As the National Democratic Alliance was re-elected for a second term with a sweeping majority, it is time for the new Government to action a long-term reform agenda.
The Government introduced some major reforms during the past few years, such as the landmark Goods and Services Tax, the Insolvency and Bankruptcy Code, Ease of Doing Business reforms, among many others, that ushered in a period of high economic growth for the country. The reforms gave the Indian economy a strong impetus and India emerged as an attractive market in the global economy.
The Indian economy is now among the fastest growing major economies in the world and over the last five years, it registered a steady average growth rate of 7.5%. While GDP expanded at 5.8% in the last quarter of 2018-19, CII expects growth at 7 – 7.4% over the current fiscal year. The challenge is to move to higher growth rates and ensure that the economy is on a steady and sustainable growth path, given slowdown in the global economy. Therefore, the reforms pace must continue, and a strong economic agenda must be pursued to realize the goal of a US$5 trillion economy by 2025.
Below are some of the crucial areas that the new Government should focus on to ensure sustainable growth.
Given that the Indian economy continues to be predominantly agriculture based and the sector is a principal source of income and livelihoods, revitalization of the agriculture sector is an imperative. Stepping up agri-infrastructure in irrigation, cold storage etc. to increase farm productivity; liberalization of land leasing laws and other measures to facilitate land aggregation; investments in new-age technology for higher quality yield and produce; promoting contract farming to protect farmers from post-harvest uncertainties, etc., are some of the initiatives that must be undertaken for enhancing productivity in the sector.
Efficiency in the Indian banking sector must be promoted by ensuring competitiveness of the sector and providing ease of access to credit. Financial sector reforms must continue to be a top priority of the Government. These should include governance reforms to address tight liquidity conditions and reducing cost of capital by lowering interest rates as well as increasing the availability of capital.
For enhancing the cash flow in the system, the issue of delayed payments is a high priority, and an effective dispute resolution mechanism would help to free blocked funds of private companies. Ensuring long term infrastructure finance would also be a key consideration.
Jobs and Livelihoods
Creating adequate and quality jobs for India’s youth is a national goal. At present, more than 60% of India’s population belongs to the working age group of 15 to 60 years. Given the advent of modern technology, whose impact can be felt across sectors, focus must be on skilling, upskilling and reskilling of the workforce along with the creation of sufficient opportunities.
A National Employment Policy as suggested by NITI Aayog, encompassing multidimensional interventions, in consultation with the industry can be formulated to address problem areas. Additionally, all states must be encouraged to notify Fixed Term Employment to promote industry flexibility. The proposed four labour codes have seen much progress and could be instituted at the earliest.
Fiscal Deficit Management
Managing fiscal deficit is critical for macroeconomic stability. It is therefore important to adhere to fiscal deficit targets. Additionally, revenue deficit must also be controlled, and efforts must be in place to earn revenue through divestment and restructuring of unproductive state assets.
It is also recommended that the use of a composite index may be considered for tracking the fiscal performance of states that captures both the fiscal deficit and the quality of budget, rather than relying on a single ratio of fiscal deficit to GDP measure. Such an index would look at spending on revenue heads such as education and healthcare.
Boosting exports through a targeted approach – identifying products with potential along with promoting employment intensive sectors – will be key to improving India’s global competitiveness. At the same time, the right marketing strategy and promotion of Indian products abroad through India’s missions abroad are also important. The development of product specific export hubs including Coastal Economic Zones (CEZ) must also be expedited. While these are top areas of consideration, the new Government would also need to look at fostering manufacturing competitiveness for boosting industrial growth, while focusing on the all-round development of the MSME sector; catalyzing investments in industry and infrastructure; continued focus on direct tax reforms, and sectoral issues. Taken together, these will unlock India’s high development potential.