Reforms must pick up pace before it’s too late
A certain amount of unrest, even if premature, has begun to set in among members of trade and commerce organisations and media commentators over the pace of economic reforms. Many of them had been disappointed with the Budget which Union Minister for Finance Arun Jaitley presented earlier this year, because they had expected second-generation reforms in it. That was clearly an unjust desire because the new Government had only assumed office and had to put in place mechanisms that would drive the reforms many expected to happen. Moreover, it was not even a full-fledged Budget since the Modi regime took charge only in end-May. Nevertheless, the desire for reforms not to be any further delayed, must be appreciated. Mr Jaitley has had more than six months to get a grip on the messy situation the Congress-led UPA Government had left behind. The Government's commitment need not be questioned, and it has the political heft and expertise to convert it into actionable evidence. There have been incremental steps in that direction — the decision not to enforce the retrospective tax provision; movement to put in place the Goods and Services Tax regime; de-regulation of oil prices; work towards rationalisation of subsidies; and enhancement of foreign direct investment in insurance, defence production and railways. But a lot more needs to be done and is expected either close to the Budget date or in the Budget proposals. If those don't happen, the despondency will be there for all to see, among business circles here and abroad. The Government and Mr Jaitley in particular should be happy that certain stars are positioned in their favour without any effort on their part. The sharp fall in global crude oil prices is one such factor. Import bills have gone down and the customers too have benefitted. South Asian countries in general are on the road to an economic recovery, and this has positively affected trends back home, with a UN report predicting economic growth in India to be 6.3 per cent in 2016.
But extraneous factors alone will not help the country get back on track to seven per cent-plus growth of the Gross Domestic Product. Besides bold measures in the Budget such as re-capitalisation of the banking sector and total abolition of the retrospective tax provision among others, the Government needs to move fast on amending the land acquisition Act and the luddite labour laws. Both in their present form are major hurdles in the way of faster economic growth. The Modi Government has opened up possibilities of enhanced economic cooperation with countries such as the US, Japan, Australia, China and Russia. The success of the Make in India campaign hinges on the enthusiasm of these countries to partner in India's economic growth. But they will not come if archaic laws and bureaucratic hurdles aren't done away with. This is another challenge that the Government faces.