Article

The Turnaround of Indian Economy Is Here: From Red Tape to Red Carpet

India is back on the commercial map of the United States after being ignored for the past few years, according to Sidharth Birla, president, Federation of Indian Chambers of Commerce and Industry (FICCI).Birla is optimistic that Prime Minister Narendra Modi’s visit to the US will attract major US companies to invest in India. A week after Modi’s visit, union finance and defense minister, Arun Jaitley is also set to tour the US.

“FICCI will be organizing two standalone events where we will invite top US business houses,” said Birla. He said the industry body was hopeful that the finance minister would be find time to address the US and Indian business leaders. Later, FICCI also plans to organize a meeting of Indian business leaders in London with institutional forum, American Investors. Jaitley is likely to address the meeting. “Business-to-business connect in America always follows a political comfort. The areas that could see an upturn can be infrastructure, manufacturing, and defense,” said Birla. Birla described the Prime Minister’s ‘Make in India’ campaign as a window of opportunity that foreign and Indian businesses will not miss.

Policy Action Pills and The Prescription of FICCI

At the same time, he called for requisite policy and implementation measures for enhancing the competitiveness of the manufacturing sector in the country. India's gross domestic product (GDP) will accelerate to 5.6% during financial year (FY) 2014-15, said the Federation of Indian Chambers of Commerce and Industry's (Ficci) latest Economic Outlook Survey.The survey further reveals economic activity is expected to continue with this momentum in the second half of the current fiscal, Ficci said.

"The new government guided by the objective of restoring growth and governance has given very positive policy signals in its first 100 days. We see the confidence amongst investors slowly returning and hope that going ahead, the momentum on implementation front will build up," said the survey.
While agricultural growth is expected to remain steady despite a delay in monsoon, the industrial sector is expected to grow by 4.7% in 2014-15 fiscal. This is 1.6% points more than the growth estimate in the previous survey round conducted in June 2014, the association of business organization said.
Retail inflation is expected at 7.8% this fiscal, in sync with the Reserve Bank of India's (RBI) target indicated earlier this year. The economists who participated in the survey also felt that the RBI will consider a cut in policy rates only in the first quarter of the next calendar year. According to them, the India's central banking institution will wait and watch until there are definite signs of inflationary pressure abating. As per Ficci, the minimum and maximum range for GDP growth in the current fiscal is indicated at 5.3% and 6%, respectively, as against 5.3% estimated in the previous round, reflecting optimism.

The Final Diagnosis and Forecasts

The projection by the economists regarding exports and the current account deficit (CAD) reflected no imminent risks. The CAD to GDP ratio for the fiscal was projected at 1.9%. The economists also identified some priority areas for the government: developing a world-class infrastructure, ensuring uninterrupted power supply, resolving labor issues and minimizing procedural hassles and fast-tracking approvals. As the new Indian government is taking constructive measures to get back the economy on the growth track, the economists believe that the macro-economic fundamentals are gradually strengthening.