From NaMOBama to IndiAmerica and other such portmanteaus used in the past couple of days to ironing out differences over the N-deal and agreeing cooperation on the climate talks to be held in Paris in December this year this visit by POTUS has been making headlines every single minute if not second. News channel went ga-ga over Michelle Obama's dress and Narendra Modi's wardrobe. But that's regular for us now - Indians love 'masala' in their food as well as news and MBA has taught me that an average report when wrapped in a good presentation makes wonders. Or as they say "A little showbiz never hurt anyone".
As I write this, Obama has announced billions of dollars of investment - from loans to renewable energy and project financing to invoking Gandhi on religious tolerance in India in the National Prayer Breakfast. But as my journalist sister says, "Everything on TV is good to look at, not enough to believe", I would not take everything that they said to fructify. And the reason is not the intent to not do but the inability by the Centre to implement its plans. Even if the Centre decides to implement a good thing, the Opposition will stay true to its meaning - oppose blindly and that holds true for the ruling party as well. If a law is luckily passed by the Centre then it faces hurdles at the State as they have enough provisions to extract money from the Centre in the form of "special packages" in return for approval.
Though Sagarika Ghose called the metallic lion "YIKES", it caught the eye of each and every viewer. And for Modi to deliver on his "Make in India" , "Digital India" and "24x7 Power" campaigns, he has to lay a strong foundation - he has the numbers in the lower house and its only a matter of time before he gets a majority in the Upper house. The foundation is change in laws and this needs to be addressed before embarking on this ambitious plan.
Manufacturing:
The manufacturing sector is plagued with problems. Labour Acts, Land Acts and even tribal Acts act as major hurdles. Labour force the government to stop modernisation plans, threaten to strike if wages are not raised - basically stop anything that would take away their freedom and force them to work efficiently. Government institutions have become resting homes for them and any move, even the talk of it, arises so much protest that it becomes difficult to bring about modernisation. Take the example of the incident in Chhatisgarh (http://goo.gl/6IjhyE) where due to a provision in the Forest Act (2006) many of the dozen coal blocks are in jeopardy. The coal block ordinance which did not attract any criticism will face trouble due to this act. And the list for such laws is endless. Recently, the law ministry ordered repealing many redundant acts dating back to the 19th century. If this is the case then I guess it will be a sorry state of affairs in India. All laws should be re-looked once in a couple of years and no government should review the laws less than twice in its 5-year term. But this is after the laws are simplified with no grey areas - it should be either black or white.
Telecom:
It's been a good two and a half years since I graduated as a Telecom engineer but the love refuses to die down. So it is difficult to see the sector in doldrums. High debt compels telecom operators to cut down on expansion (and it is a pain for the banks as well), spectrum scarcity shoots prices up in all the auctions and creates problems for the customers as well. The government can auction enough spectrum so that the government can fill its coffers and telecom operators can freely expand to the hinterlands with the savings that are made in the auctions. To ensure the latter, conditions can be laid when spectrum is awarded. From my personal experience, not having a net connection these days is a pain in the wrong place. If India has to grow and beat countries like China and USA, last mile connectivity is a must. But sadly it is our inefficient, state-run behemoth BSNL that has to do this single handedly. The best way to bring reforms in the sector would be to give BSNL a corporate-like makeover. This will make BSNL an acquirer from the target. And in the interest of the sector not more than 6 players including the state run entity should be allowed. This will kill cartelization yet keep rates low. On the other hand, manufacturers like Micromax and Lava should be given support to buy marquee brands like Sony if they are planning to spin-off their mobile division as per an article in Reuters in mid January. This will help manufacturing here, increase jobs and save on forex outflow due to import of handsets. But for this lending rules will have to be changed as banks cannot lend beyond a certain percentage to one sector.
Banking & Finance:
The best reform that I can state from my personal experience in this sector is the introduction of the RuPay cards. I was pleasantly surprised when I could use my local (Mumbai) bank's ATM card to pay at an outlet in Hyderabad. This was not earlier possible and helps a long way in financial inclusion. If a bank which has 50 odd branches across Maharashtra and Goa and predominantly in Mumbai can give me alerts and it is possible that I can use its ATM card anywhere in the country then think about the potential if a system developed where all the major cooperative banks serving the rural areas are connected and account holders given RuPay debit cards for easy use, the amount of money that will come into the system will be enormous as farmers have huge amounts of tax free income. It will also benefit the larger banks as they will not have to open loss-making branches in the rural areas leaving them to focus on high margin urban markets. But this will require changes in the Banking Regulatory Acts to ensure there is uniform implementation across the sector. Hope the PMJDY addresses these issues.
