With the gargantuan exercise associated with general elections gaining traction, and the new government set to be in place in around a month from now, there is much anticipation and interest among major stakeholders on what would be the economic agenda of the new government? The question which is uppermost in our mind is: Would the government unravel a national vision which would steer the economy to high echelons of growth with inclusion? At the threshold of the second decade of the present millennium, the country is keenly awaiting a new policy direction and is debating on the extent to which the unfulfilled reform agenda would be addressed to take the country forward.
The new government would be assuming office at a time when the economy is at an inflexion point. It is good to see that growth in the economy is exceeding 7 per cent. At the same time, there is a durable reduction in inflation; fiscal deficit targets have been broadly adhered to, our current account deficit is under control, external debt to GDP ratio is low, stock market is on the ascendant and foreign exchange reserves have touched an all-time high.
Yet, we are concerned about some of the underpinnings of this growth. The slackening agrarian growth and deflationary trends in certain agri-commodities will continue to cloud the rural prospects. Other indicators that are flagging concern include sluggish credit offtake within industry, slow uptick in greenfield investment, decline in vehicle sales and slowing exports, thereby eluding that the growth momentum is losing steam. Hence the economy needs assiduous stewardship from the incoming government to realise the latent potential through investment supportive policies and affiliated actions.
It is in this context that, after extensive discussion with industry members and experts from various fields, CII has evolved key suggestions to make an India of economic strength, technological vitality and moral leadership. We hope and believe that political parties will consider these suggestions and include them in their election manifesto and policy agenda.
In designing an economic vision for the country, CII has broadly looked at seven core and critical areas, identified through a comprehensive visioning exercise, to transform the economy and take it to a higher growth orbit. Let us elaborate.
First, at the current critical juncture of India’s development journey, the country is faced with the daunting task of providing an impetus to growth and strengthening the investment climate. For this, it is important that a consensus is arrived among political parties to maintain fiscal prudence. This would call for hastening the disinvestment process whereby the government should progressively reduce its stake in strategic PSUs while completely exiting from non-strategic PSUs within 5 years. Similarly, reducing corporate tax rate to 18 per cent with no exemptions, confining GST rates to 2-3, bringing electricity, oil and gas, real estate and alcohol into the ambit of GST, among others would enhance our competitiveness both in India and abroad.
Secondly, stepping up manufacturing investment should be the key consideration to drive growth while providing productive job opportunities to the populace. In fact, having envisioned that the economy would reach a size of US$5 trillion by 2025, it is envisaged that 20 per cent of this, or US$1 trillion, will come from manufacturing sector. Hence, it is important that the sector is given priority in policy formulation. CII recommends stability and continuity in policy with minimal changes. Revamping of labour laws and facilitating ease of doing business are also crucial give a fillip to manufacturing growth.
Further, with industry 4.0 becoming a reality, advanced manufacturing deserves specific focus. For this, there is need for building a shared and secure digital infrastructure while it is imperative to develop self-sustained ecosystems with testing labs and digital infrastructure near automotive, engineering and electronics clusters. And for boosting manufacturing exports, internal support infrastructure to increase production of international standards compliant products with adequate testing and certification bodies that are easily accessible at low costs, should be created.
Within manufacturing, the MSME sector needs special attention in view of its significant contribution to growth and jobs. CII would recommend that 25 per cent land available at Industrial Corridors should be allocated to MSMEs at lower rates. In industrial areas, land should be allotted on a rent-cum-own basis. Access to finance and technology should be enhanced.
On services, one area which deserves special mention is the tourism sector. Tourism could be termed as a natural and efficient vehicle for promoting inclusive growth for our country. A renewed push for building Brand India as a tourist destination should be taken up on a priority basis. Tourism circuits and infrastructure projects should be given high importance and funds for tourism safety should be enhanced.
Thirdly, a major intervention that industry would appreciate is developing the innovation-led economy for the future. Currently, the spending on R&D is much below expectations and much of it is through public sector research institutions. At a time when industry 4.0 has assumed centerstage, it is imperative that technology is leveraged to help the country to emerge as a manufacturing hub and ensure basic services for citizens.
Fourthly, provision of education and skills should be the major priority in election manifestoes and speeches. Education has emerged as the key element that will enable India’s transition to a strong economy as it empowers our people with the right opportunities and tools to move ahead. There is an impelling need to augment public investment in education, improve the education quality, facilitate development of market-oriented skills etc. Similarly, sustainable economic and societal progress also requires augmenting public investment in health care which together with education is crucial for harnessing the latent potential of our citizens.
Fifth, critical reform in the agriculture sector can no longer be ignored, as this would not only alleviate farm distress but would also improve consumption demand in the economy. In this regard, precedence should be given to significantly improve farmer’s income from the current level. Indian Agriculture should be revamped to the extent that the farmer is seen as a micro-entrepreneur who requires better market access for his products and not higher minimum support prices or loan waivers. For this, reforms in the existing marketing structure, wherein the states are encouraged to implement the Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017, deserves special consideration.
Priority should also be given to further investments in irrigation, especially micro-irrigation practices, cold chains, warehouses, agri-infrastructure and rural roads, communication linkages, etc. Further, digitization of land records, encouraging progressive land leasing policies to ensure corporate farming while protecting land-owner rights as in the Model Agricultural Land Leasing Act etc., deserve special attention. The focus should be on ensuring remunerative prices for the farmer so that it enhances the income of workers engaged in cultivation.
Sixth, governance reforms – administrative, judicial, police and electoral reforms are essential for democracy to function effectively. This has been a long-neglected area which needs consideration.
In judicial reforms, a paperless court system with facilities for e-summons, e-cause lists, e-payments, digitally signed court orders and e-filling provisions should be implemented. A National Judicial Service should be created to select Judges for the district courts. Similarly, elections to the Parliament and all state legislatures should be conducted simultaneously from 2024 as part of judicial reforms.
Seventh, the crumbling urban infrastructure and congestion in cities are major problems which hardly get enough traction. Another such area relates to sustainable development-air pollution, water scarcity etc. where appropriate policies need to be designed for improving the quality of life of the average citizen.
Then there is the non-economic area of art, culture and sports as well as women & child development, which concerns the well- being of citizens and need suitable policy intervention.
Indeed, initiatives such as those suggested above, when implemented, would provide a powerful tool for economic and social uplift which in turn would help us to accomplish the dream of a new India sooner than anticipated.
Past President, CII and Chairman, CII Public Policy Council