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A WATERSHED YEAR

The most notable event of 2014 was the BJP’s voted to power with a majority of its own, ending 25 years of unstable coalitions. There is today the promise of more decisive governance releasing the Centre, of the pulls and pressures of the regional satraps. The credit for this should go to the spirited campaign of Narendra Modi aided by the Amit Shah-led BJP  with strong organisational support from the RSS.

The poor record of the UPA II with widespread charges of corruption, non-governance and lacklustre decision-making, made a rich contribution to the anti-incumbency sentiment. The BJP consolidated its position over much vaster areas winning Haryana, emerging the largest party and head Maharashtra, re-capturing Jharkhand and making sizeable gains in Jammu & Kashmir. The brilliant organiser Amit Shah is now focusing on the tougher states of West Bengal and Tamil Nadu.

The next two to four years, with the biennial elections to Rajya Sabha held in alternate years, will help BJP improve its share substantially in the Rajya Sabha and enable the party forge ahead with needed reforms.

The Modi government has been extremely lucky in a steep fall in crude prices from around $ 105 to less than $ 65 per barrel. This has been of enormous help for a steep fall in the outgo of precious foreign exchange on import of petroleum products, a corresponding fall in domestic prices and comfort in current account deficit. This has helped in correcting the anomalies in oil subsidies. In quick succession, Finance Minister Arun Jaitley has de-controlled diesel prices, increased excise duties on petrol and diesel to compensate for the loss in revenue from customs duty, put a cap of Rs 25 on domestic LPG cylinder subsidy, eliminated kerosene subsidy through the PDS and resorted to direct cash transfer of subsidy entitlements  through Aadhaar cards. These have also helped in eliminating a sizeable quantum of bogus claims: Global commodity prices have also fallen in tandem-coal, iron ore and other commodity prices are today much lower than they were a year earlier.

There has also been a sizeable fall in consumer prices of a vast range of products. Inflation falling to zero level in November is the best news for the consumer in months.

Some quick action in removing the bottlenecks focusing on quick clearances have also helped the power sector. Power Minister Piyush Goyal has been able to activate a number of projects that got stuck through policy paralysis.

With the year 2014 ending on such favourable note, the outlook for 2015 appears encouraging. The initiatives of Arun Jaitley to go ahead with reforms do meet with road blocks through disruptions to work in the Rajya Sabha. But the suave Jaitley is bound to emulate NDA 1. Remember the success of Yashwant Sinha in introducing the uniform sales tax under NDA1 and winning support for the national highways development programme through cess on petrol and diesel? And in pushing ahead with privatisation of insurance which has resulted in over 50 private companies with foreign collaborations competing for custom?

There is hope for Arun Jaitley succeeding likewise in introducing the goods and services tax in quick time by taking the Congress and the state governments along. He has been liberal in offering higher compensation to states and going all the way to allay their apprehensions. The GST system is expected to simplify vastly tax administration and also expand the tax base.

Much, however, depends on the ability of NDA to ensure a few big ticket investments which have been missing in recent years. 100 per cent FDI in railways can attract massive foreign investments. The construction of high speed rail tracks as in China can open up huge demand for cement, steel, communication equipment and other goods and services. There is need for the policymakers to select a few areas for special attention, provide these with special investment incentives in the short run. Modi and his team should work for greater transparency and efficiency in governance.

During 1998-2004, the NDA 1 government triggered a steep fall in interest rates by over six per cent. This resulted in a boom in housing and infrastructure as also increased demand for a vast range of consumer goods and services. With inflation abated, it is time to look at a drastic reduction in interest rates that would make costs of finance cheaper, in turn leading to large investments.

 

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