Modi regime takes key decisions for growth
By announcing a new team to steer the economy on an overdrive and initiating labour reforms, the Narendra Modi Government has signalled its intention to bite the bullet on rapid economic and industrial growth. Speculation had been rife ever since the presentation of the Union Budget three months ago on the next course of action that the Government would take to banish the sluggishness which had steeped into an economy virtually abandoned by the previous Congress-led UPA regime. The new decisions will not only bring matters back on track but also provide the foundation for the preparation of the next Budget — the first full-fledged one of this Government.
If things go well, the Budget is expected to meet the expectations that industry and the people at large hold, with some bold flourishes. In these three months or so, the Modi Government had been doing without a Chief Economic Advisor — a key appointment since the CEA is a critical player in the formulation of economic policies and the Economic Survey of India. New CEA Arvind Subramanian has an impeccable credential of being pro-growth and pro-reform. He has straddled the area of global economy as an economist for the International Monetary Fund, and is known to entertain firm ideas on reforming the subsidy structure and the quick introduction of the Goods and Services Tax regime. Incidentally, both these issues are high on the Modi Government’s agenda.
However, given the political implications that they carry, Mr Subramanian will need to tread carefully even as he works to realise the goal. That his appointment came alongside the announcement of Mr Rajiv Mehrishi as the new Secretary in the Department of Economic Affairs is no coincidence. Mr Mehrishi too is seen as being pro-market. The new appointments are part of the Government’s plans to restructure the economic departments well before the Budget, so that the expertise of these experienced people is reflected in the document which is widely expected to dramatically revamp the economy. The fact that the country will soon have a new Finance Secretary (possibly Mr Mehrishi himself) completes the picture. Union Minister for Finance Arun Jaitley finally has a team to deliver on the promises.
Simultaneously, the Union Government’s drive to make doing business in India easier received a boost with the beginning of labour reforms, which the Prime Minister flagged off on Thursday. While there is still a long way to go, critical moves have been taken to end the ‘Inspector raj’ and make it easier for employees to manage their provident fund accounts by making such accounts portable through a Universal Account Number. The labour sector should have nothing to complain about on the measures announced. Given that India is placed at the bottom in the list of countries on the ease of doing business, it is hoped that these measures, and more that should follow, will change perceptions. The real challenge for the Government will be in tackling the politically-sensitive Industrial Disputes Act and the various labour laws that have frustrated employers. The ‘Make in India’ campaign will be the biggest gainer if the Government manages to push through the long-overdue changes.