Credit Suisse: Investment cycle revival at least 3-4 yrs away

Nov 13 2012, 18:03 IST
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SummaryCredit Suisse has said the impact of recent reforms will have no impact on the investment cycle at least in next 3-4 years as the past eight years have "sapped the energy out of the economy".

the Cabinet as it will have the mandate to expedite large infrastructure projects.

It also said that a whopping Rs 10 trillion worth projects are stuck pending clearances, most in the power, petroleum and steel sectors, constituting 70 per cent of all delayed big-ticket projects.

Stating that the earlier Cabinet Committee on Infrastructure formed in July 2009 or the various empowered groups of ministers did not have the desired impact, it said "the very fact that an NIB is now being proposed suggests these have only been partly successful. It is thus important to know how the NIB is different."

It further says, its worries on the efficacy of the NIB arise from the fact that the proposed super body will have no authority over state or district administrations.

Thus, while NIB will add certainty to projects, it will not drastically speed up the pace of implementation as other impeding factors will continue to prevail.

To analyse the impact of the past two decades of reforms and their economic impacts, the brokerage has looked at all the major reform measures since 1991 and also the past 22 Budget speeches.

"We have re-discovered how dramatically the economy has changed--de-licensing and de-reservation; import duties cut from 78 per cent to 7 per cent; NPAs down from 26 per cent in 1992 to 2.5 per cent as of FY12; import licences and dual exchange rates to open current account," says the report.

Accordingly, since the 1991 reforms, GDP growth accelerated from an average of 5.6 per cent in the 1980s to 6 per cent in the 1990s and then 8 per cent in the 2000s.

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