruptcy code; tightening the Corporate Debt Restructuring (CDR) mechanism, setting up a Joint Lenders' Forum, introducing a 5:25 scheme; Strategic Debt Restructuring (SDR) scheme, etc. Previous attempts to sort this out have been ineffective and an urgent need has been felt to take a step further for effective control of mounting NPAs.

With the above background in mind, the Government has decided to take a more “hands on” approach by changing the country’s banking laws to speed up the resolution of bad loans and providing comfort to bankers in taking decisions. Having passed a modern Insolvency and Bankruptcy Act, it has recently enacted an Ordinance empowering the Reserve Bank of India (RBI) to give direction to banks to take the necessary action to resolve their NPAs. Consequently, the Reserve Bank of India (RBI) has released an action plan to implement the Banking Regulation (Amendment) Ordinance 2017 and will soon announce the guidelines to operationalise NPA ordinance. RBI will likely exercise control through oversight committees which will have representation from the central bank and help bankers overcome concerns about their decisions being probed by vigilance agencies.

India’s economy largely relies on its agricultural returns and the farmland banks on a good monsoon. The India Meteorological Department (IMD) forecast of a near normal monsoon brings some cheer. The June – September monsoon rainfall this year is expected to be 96% of the long-term average, which will bring relief to the millions of the farmers in the country. This year’s monsoon will contribute similarly as last year to Indian Agriculture which in turn will contribute to the economy. Hence, favourable conditions for agriculture and economy are expected this year.

In the given circumstances, wherein the present Government has practically no more hurdles in their way to move ahead for the required aggressive economic reforms, we can envisage GDP growth of the country to increase year-on-year having robust business relationships/linkages with the other strongest economies in the World. As stated above, all the reforms initiated so far, especially the successful implementation of demonetisation drive and clearance of GST Bill/various other legislations, will undoubtedly create our country’s much better perception in the global financial market facilitating easy and larger flow of overseas investments for a big push to the infrastructure reforms in the country.

I am sure this favourable economic climate will enable large institutional players like IL&FS, having special focus on infrastructure development, for their larger contribution in successfully achieving government’s agenda of the country’s reforms.


Sincerely yours,
Ramesh C Bawa
Managing Director & CEO
IL&FS Financial Services Ltd (IFIN)

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