Much-needed reforms welcome

The government has launched another round of remedial reform measures which seek to address problems in some key sectors of the economy. They are also meant to answer criticism that it was shy of taking even decisions which could be made within the accepted policy framework. The new steps announced on Wednesday are intended to promote the ailing infrastructure sector and to give a boost to exports and disinvestment plans. The need for disinvestment in government-owned companies had been well recognised and underlined by the government, both as a means to raise funds and to improve the working of these companies. But action on the front was slow when the environment for it was more favourable than now. The government has now announced its decision to sell its stakes in Coal India and Cochin Shipyard. It would have gained more from the stake sale if it had done so when the stock market had peaked earlier this year. But the move is still welcome.

Road projects, which are an important part of infrastructure needs, have been delayed or stalled for years for reasons like fund crunch, land acquisition problems and non-availability of timely clearances. The government has now decided to extend the concession period of 34 incomplete projects which were done on a BoT basis, to separate the civil construction and land costs of projects and to increase the project approval limits of the road transport ministry. Ratification of the agreement to join the newly formed Asian Infrastructure Investment Bank may lead to the flow of more funds to the sector. Revival of the sector is key to the revival of the economy. It will also help the banks which have a good part of their NPAs locked up in infrastructure projects. While the steps announced may have some positive impact, there is disappointment among highway builders that some of their major demands like compensation for cost escalation have not been accepted.

The package of measures to improve exports is much delayed, and therefore much needed. The country’s exports have fallen consecutively for 11 months. After revising the rates for the duty drawback scheme, the cabinet has approved a scheme for exporters to access cheaper credit. An interest subsidy of 3 per cent has been given for exports by small and medium enterprises. Other measures in the package can also help give a boost to exports. But ultimately, export growth will depend on the performance of the economy, the health of the global economy and the direction of trade winds.