Reforms now in take-off mode

Over the past year, the government has come out with a range of targeted policies to address the challenges faced by the economy — such as a difficult global environment, slowing investments, creation of new jobs, and so on. A strong foundation has been instituted for more extensive reforms and policy actions that would take India categorically into the next phase of its development cycle.

At a time when the world is looking for new opportunities, the Indian economy, widely expected to be the fastest-growing large economy in the near term, offers a ray of hope.

Integrated approach

Continuing with its strategic reform agenda, the government would need to look at both macro policies and sectoral policies to maintain the growth momentum. With a fiscal roadmap outlined for the next four years, balancing public investments with fiscal consolidation would be a key imperative. Convergence of subsidy management, disinvestment, and taxation issues would help to keep the fiscal deficit at non-inflationary levels.

The successful rollout of the Jan Dhan Yojana sets the stage for Direct Benefits Transfer (DBT) as a tool for reforming the public distribution system, allocating LPG and kerosene to needy sections of society, and better disbursal of fertiliser subsidy. With less leakage and well-targeted subsidies, the expenditure side of the fiscal balance sheet can be improved considerably. At the same time, tax administrative issues are being addressed to make the tax regime simpler, predictable and non-adversarial. The deferment of GAAR, setting up of a committee for tax disputes and greater consultation with industry raise confidence in the tax regime, and would ensure better compliance and revenues.

This process would be further consolidated with introduction of processes for alternate dispute resolution.

The introduction of Goods and Services Tax has been placed on the front-burner. We hope Parliament will quickly pass the supporting legislation.‘Make in India’ has been a revolutionary concept, integrating ease of doing business, skill development and R&D. The next stage would be to introduce national policy strategies for key sectors like textiles, steel, chemicals, and electronics which would contribute to making India a global manufacturing destination. Skill development must be taken up in mission mode.

A significant beginning has been made on labour reforms by introducing the Shram Suvidha portal and social security models. This should be followed up by combining many labour laws into a few specific legislations as also tackling existing laws like the Industrial Disputes Act, Factories Act and the Contract Labour Act for greater consistency and flexibility.

The financial sector faces duress from non-performing assets which inhibit future investments. To tackle this, CII suggests a national asset management company which would take distressed assets off the balance sheets of banks. Banks would then be able to elevate their disbursals and improve their capital adequacy ratios. The government and the central bank should consider deepening the financial market to diversify away from over-dependence on the banking system.

The bond, currency and derivatives markets must be integrated as in the equity market.

The government has taken a huge step towards revising the land acquisition regulations to make them faster and simpler. Industry has maintained that a protracted procedure for land acquisition detracts from infrastructure development plans while additional payment for rehabilitation and resettlement should be limited to affected families rather than owners. In addition, ex ante zoning and land-use planning for a 100-year time period may be commenced for the future.

In the infrastructure space, investors are heartened by announcements regarding renegotiation of public-private partnerships, exit, and plug-and-play model of bidding for certain projects.

The government has also scaled up infrastructure plans in roads and highways, ports, and railways. Further action to treat non-performing infrastructure assets separately from other NPAs, systematic exit policies, and obtaining all government approvals before awarding projects would help to meet the targets.

The power sector has greatly benefited from better coal allocation. A roadmap for transition to market-based pricing would help the gas sector. Actions are required with respect to the financial health of distribution companies and legislation of the Electricity (Amendment) Bill.

With this solid platform, a new generation of reforms can find traction, leading to faster and more equitable economic progress.

The writer is the president of CII

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