Viewpoint: India at 75 – The Road Ahead

16 AUG,2022 | MEDC

On the eve of the historic 75th anniversary of our Independence Day, one of the most important things that policy can do is to push through much-needed reforms in all spheres of the economy. We need to instill a culture of data-driven development in India. Rebalancing the economy in the wake of Covid will not be easy, but it can be facilitated by intensifying reforms (which mayprove politically difficult) encouraging public and private investment and discouraging excessive private saving. This could be done by actively expanding social security nets in some areas.

India's economic reforms are still not attracting investors (and generating employment) to the extent desired. The global economy has an uncertain future and this is the time to play to our strengths. Tapping the GST growth opportunity is probably a good place to begin. It is no secret that streamlining the federal nature of the GST along with rationalizing the tax slabs would probably lead to more harmony in Centre-state relationships than anything else today. That will enhance the ease of doing business and attract more FDI into the economy. Policymakers should learn from their past mistakes and ensure beforehand that there are no loopholes and drafting errors in the subsequent versions of the GST that could hinder its swift and efficient implementation. Frittering away this opportunity would be a costly mistake for our economy.

As firms worldwide reconfigure their supply chains to reduce their dependence on China, India needs to project its attractiveness as a global manufacturing hub more aggressively. The demographic dividend is in our favor … but it may not last much longer. The main pillar of India’s new growth pattern is the emergence (thanks largely to GST) of a single national market in which more firms and consumers use the modern financial system. The informal sector is shrinking in size and many smaller players are now benefiting from whatthe formal economy has to offer them. A new bankruptcy code making it harder for zombie firms to carry on their activities is also spurring a healthy consolidation in the marketplace.

Infrastructure development continues to remain India’s Achilles heel. Even though much has been done – including the recent 5G spectrumauction – India needs to urgently develop local supply chains for its industrial sector, which dovetail with government goals and aspirations. A large and swift shift to green energies also needs to be a policy priority. Climate change has impacted our economic growth and too little is still being done to prepare our agricultural sector for the ravages of global warming. That needs a relook.

Much impressive work has already been done, but we cannot afford to slacken our efforts. Oureconomy needs to keep growing despite inflation being often outside the RBI's comfort zone. Over the past decade India has outdone many of its economic competitors, but setbacks have also arisen. We have not yet engineered the manufacturing surge that enriched much ofEast Asia, and createdsuitablelocal employment prospects. Still, huge opportunitylurks just around the corner. Tapping it optimally necessitates a mindset shift, generating more creative policy responses to the tensions inherent in the system.

*Picture Credit:Google


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