Viewpoint: Why Structural Reforms Matter

18 OCT,2021 | MEDC


 

  • The pandemic is leaving behind a legacy of rising poverty and widening inequality. This provides structural reforms a fertile ground to support economic productivity and ensure that the development narrative retains its much-needed inclusivity. Thanks to the RBI's far-sighted policies, inflation is expected to subside in 2022. However, there continue to remain risks to its long-term outlook. A credible fiscal consolidation process can help India get better sovereign ratings, and thus, improve its prospects as a global investment destination. Additionally, increasing fiscal space and fair and efficient domestic resource mobilization will be needed to support investments required for inclusive growth.
  • The government’s recent pitch for Gati Shakti is encouraging. It focused on providing clarity and consistency to private players in order to catalyse investment and reduce policy risks. The important fact is that the focus of any economic policy should not be the government or any political priority, but rather, the creation of productive forward and backward linkages between domestic and external markets. The regulatory authorities should play a supportive role here, and ensure that the enhancement of transparency and efficiency form the core of all their pronouncements.
  • To jumpstart the process of the post-Covid economic revival, some key sectors need special attention. For example, no policy push will enthuse investors (especially those overseas) unless electricity supply is assured, affordable and available around the clock and throughout the country. This is easier said than done considering that our power sector continues to remain relatively unreformed and requires continual state bailouts. The state's rocky interface with the private sector is another hurdle to overcome if structural reforms are to take deep-root in India. However, there has been progress in these areas. The recent privatization of Air India, alongside the National Monetization Pipeline, and now Gati Shakti do inspire confidence that the government is on the right track.
  • Covid has deepened the digital education divide in India, and, unless it is immediately addressed, extended school closures will result in a loss of human capital and diminished socioeconomic opportunities. While the government is doing its bit to bridge the gap, as supported by the recently drafted New Education Policy, e-learning platforms cannot replicate the various dialects, varied contexts, and different lived experiences that are brought together by physical classrooms. If e-learning is indeed the new normal, government policy must go further in addressing the feasibility of digitalization in ensuring the equity and quality of education imparted across the country. Failure to do so would lead to uneven development and hinder the revival process. After all, education remains the most effective way to equip the marginalized with tools to access economic opportunities and overcome ingrained social prejudices keeping them mired in poverty and ignorance.
  • India has historically displayed the ability to face up to a difficult economic situation and take concrete steps to resolve it. We need to show the world that this time also it is no different. The deft handling of delicate scenarios and a willingness to face facts are the hallmarks of our policymakers. We trust that on this occasion also they will undertake the structural reforms necessary to pull us out of this morass.

*Photo Credit: Google

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