What are the five most important things that need to be on the economic agenda of the next government? FE posed this question to some leading economists and policy experts within and outside the government. The answer was unambiguous: Inspiring confidence among investors by ending policy dithering and implementing projects with gusto; boosting manufacturing by way of better policy coherence and labour reforms; rationalising subsidies and revamping social sector schemes to plug leakages while not deviating from the path of fiscal consolidation; and avoiding a banking crisis by taking steps to stem mounting NPAs.
With GDP growth plunging to under 5% and the investment scenario remaining dismal, the new government cannot postpone “Track II reforms any longer,” said Planning Commission member Arun Maira. Crisil chief economist DK Joshi stressed the need to continue with tough decisions on reducing non-merit subsidies such as those on petroleum products. CARE ratings chief economist Madan Sabnavis advocated a one-year programme to revive the power sector. Financial sector reforms (bolstering the corporate bond market), rise in farm productivity and policies to support SMEs also featured among the suggestions.
Arun Maira member, Planning Commission
India cannot postpone Track II reforms any more. Track I reforms are economic reforms — opening up to FDI, financial sector reforms, etc. Track II means reforming institutions and streamlining processes for effective outcomes. Track I reforms may be the accelerator, but stepping on the accelerator without releasing the brakes on Track 2 can stall progress and slow growth, which is what has happened in India in the past few years. The five reforms that must be given priority by the next government are:
Improve regulatory environment for small enterprises. We need regulations no doubt, but the administration of regulations must be streamlined. Fewer forms, less corruption and speedier clearances must be the motto.
Implement infrastructure projects faster. Stuck projects are making investors wary of putting money into infrastructure. The banking sector is also under strain with past investments in projects not yielding expected returns.
Focus on how to implement big changes, rather than merely demand big-ticket reforms. For example, both trade unions and employers have been demanding labour reforms for over twenty years. We will not be able to make reforms until we get the stakeholders to work out what the reforms must be. Similarly, several big policy announcements, such as FDI in retail, have been stuck because all stakeholders are not on board.
Coherence for central government