The year before and the year ahead

Life is divided into three terms - that which was, which is, and which will be. Let us learn from the past to profit by the present, and from the present, to live better in the future.

- William Wordsworth

The year 2015 had some fascinating developments as far as India's political economy and social sectors are concerned. The country had its share of ups and downs in different spheres. In the domain of external affairs and foreign policy, it had many ups and some downs. The ups included the country breaking new ground with the prime minister leading from the front. The year included the PM's many successful visits abroad and inviting state guests to India. These included hosting President Barack Obama for the Republic Day celebrations, hosting Chancellor Angela Merkel in October followed by the visits of heads of state and leaders of Africa in the third Indo-Africa Forum Summit, and hosting Prime Minister Shinzo Abe for the Ganga Aarti in Varanasi. On the negative side, there was continued dominance of domestic politics trumping talks with some leaders in the South Asian region and the continuing border issues with some of India's neighboring countries.

On the political economy front, several things changed. Some for the good others for the worse. The brute majority force and especially the insensitive remarks post the communal violence incidents were checked by the people voting in Bihar. Before this too a setback in Delhi sent a clear signal of focusing on development and governance, the two things for which the government was chosen. Also, the election results in Delhi and Bihar reflected that the honeymoon period for the government seemed to be over.

On the economic front, several positives emerged which show the signs of a recovery albeit a slow one. The relatively high GDP growth, low inflation, a surge in private consumption and increased government investment, substantial investment in highway sector, positive developments in railways and power sector performance seem to be a positive for the government. The negatives seemed to be stalled private investment due to massive debt/ leverage, rising NPA's of banks, spiraling pulse prices, and falling exports. The decision of greater decentralization and acceptance of Finance Commissions recommendations is a welcome institutional step for strengthening the federal structure of the country.

On the legislative reforms agenda, people had expected much more legislative action but various sessions were rendered unproductive due to stalling of key reforms by the opposition. In spite of this, the government seemed to have been able to maneuver in particular areas where reforms could have been done without legislative action, most notably in the roads, railways and power sectors.

In the sphere of education, healthcare and law and order some activity was observed but much more remains to be done. The ASER report pointed to the alarming statistics of children's learning outcomes at the primary level. Similarly, the healthcare debates continued to be around spending and increasing access to healthcare especially in rural areas. In law and order much has remained the same, as there is a pendency of 30 million cases. The landmark judgement on NJAC showcased that the Judiciary will retain the right to appoint judges.

An important question now to ask is where does India go from here. In the next year, i.e., 2016 on the external front, foreign policy calibration is likely to continue expected lines. No significant breakthroughs in the neighborhood but increased engagement in the international arena and use of geopolitics and geo-economics to drive investments into India.

On the political economy, front state elections are expected in the southern and eastern belt. Assam, West Bengal, Kerala and Tamil Nadu as well as the UT of Pondicherry will most likely see elections in 2016. Will this tip the balance in favor of the incumbent government or away from it only time can tell.

On the economic front, things are looking good for India as commodity prices are expected to stay low amid global glut caused due to falling Chinese demand. India's exports will be an area to look out for on the negative side. Another area to watch out for is the monetary tightening speed of the Federal Reserve. This could have consequences of a weaker rupee against the dollar and chances of capital flight. But overall the country seems well poised for growth amidst stumbling BRICS.

Some positive news is expected in the legislative arena. Members of opposition in Rajya Sabha may just tip the balance closer where the opposition may just become irrelevant as quite some incumbents are will retire. This may just help see some legislative action in the year ahead. The pace of legislative reforms could help India's internal economy as well will have a crucial bearing on India's trade relationships.

In the social spheres namely education, healthcare and law and order much is thought to be expected lines. The crucial problems will persist; the government and the institutions of the state must focus on improving outcomes in all these spheres.

Overall what will 2016 hold for India only time can tell? It is in a better position than other BRICS economies to be an engine of global growth

(The article is co-authored with Sankalp Sharma, Senior Researcher at the Institute for Competitiveness, India. Amit Kapoor is Chair, Institute for Competitiveness & Editor of Thinkers. The views expressed are personal. Amit can be reached at amit.kapoor@competitiveness.in and tweets @kautiliya)

Image credits: indiatimes