(
M.K.Venu is Executive Editor of Amar Ujala publications group)
Even as the Modi government celebrates its first 100 days amidst a lot of self-congratulatory talk of an economic revival, there are big risks looming on the horizon which could potentially disrupt the growth momentum. The likelihood of the Supreme Court cancelling nearly 200 coal blocks arbitrarily allocated since 1993 could be the biggest risk to growth revival in the coming 12 months.
Narendra Modi took credit yesterday for 5.7% GDP growth recorded in the April-June quarter, though it is apparent that the output produced during the period would have been planned in end 2013 or early 2014 when the UPA was in power. In any case, the UPA government was still in place during most of the April to June quarter.
So it seems a bit churlish for the NDA to take credit for something that happened before their government was installed. Be that as it may, one need not quibble over such minor detail and be somewhat satisfied that GDP growth has indeed picked up from its low of 4.7 % recorded last year to 5.7 % now.
The Modi government would be well advised to build on this momentum rather than quibble over who should take credit for the mere 1% uptick in GDP. India's average of 8% GDP growth has receded so much from memory that there is excessive celebration over the prospect of 6% GDP growth!
The NDA government has a huge task ahead especially in easing bottlenecks on the supply side to fuel higher growth. Clearly, this was one reason why the UPA could not maintain growth over the past three years when it followed a process of allocating resources without transparency. One major area of de-bottlenecking is fixing the legal problem around the 218 coal blocks allotted arbitrarily and illegally by the Centre and state governments run by both Congress and BJP.
The NDA government has pleaded with the Supreme Court that of the 218 coal license at stake, it should leave aside some 40 coal blocks where mining work has already begun; 80 licenses have already been scrapped; the government says it can re-auction the remaining blocks.
Even if the Supreme Court has the discretion to grant the government some relief in regard to coal blocks that are already operational, one is not sure whether the judges would be in a mood to do so, given the way Modi and his men have been needling the highest judiciary since they came to power.
What the government doesn't realize is that it needs the judiciary and regulators to create a new spirit of cooperation within the confines of the rule of law. This does not seem to be happening at present. This was evident in one chance remark by a judge that the NDA government is advised to take up more pressing issues like cleaning of the Ganga rather than engage in shadow-boxing with the highest judiciary. The obvious reference was to the indecent haste the government has shown in pushing through the National Judicial Appointments Commission, which changes how judges are appointed.
Last week, in another veiled reference, a Supreme Court judge sarcastically remarked during an open hearing how power companies located in a certain state are getting away with a lot!
These are not good signs for the NDA. The coal block case will be a big test as it has the potential to have the same fallout as the 2G scam. Top companies risk the prospect of coal blocks being taken away from them on the ground that were totally arbitrarily and illegally allotted. If the blocks are auctioned, the costs for these companies would rise dramatically. The companies allotted coal mines belong to the power, steel and cement sectors. The share price of many of these companies has fallen dramatically after the Supreme Court declared the coal block allotment arbitrary and illegal.
This will also have an impact on the banking industry as gross bank credit to power and steel industries stood at $84 billion and $44 billion respectively. So far, 52 loan accounts of steel companies and 16 loan accounts of power companies held in various banks have been restructured because of their inability repay interest. So these accounts are already stressed and could have a negative impact on the banks as well. Nearly 10% of the total non-food credit extended by banks is to the power sector and the fate of the coal blocks will partly determine whether these power sector loans will be repaid at all in the future.
So the Modi government has a hard task ahead as it grapples with the fate of big projects which are stuck in the domain of the judiciary, regulators and the investigating agencies.
Disclaimer: The opinions expressed within this article are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability, or validity of any information on this article. All information is provided on an as-is basis. The information, facts or opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.