Viewpoint: Why institutional reforms matter

24 FEB,2020 | MEDC


 

India’s GDP since 1950-51 has experienced four doublings – by 1969-70, 1987-88, 1999-2000 and 2010-11. For every successive doubling, the time period is reduced (as it should be). However, major policy changes and institutional reforms in the government’s interactions with the economy may not have kept pace with every doubling of the national income. India has grown beyond the stage when it needs a patronizing government. Its economy is now too complex and integrated with the rest of the world to be managed centrally. Its people and businesses are now too ambitious and aspirational to be spoon-fed by public handouts. Government at all levels should now step back from direct engagement in the economy, and focus on correcting market distortions in various socioeconomic sectors. India and Indians have a fair stake today in global businesses, and protectionist tendencies should be eschewed in favour of opening up the economy to greater foreign participation in the development process. In the education sector, for example, the government should reduce its control and examine how private sector participation can bring about the desired quality improvements. The US President is also visiting India at a uniquely opportune moment, and this is a good time to proclaim to the world that we are capable of bringing about game-changing institutional reforms. India surely has a lot to gain from major governance and policy changes in agriculture, MSMEs, taxation and the healthcare sector. In each of these areas, some piecemeal attempts have been made, but they do not constitute a fundamental change of approach which is necessary for a sustained take-off. Given our current economic situation, there is a lot more we need to be doing. The questions that policymakers seek to answer should not be superficial, but run deep. India needs to urgently introduce major institutional reforms in most key sectors of the economy.

*Photo Credit: Google

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