The economic slowdown has presented the Narendra Modi government with an opportunity to enact big reforms that will take the Indian economy to a higher trajectory, says Richard M Rossow, India expert at the Center of Strategic and International Studies, a Washington DC-based think-tank.
The government should bring in reforms in crucial areas such as labour, land acquisition, power sector and foreign direct investment, said Rossow, Wadhwani Chair in US-India policy studies at CSIS.
“The Economic Survey this year identified the Industrial Disputes Act as the reason why Indian firms remain small. Rajasthan amended the Act and there was an increase in the average firm size,” he said.
“Land acquisition is one of the most difficult parts of doing business in India. The power sector is one of the major failures of the Modi government. It should help the state governments to implement reforms in this crucial sector,” Rossow said.
Despite the Modi government taking several steps to attract foreign investment, a lot more needs to be done. he said referring to restrictions on FDI in insurance and pension sectors. While labour and land reforms are difficult to implement, things like easing FDI restrictions are easier to achieve, he added.
Stimulus measures may be crucial to tide over the current economic crisis, but the government should resist the temptation to come up with politically attractive steps like farm loan waivers and unproductive doles, Rossow said.
“Farm loan waivers are politically attractive, but you are falling into a trap. If you have to do stimulus, target it well and roll back when things get better,” he said.
The government should ensure that the stimulus measures are in the right direction, he said referring to the tendency among Indian states to give away television sets and bicycles. The government should identify measures like Saubhagya schemes that will result in an improvement in standard of living, Rossow said.
Indian economy which has been growing at high single digit levels since the year 2000 saw growth slipping in the quarters ended March 2019 and June 2019. In the April-June quarter, the economy recorded 5 per cent growth, its slowest since 2014. The government has taken several steps including cuts in corporate tax rates and GST rates to boost the economy.
