Need next-generation reforms to become an upper-income country: CEA

To transition from a lower-middle income to an upper-income country, the Centre, states and other stakeholders need to build consensus for next-generation reforms and reconcile the priorities for economic growth, chief economic adviser V Anantha Nageswaran said on Saturday.

India needs to move towards principles rather than prescriptive regulations, more deregulation and a lightening of the compliance load at all levels, particularly for small and medium enterprises, Nageswaran said while speaking at a CII event here.

He said reforms are the most critical part for the country as it moves towards becoming the third-largest economy in the world in the next three years and a developed nation by 2047.

“We need to address factors of production, land, labour markets, and the efficiency of land utilisation. Multiple rules are preventing our businesses at the sub-national level local governments or state governments that prevent our land resources from being properly utilized,” Nageswaran said.

The fragmentation of land also prevents India from reaping the full benefits of agricultural productivity.

“At the state level, we have to ensure if we have to make the energy transition towards more alternative sources of energy apart from fossil fuels, we first have to get the power generation and distribution economically viable, whether it’s in terms of the sanctity of contracts, whether it is in terms of setting the tariffs right, etc,” he said.

India will have to make sure that this sector is viable before it can embark on a successful energy transition, he added.

The senior finance ministry economist talked about the importance of creation of robust small and medium enterprises. “Today’s manufacturing powerhouses in developed countries did not become manufacturing powerhouses without having a vibrant small and medium enterprise sector and they are the ones who bear the brunt of excessive rules and regulations at the subnational level.”

With the increasing presence of artificial intelligence (AI) likely leading to huge dislocations, India needs to prepare its youth to help them profit from this development, he added.