NEW DELHI: The Bihar election outcome was a big setback for the Modi government, but that didn't deter it from launching various policy-level initiatives to boost economic growth and revive investment cycle in Asia's third largest economy. The Modi government was quick to bring about changes in the foreign direct investment regime and in the power sector. The government has eased FDI norms for 15 sectors, including defence, broadcasting, construction and retail. The government aims to improve the ease of doing business, which is likely to be a key catalyst for drawing foreign investments.
Furthermore, states will be allowed to issue bonds and the balance discom debt will be converted into loans or bonds at concessional rates. "UDAY would also reduce the cost of power through coal rationalisation and at the same time bring down interest cost significantly. The initiative will help reduce interest cost on the debt taken over by the states to around 9 per cent from as high as 15 per cent," said DK Aggarwal, CMD, SMC Investments and Advisors.
"Undoubtedly, the initiative would also help the lenders, including Bank of India, Punjab National Bank and Power Finance Corp," he added. Seventh Pay Commission:
The Seventh Pay Commission this past week proposed a pay hike of up to 23 per cent for 4.2 million central government employees and 5.2 million retirees, entailing Rs 73,000 crore outflow from the exchequer. Historical data suggests pay commission awards have in the past led to a spurt in demand for consumer durables, automobiles and housing. But it adds to the challenges that the government faces in achieving fiscal consolidation targets.