10.9.15

A burst of activity

The Union Cabinet has allowed mobile phone companies to trade unused spectrum, unveiled details of a plan to use idle hoard of gold in the country and spelt out a policy for offshore wind farms, all part of a fusillade of executive decisions aimed at shoring up sentiment amid a creeping sense of pessimism brought about by recent legislative setbacks. The barrage of announcements on Wednesday, a day after Prime Minister Narendra Modi met top industry leaders to review the economy and exhorted them to step up investments, was seen as an attempt to follow through on this meeting and convey an impression that the government was doing its bit to prevent animal spirits in the economy from ebbing.
In all, the Cabinet and the Cabinet Committee on Economic Affairs (CCEA) cleared 12 proposals that included 100% foreign investment in companies setting up white-label ATMs, setting up of the 21st Law Commission, giving states power to regulate potable alcohol, approving 6% dearness allowance to central government workers and approving revised cost estimates for four-laning of two crucial sections of the Jammu-Kashmir highway .
Analysts said executive actions such as the ones announced on Wednesday are the only way forward.
In the absence of an M&A policy for the telecom sector, the spectrum trading guidelines provide an exit route for financially stressed mobile operators saddled with unused spectrum. Coupled with spectrum sharing, trading also allows bigger operators to beef up their spectrum holdings through other means than expensive auctions. Besides helping operators, consumers will also benefit as greater spectrum holdings are key to providing better-quality services.
The gold deposit and gold bond schemes are expected to moderate demand for physical gold by bringing out family gold in circulation and reducing the demand for yellow metal for investments. India's high gold imports, pegged at $34.4 billion in 2014-15, have been a source of worry for the current account.
The government's ability to push through decisions had taken a beating in recent weeks after it backtracked on the land acquisition Bill and failed to get the Congress-led Opposition to agree to a special session of Parliament to pass the goods & services tax Bill. Coming as these did amid plunging stock markets, a weakening currency and worsening global economic outlook triggered by a slowdown in China, concerns arose whether the reform momentum would stall.

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