Over the last two years, the Government of India has taken several steps in the right direction. We have seen notable reforms both in the power sector as well as the infrastructure sector. It has also made commendable efforts towards ease of doing business in India, specifically to make India amongst the top 50 countries in the world in this regard.
The major thrust to Make in India and Startup India are welcome, especially the focus on manufacturing which is slated to account for 25% of India’s GDP by 2025.
The last two budgets from this government have led to an improvement in the fiscal deficit.
This has inspired great confidence globally, leading to consistent improvement in FDI making India the largest destination of FDI in emerging markets over the last year. At this stage, it is crucial to keep this momentum going.
First, the government has to ensure consistency and stability in policy making. Abolishing retrospective taxation measures and the creation of a time-bound dispute resolution mechanism is important to further build confidence in the global investment community.
Second, the need of the hour is to successfully implement key structural reforms that can reduce inefficiencies that have a multiplier effect on overall growth.
This includes the passage of the GST, which is the basis for creating a common market that will replace multiple levels of cascading taxation. I hope all sections of polity will reach a consensus soon to pass this most significant tax reform since Independence.
Third, there must be a strong thrust given to the rural economy. Considering the current state of rural India, directed support to the distressed farming community is critical.
The harrowing times being faced by them due to successive droughts need to be understood and dealt with compassionately.
Further, the implementation of the APMC Act across all states is essential to ensure that farmers get the bulk of the benefits for their efforts by reducing their dependence on middlemen who exploit them.
Fourth, investment in infrastructure needs to remain a priority to unlock future growth.
It is estimated that nearly $1 trillion will be required in the next few years for development of ports, roads and airports.
In order for this investment to enable economic growth, revamping of laws to enable faster resolution of disputes and up-gradation and modernization of existing infrastructure.
Finally, priority on exports to be accorded to make our trade deficit into a trade surplus. Exports from India have declined precipitously over the last 15 months, partially due to a fall in both input prices and therefore in output realisation as well.
This has been further accentuated by fierce Chinese competition and the commodity-led foreign exchange crisis in Africa, Asia and South America.
Given the current global economic crisis, a crying need is for the government to urgently increase the duty drawbacks for manufactured exports that would help increase the competitiveness of exports from India in the face of very low priced competition from other emerging markets.
The long-term goal for any robust economy is to create a favourable environment that promotes transparency, entrepreneurship and excellence over a sustained period of time.
At the moment, India ranks 130 out of 189 countries in terms of ease of doing business. Clearly, the road ahead is challenging and it will take several more rounds of structural reforms matched with a rigorous implementation to move up these rankings and make India a favoured destination for businesses.
Since the government is committed to long-term growth, it is imperative that it stays the course and remains anchored in values of fiscal prudence and governance. This will prepare us for further policy changes that will unleash the full potential of the Indian economy. The focus must remain on developing consistent and stable policies that will build confidence in investors for the future.