TWELVE months ago, when 2014 was coming to a close, there were high hopes about the National Democratic Alliance government, headed by Prime Minister Narendra Modi, being able to revive the economy, which had appeared directionless during the previous United Progressive Alliance regime.

There was a strong government at the centre, which had a comfortable majority in the lower house of parliament. The prime minister and his team were also seen working hard in cutting through the red-tape, clearing projects and launching ambitious initiatives to transform the Indian economy.

Fortuitously for the government, global oil prices tumbled by more than 40pc in 2015, dipping to less than $35/barrel towards the end of the year. A report by Morgan Stanley last week estimated that India’s annual oil import bill fell from $108bn in 2012 to $61bn in 2015.

The Indian government was the biggest beneficiary, saving $27bn; the corporate sector saved about $12bn, but ordinary consumers gained just $8bn. Though petroleum product prices have been reduced by the oil companies, the government has been steadily increasing excise duties on the products to boost its income.

Towards the end of 2014, there was an enormous amount of goodwill for the Modi government, which had also been able to run parliament smoothly, passing many of its bills. But as 2015 comes to a close, there are worries on the economic and political front, as the government seems to have lost the cockiness that was evident last year.

Politically, the monsoon and winter sessions of parliament were a washout, with a strident Congress refusing to allow any legislative business being done. The government failed to get crucial support from the Congress in the upper house of parliament (where the NDA does not command a majority, and is unlikely to do so before 2019, when the next general elections are due) for the crucial Goods and Services Tax (GST) bill.

The BJP has been projecting the GST legislation as a magic wand and crucial for the success of reforms, a measure that can boost India’s GDP and help reduce poverty. But the Congress, which has stonewalled the move, taunts at the ruling party that it was the one which had blocked the legislation when it was in opposition and the UPA government was trying to get it passed.

The BJP also suffered a setback when it lost to an opposition combine in the Bihar assembly elections a few weeks ago; the party is now nervous as it will face a formidable challenge in 2016, when elections to five state assemblies — Assam, West Bengal, Kerala, Tamil Nadu and Puducherry — will be held. In 2017, the UP and Punjab assembly elections will be crucial.

With such a busy electoral calendar leading to the 2019 general elections, it is unlikely that the NDA government would embark on any bold reforms measure, especially with the Congress — and even smaller parties with a handful of lawmakers — mastering the art of stalling both the lower and upper houses of parliament.

Of course, the government could introduce a slew of reforms that don’t need legislative sanction; it could also ensure faster clearances for several major projects that are still stuck up in various ministries. However, with senior ministers busily engaged in fire-fighting operations, and motormouths from both within and outside the BJP continuing to make intemperate statements, the Modi government will find it difficult to bring the focus back on the economy.

UNFORTUNATELY for the government, there are concerns about the economy at a time when India has emerged as the fastest-growing large economy in the world. Indian GDP is expected to expand at between seven and 7.5pc in the current fiscal (2015-16), way above the US (2.6pc), the Euro area (1.5pc), the UK (2.5pc) Asean-5 (4.6pc), Mexico (2.3pc), Brazil (minus 3pc) and even China (which has slowed down to 6.8pc).

Last week, the government’s mid-year review presented to parliament projected GDP growth of between seven and 7.5pc against the earlier forecast of 8.1 and 8.5pc. GDP growth in the first half of the fiscal (April to September) was 7.2pc, down from 7.5pc in H1 of the previous fiscal.

“The economy is recovering, but it’s hard to be very definitive about the strength and breadth of the recovery for two reasons — it is sending mixed signals and there is some uncertainty how to interpret GDP data,” said Arvind Subramanian, the chief economic advisor.

Admitting that going forward, the outlook appears ‘a little bit challenging’, Subramanian noted that private sector investment remains challenging because of legacy issues. The review blamed the two successive droughts and a 17.4pc fall in exports for the slower economic growth rate.

“The improvement in growth has been uneven, powered only by private consumption and public investment,” said the review. “To move India rapidly to its medium-term growth trajectory, supply side reforms and demand management will be essential.”

Finance minister Arun Jaitley, however, is confident that the government will be able to meet its commitment to retain fiscal deficit at 3.9pc of GDP this fiscal and 3.5pc in the next financial year.

Earlier in the year, the NDA government was hopeful that the economy would expand by between 8.1 and 8.5pc in the fiscal, though the Reserve bank of India had maintained a 7.4pc growth rate. Even the International Monetary Fund had projected a 7.3pc growth rate.

The Congress, which has stubbornly refused to let parliament function and stonewalled several key legislations for much of 2015, however, refuses to take the blame for the slowing pace of growth. Former finance minister and Congress leader P. Chidambaram describes the economy as ‘stagnant’ and blames the NDA government for its ‘complete lack of direction’.

Fiscal 2016-17 will be even more challenging, as the government’s outgoings will surge following the implementation of the Seventh Pay Commission report, which hikes government employees wages, and the One Rank One Pension for the armed forces.

Published in Dawn, Business & Finance weekly, December 28th, 2015