26 SEP,2022 | MEDC
Macroeconomic policy stability is an important factor responsible for minimizing inequality in the post-Covid world. Socioeconomic inequality tends to increase in environments with high, persistent inflation by eroding the purchasing power of consumers, reducing government spending in real terms, and disincentivizing private investment. Institutions also play a key role here. Weak institutions impede the capacity of the state to provide public services, leading to civic unrest that imperils infrastructure, raising the likelihood that regional disparities rise even further, thus fueling nationwide socioeconomic tensions. Policy continuity can foster inclusive growth and help build institutions to ensure political stability and equitable public service delivery.
The government of the day was elected on the promise of minimum government, maximum governance. Policy stability will be able to ensure the success of both these goals. If India is to emerge as an oasis of political stability and economic dynamism in an increasingly volatileregion, extra efforts need to be taken to improve internal coordination. All government officials at all levels must speak in only one voice, and constantly strive to weaken our economy’s weaknesses and strengthen its strengths. The objective should be to continuously monitor the global perception about India and ensure that it keeps improving over time.
This is especially important to us at a time when the war in Europe is weighing heavily on most of the world. Industry captains and the government need to promote India as a stable, reformist and growing economy which is going all out to maximize its unique demographic dividend. Further, the debt crisis triggered in several countries by China's economic misadventures has made investors fearful. Our policymakers must immediately fill that gapby highlightingour economy's comparative advantages in an unambiguous manner. There is, especially, a need to refer to the remarkable rise of unicorns in India and the environment which facilitated it.
The relative policy stability in Indiaover the past few years is responsible for building a robust digital ecosystem, a digital regulatory framework along with social inclusion, and the socioeconomic imperatives around it. Given our level of development, these are no mean achievements, and their success has largely depended on minimizing policy inconsistency. The fundamental issue of sustainability must always be considered in the constant process of balancing policy stability and regulation on one hand with innovation-driven disruptive growth on the other.
There is a need for harmonizing the interests of the smaller players in agriculture and industrywith the enabling role of modern technology in promoting efficiency, innovation and a result-oriented system. Regulation is only part of this picture. India's policymakers will need to convince the world at large through their actions that progressive reforms are irreversible and that the government itself will act as a major catalyst in driving this great balancing act.
India is not as integrated with the global economy as many other countries of a comparable size. In this age of uncertainty, that may well turn out to be a blessing in disguise. The global slowdown could work to India's advantage by lowering our energy import bill and also influencing a more benign monetary policy in advanced economies. But we first need to set our own house in order. Policy consistency promotes economic resilience and the ease of doing business both locally and globally. It is the key to boosting our domestic growth prospects as well as the world’s engagement with us.