Defence:
Until foreign companies are not allowed majority ownership of Indian operations, they will not invest in India. And more than outsourcing of manufacturing, India needs technology to be able to give a fitting reply to Pakistan and China at one go in case the 'all-weather' friends decide to launch an assault together. For this we will have to open the gates by raising the FDI and allowing the private sector to build and supply equipment to the armed forces. The private sector is known to be efficient and honour its commitment on delivery time if the government does not keep throwing spanners in the implementation of the original contract.
These are some of the sectors which require a complete overhaul of rules and it is a great opportunity for the Narendra Modi government to wipe the slate clean and start afresh so that India can truly achieve a dominant status by the years that the rating agencies have expressed as opinions. We need to have clear rules if we want India to produce its own Alibaba, or maybe bigger.
Manufacturing:
The manufacturing sector is plagued with problems. Labour Acts, Land Acts and even tribal Acts act as major hurdles. Labour force the government to stop modernisation plans, threaten to strike if wages are not raised - basically stop anything that would take away their freedom and force them to work efficiently. Government institutions have become resting homes for them and any move, even the talk of it, arises so much protest that it becomes difficult to bring about modernisation. Take the example of the incident in Chhatisgarh (http://goo.gl/6IjhyE) where due to a provision in the Forest Act (2006) many of the dozen coal blocks are in jeopardy. The coal block ordinance which did not attract any criticism will face trouble due to this act. And the list for such laws is endless. Recently, the law ministry ordered repealing many redundant acts dating back to the 19th century. If this is the case then I guess it will be a sorry state of affairs in India. All laws should be re-looked once in a couple of years and no government should review the laws less than twice in its 5-year term. But this is after the laws are simplified with no grey areas - it should be either black or white.
Telecom:
It's been a good two and a half years since I graduated as a Telecom engineer but the love refuses to die down. So it is difficult to see the sector in doldrums. High debt compels telecom operators to cut down on expansion (and it is a pain for the banks as well), spectrum scarcity shoots prices up in all the auctions and creates problems for the customers as well. The government can auction enough spectrum so that the government can fill its coffers and telecom operators can freely expand to the hinterlands with the savings that are made in the auctions. To ensure the latter, conditions can be laid when spectrum is awarded. From my personal experience, not having a net connection these days is a pain in the wrong place. If India has to grow and beat countries like China and USA, last mile connectivity is a must. But sadly it is our inefficient, state-run behemoth BSNL that has to do this single handedly. The best way to bring reforms in the sector would be to give BSNL a corporate-like makeover. This will make BSNL an acquirer from the target. And in the interest of the sector not more than 6 players including the state run entity should be allowed. This will kill cartelization yet keep rates low. On the other hand, manufacturers like Micromax and Lava should be given support to buy marquee brands like Sony if they are planning to spin-off their mobile division as per an article in Reuters in mid January. This will help manufacturing here, increase jobs and save on forex outflow due to import of handsets. But for this lending rules will have to be changed as banks cannot lend beyond a certain percentage to one sector.
Banking & Finance:
The best reform that I can state from my personal experience in this sector is the introduction of the RuPay cards. I was pleasantly surprised when I could use my local (Mumbai) bank's ATM card to pay at an outlet in Hyderabad. This was not earlier possible and helps a long way in financial inclusion. If a bank which has 50 odd branches across Maharashtra and Goa and predominantly in Mumbai can give me alerts and it is possible that I can use its ATM card anywhere in the country then think about the potential if a system developed where all the major cooperative banks serving the rural areas are connected and account holders given RuPay debit cards for easy use, the amount of money that will come into the system will be enormous as farmers have huge amounts of tax free income. It will also benefit the larger banks as they will not have to open loss-making branches in the rural areas leaving them to focus on high margin urban markets. But this will require changes in the Banking Regulatory Acts to ensure there is uniform implementation across the sector. Hope the PMJDY addresses these issues.
Defence:
Until foreign companies are not allowed majority ownership of Indian operations, they will not invest in India. And more than outsourcing of manufacturing, India needs technology to be able to give a fitting reply to Pakistan and China at one go in case the 'all-weather' friends decide to launch an assault together. For this we will have to open the gates by raising the FDI and allowing the private sector to build and supply equipment to the armed forces. The private sector is known to be efficient and honour its commitment on delivery time if the government does not keep throwing spanners in the implementation of the original contract.
These are some of the sectors which require a complete overhaul of rules and it is a great opportunity for the Narendra Modi government to wipe the slate clean and start afresh so that India can truly achieve a dominant status by the years that the rating agencies have expressed as opinions. We need to have clear rules if we want India to produce its own Alibaba, or maybe bigger.
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