Pass The Bill, Improve The Economy

The one word that defines the nature of trading in the Indian equity market as seen over the last fortnight has to be ‘volatility’. The frontline indices are making large intra-day swings effortlessly. In the process, the bellwether indices are making lower tops and lower bottoms, thus painting a grim short-term picture. The market participants are attributing this volatility to notices sent to 68 foreign institutional investors (FIIs) for payment of dues totalling Rs 602.83 crore towards Minimum Alternate Tax (MAT). This along with the not so good earnings season, the higher valuation at which the Indian equity market is trading, and the global factors that are playing spoilsport is making the market nervous.

Regardless, most of the above factors have been blown out of proportion. According to me, the most important reason for the market trading at around its seven-month low is the Narendra Modi-led government’s difficulty in passing the Land Acquisition Bill. This may sound bizarre but it is after a lot of deliberation that I have come to this conclusion. The NDA government’s foundation of economic growth lies in a robust manufacturing sector. The experience of developed countries shows the importance of the manufacturing sector in the overall advancement and transformation of an agrarian economy into an economy that is dominated by the service sector. India missed the power of having a strong manufacturing base in its economic history because the contribution of the manufacturing sector in India’s GDP has remained stagnant at around 16-18 per cent.

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The present government is determined to correct this anomaly and is planning to boost the share of manufacturing to 25 per cent of the GDP in the next decade. The government’s various policies such as ‘Make In India’, liberalising foreign direct investments (FDIs), etc. are weaved around achieving this objective.

Land being one of the most important factors of production becomes indispensible in realising this goal. And that points to the importance of the Land Acquisition Bill. In their second innings, the UPA government gave the nation the National Food Security Act and the Land Acquisition Law. These laws were enacted with the sole aim of getting re-elected at the centre. Towards the end of their first innings, they waived farm loans that may have helped them to get re-elected in the 2009 election and they thought the same trick would work once again. Nonetheless, they did not manage to create a win-win situation but what they did manage is to create one of the biggest obstacles in accelerating economic growth in the form of these laws. This has become a millstone around the neck of all the politicians. What is also frustrating is the way the opposition is thwarting all the efforts of the present government to work out a middle path.

After a sabbatical of 59 days, I was expecting Rahul Gandhi to be more measured in his approach and mature in his responses. Nonetheless, his criticism of the ruling government for being “suit book ki sarkar”, the allegation that Narendra Modi ‘borrowed’ money from big businessmen and was trying to repay this debt by taking away the land of poor farmers, and his comment of distributing the internet to the industrialist on the net neutrality debate shows how ill-informed he is on different matters and also his immaturity in handling such delicate issues.  What is also appalling is that none of the BJP MPs or for that matter NDA MPs have vehemently opposed such statements in public. This adds further confusion among common citizens. We at DSIJ believe that the government should have defended their stand in a more aggressive way.

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We further believe that the Land Acquisition Bill is not only good for industrialists but also for the farmers. The example of Gurgaon clearly demonstrates how industries change the face of a place. Before Maruti Suzuki opened its plant in the 1980s in Gurgaon, it was a farming village and was largely regarded as economic wasteland. Nonetheless, now the city prides itself as the third-largest in India in terms of per capita income. With its shiny buildings and galloping economy, Gurgaon is often portrayed as a symbol of a rising ‘new’ India. It has not only lifted many farmers of the area out of poverty and improved their standard of living; it also provided employment to many immigrants. Therefore, I believe that the passing of the Land Acquisition Bill will pave the way for accelerated economic growth of India and that will ultimately help the stock market.

I personally believe that the media, which is considered as the fourth pillar of democracy, should also be playing its role in highlighting the various good policies and development action taken by the government in the last one year. Along with this the government should also be changing their narrative and explain to the public why the Land Acquisition Bill is important for the development of India. All this will help in creating a conducive and healthy environment for a better future.