Underlining that India’s 7.5 per cent growth rate may be “overstated”, the US has said the Narendra Modi government has been “slow” to match its rhetoric in economic reforms even as it appreciated measures taken by it in areas like bureaucracy and easing FDI restrictions
Highly appreciative of the series of economic reforms, in particular streamlining bureaucratic decision making and raising FDI limits in certain sectors, US State Department in a report said on Tuesday, the Modi government has been slow to propose other economic reforms that would match its rhetoric
Noting that many of the reforms it did propose have struggled to pass through Parliament, the report “Investment Climate Statements for 2016” said that this has resulted in many investors retreating slightly from their once forward-leaning support of the BJP-led government
For example, the government failed to muster sufficient political support on a land acquisition bill in Parliament?all but ending its chance of passage in the near term?and is still negotiating with opposition parties the details of a Goods and Services Tax Bill, which if not watered down in negotiations, could streamline India’s convoluted tax structure and provide an immediate boost to GDP
“Ostensibly, India is one of the fastest growing countries in the world, but this depressed investor sentiment suggests the approximately 7.5 percent growth rate may be overstated,” says the report produced by the Bureau of Economic and Business Affairs of the State Department.
There are few quick fixes to the structural impediments, poor regulatory environment, tax and policy uncertainty, infrastructure bottlenecks, localization requirements, restrictions in many services sectors, and massive shortages of electricity that hinder India’s economic growth potential, the report says.
The State Department said the 2014 election marked a turning point in investor sentiment, as a fractured minority government, seemingly unable to advance essential economic reforms, was displaced in favour of a government that had won on a platform of economic growth.
“Additionally, the monetary stewardship of Raghuram Rajan, the respected Governor General of the Reserve Bank of India, further boosted investor sentiment,” the report said.