Every new year brings with it a new glimmer of hope, new growth opportunities for our economy, new possibilities of jobs, and positive expectations in the minds of everybody. But rarely does a new year bring with it so much suspense, so much enigma and therefore, so many imponderables, as it is doing in the year 2017. This is because, towards the end of the year 2016, a few watershed events have taken place and a few path-breaking trends have emerged whose implications for India are at best complex to fathom. At worst, it is almost impossible to assess these implications, simply because these are unprecedented events, taking us to uncharted territory. Events such as BREXIT, US Elections and our own demonetisation have far-reaching influence, and so have the rising trends of US interest rates and fuel prices.
With all these developments, and more, what the year 2017 has in store for us has become an inscrutable unknown. We have huge sensitivities to oil prices, in the sense that we have to spend an additional Rs 9,000 crore a year for every dollar increase in per barrel crude prices. Our current account deficit, our forex reserves, our rupee vs dollar rate, our export performance and our inflation figures, even our budget deficit management – all have significant dependence on petroleum price trends. From Jan to Dec of 2016, crude prices have almost doubled from $29 to $57, and the trend does look quite ominous.
Through all this smog, what stands out as a rare bit of a certainty, is infrastructure. Irrespective of whether Keynes said or did not say, that the government should pay people to dig holes in the ground and then fill them up, (taken to mean that in bad times, the government of the day should invest heavily in building infra assets), our government is expected to follow this advice in essence and push infrastructure projects across all sectors. This is a no-brainer, because, under the given conditions of low demand growth, low IIP, low credit off-take and low capital formation, the only way to try to fire up economic activities and help create newer jobs, is to induce construction projects for building infra assets. This is what the government must do, and this is what the government will do. We already have some impressive numbers for proposed investments into Sagarmala Project, railway projects, urban transportation projects and highways. But, to what extent will increased infra construction alone be able to energise a morose and limping economy and bring it back to life, is something only time will judge.
Refreshingly however, non-traditional areas of infrastructure are opening up, and begging for attention and investment. These are things like rooftop solar power plants, Internet network, telecom network, banking services backbone, weather forecasting systems, digital payment gateways, biometric identity database, various e-governance facilities, and such other new age technology driven infrastructure which are as important for us to carry on with our businesses today. If the traditional infrastructure assets can be called ´Hard Infrastructure´, perhaps we could call these newer networks as ´Soft Infrastructure´. Given the current emphasis on digital transactions and all that, we can expect a lot of push for soft infrastructure in 2017, alongside the investments imminent in hard infrastructure.
Maybe, when the mystery clears out, we will be lucky to have a prosperous new year in 2017 after all, in spite of all the uncertainties.
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