Expect economic reform to be fast-tracked

The clean sweep by BJP of the UP State elections is indicative of the fact that voters appear to have become focussed on the future (economic growth and jobs) rather than on the past (caste, creed, religion and the bogey of alleged grievances emanating from them). This is to be welcomed.

One can expect this government to now move faster with economic reforms. Some of the things to expect would be:

Job creation: India’s biggest concern is a paucity of enough jobs to provide gainful employment to the 10-12 million people who join the labour force every year. Well over half our population is dependent on agriculture, which gets some 14 per cent of national income, a clearly discriminatory situation.

This government has sought to encourage Make in India and has attempted to reduce procedural hurdles to encourage Ease of Doing Business.

Inflexible labour laws are among the chief reasons preventing foreign direct investment. Many more jobs would be created if flexibility was given to businesses to shut down unviable operations due to changing global situations, of course, with a fair compensation.

So, here is something the government could think of. Why not offer all State governments (since labour is a State subject) that if they were to allow industry in an industrial hub, the flexibility to hire and fire (after due process and with due compensation) then the Centre, on its part, would provide, say, a 10-year tax holiday? Perhaps this could help attract FDI and, over time, make the State governments, the Unions, and, more importantly the youth waiting for jobs, realise that flexible laws are better at creating jobs than inflexible ones.

Given that robots are fast replacing humans in several jobs, the urgency of introducing flexibility in labour laws becomes more pronounced.

War against corruption: Demonetisation was the first step in the war against corruption. This ought to be followed up by trying to plug loopholes and by proceeding against those where evidence points to corruption.

An article on www.pgurus.com points out how Subramanian Swamy has exposed property purchases of P Chidambaram and his son, abroad, which has not been declared by them. Why not investigate these, and other similar cases, and take action if found true?

Infrastructure spending: The private sector investment cycle has not yet kicked off in earnest, due to excess capacity. The public sector has stepped in, mainly in infrastructure, which also provides jobs (MNREGA jobs have shot up). The planned new 100 smart cities would not only provide jobs in building them, but also in their continued running.

Foreign investment is being welcomed in infra, including in real estate. When foreign investors come in, there is always wider fluctuation in prices, which behave like a yo-yo. Australia has a model to smoothen fluctuations, which can be looked at.

In Australia, foreign investors are permitted to invest in ‘ground up’ projects (new projects) but not in existing flats already built. So the fresh foreign money goes into creating new housing stock, and not in speculating on existing stock. The government could look at this model. Singapore adjusts its stamp duties to cool or heat demand for real estate.

(The writer is India Head, Euromoney Conferences. The views are personal.)

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