Crucial year for PM Modi's efforts to kick-start growth in India

2015 will be a crucial year for Indian Prime Minister Narendra Modi's reputation as a reformer. During his first six months in office, Mr Modi has made some progress on the policy front, unveiling a number of initiatives such as "Make in India" which is intended to kick-start manufacturing in the largely services-driven economy. His government has given the green light for several stalled projects and also appears to have made progress on the implementation of a goods and services tax which has been held up for nearly a decade.

But Mr Modi now needs to do more to fulfil the high expectations following his election last June and particularly to revive the India growth story. In this context, all eyes will be on the budget that his government will unveil next month. It has already been touted as a "transformational" budget and will have to live up to that promise. His government did pass an interim budget last year after coming to power. It was a reasonably good budget but not visionary.

But with Mr Modi's "honeymoon period" running out, it will be different this time. The government will have to perform a fine balancing act between bringing the budget deficit down and stepping up investment in India's inefficient infrastructure. The government has already reached 99 per cent of its deficit target for the fiscal year that will end on March 31. Fortunately for the government, the price of oil, which accounts for more than 60 per cent of India's imports, is at a historic low and the price of gold, another big import item, is also down, and the current account deficit is low.

Indian industry is looking for a slew of measures in the forthcoming budget, such as a reduction in the corporate tax rate, more disinvestment of government stakes in public-sector units, higher personal income tax exemptions and a massive increase in public expenditure - particularly in infrastructure - to boost growth.

Mr Modi has made it clear that he is looking at big-ticket investments in the infrastructure sector. One of them is an effort to fix India's electricity production and distribution network by 2019. For this, the government is looking to spend around US$250 billion over the period. During the 2015-2016 fiscal year, the target is to spend 1.4-2.1 per cent of the gross domestic product on various projects. With the private sector wallowing in debt due to an economic slowdown and given the amount of bad loans clogging the banking system, most of the investment will have to come from the government and foreign investment. The government hopes to raise some of the money through disinvestment, sale of coal blocks and auction of telecom spectrum.

India's renewed focus on infrastructure spending is good news for Singapore companies. The visit to India by S Iswaran, Minister in the Prime Minister's Office and Second Minister for Home Affairs and Trade and Industry, has already resulted in a Singapore consortium being set up to build the new capital city for the state of Andhra Pradesh. The consortium will draw up the master plan for the more than 7,000-square-kilometre city that is expected to cost S$21.5 billion. Once the master plan is done, more Singapore companies can participate in building the city. As Mr Iswaran noted, this is an opportunity for Singapore to showcase its capabilities in urban planning and development. With India urbanising rapidly, it could present a lucrative market for Singapore firms for many years to come.