India stepping into limelight, but there are still battles to be won

The period between 2015 and 2017 is likely to be important for the Indian economy due to a number of reasons. If one were to go by prevailing sentiments, this can also be considered the period when India takes the global centre stage. India is finally stepping into the limelight and etching its own course with a pro-business government at the helm. More significantly, China's growth is slowing down.

For the past few years, the Indian economy had been bogged down by inadequate infrastructure, commercials banks experiencing stretched books, a deteriorating financial position characterised by rising fiscal and current account deficits, and most importantly, lack of political will. But now, we have a government that is channelizing its energies for higher infrastructure spending, increased fiscal devolution to states and continuous reform of the financial and monetary policy.

There is, however, a need to tackle politically difficult structural issues that have slowed and halted investments and limited the economic performance. By doing this, India's Gross Domestic Product (GDP) growth, which was at sub-5 per cent levels during the past two fiscal years, will reach higher levels.

The current improvement has come on the back of better performance in the industrial sector, resilience in the agriculture sector, and stable growth in the services sector. Timely clearance and stable policy action, along with mining licences have helped prop up investor sentiment, while a push on some stuck projects has aided growth prospects.

The following factors are likely play a critical role to bring India on par with, if not take it above China.

- The Indian market still has a relatively low penetration of goods and services and a low per capita power consumption when compared globally, which translates into massive untapped potential.

- Little more than half of India's 1.2-billion population is under the age of 25 and India will have the youngest population globally by 2020. With a median age of 29 years compared with a median age of 37 in China, India with its biggest labour force could make the country the largest consumer market in the world.

SIGNS OF IMPROVEMENT

The rebound in growth in the crucial industrial sector, following a pick-up in mining, manufacturing and electricity segments, is a positive indicator. Overall, core industries have also performed better than the previous year, with the core infrastructure sector growing 4.4per cent in the first nine months of 2014/15 as compared to 4.1 per cent during the same period in the previous year.

Electricity production continued to impress as it registered a growth of 10 per cent in the period from April to December 2014, compared to 5.6 per cent during the same period in the previous year. Manufacturing growth on the other hand remained anaemic, as it grew 1.2 per cent in the first nine months, compared to a contraction of 0.4 per cent in the same period in 2013/14.

While these are certainly major positives, for the GDP to touch 7 per cent-plus rates, steps must be taken to tackle the logjam, NPAs and find solutions to create space in the books of the financial institutions and commercial banks.

Indications are high that the 'Make in India' lion will roar, but there are many battles to be won before that happens.

(The author is Chairman, Hindustan Powerprojects)