Reform measures for successful recovery?

Many months after the Covid-19 crisis first began, the global economy may be showing signs of recovery. The Indian economic landscape, too, is indicating a revival. The month of September proved to be particularly promising, with an uptick recorded in many areas like GST collections, toll collections, e-way bills, power consumption, and sales in the auto sector.

Nevertheless, experts still advise that it’s a good idea to maintain caution. The signs of recovery may be showing up, but there’s no doubt that the path to growth may be slow. Six months into 2020, the IMF predicted a contraction of 4.9% in the world’s economic trajectory. Even amidst such challenging times, there is still hope. The need of the hour is a set of reform measures and policy initiatives that can help India traverse the thin line between economic recovery and inflation.

Demand-side rehabilitation

Over the past few months, the regulatory bodies in India have announced many measures to boost the supply side of the economy. But a steep rise in supply without a corresponding boost in demand will have little impact. As things stand now, it is only demand-based rehabilitation that can put India back on the path to a successful economic recovery.

Measures like a one-time fund transfer, which some foreign economies experimented with, may not foot the bill for India Inc. What we need at the moment is a more lasting initiative to generate sustainable income for the average consumer.

Tackling unemployment

In a country like India, the issue of unemployment is deep-rooted, with far-reaching effects right up to the rural sections of the economy. While rural unemployment has always been a problem to be dealt with, urban unemployment became more acute during the pandemic. The Center has certainly taken cognisance of this issue.

What the economy needs at this juncture are labor reforms that will have lasting positive effects and succeed in securing the jobs of millions of Indians in an already unpredictable ecosystem.

Stabilisation of tax regimes

Tax regimes have long been a sore spot for a large section of India’s working class. The most recent budget announcement from the Finance Ministry put forth two systems of taxation. This system may, once again, merely be a temporary measure to curb taxpayer dissatisfaction. Stabilisation of the country’s tax system can improve the levels of confidence among the taxpayers in the long run.

The GST regime is another area that needs streamlining. Temporary measures to put off tax filing due dates and extension of deadlines cannot create long-term changes in the right direction. Slimming the GST laws and making it more taxpayer-friendly is something we may need to be looking at if we hope for a quicker economic upturn.

Agricultural reforms

Agriculture continues to remain the backbone of our economy. India is a predominantly agricultural country, and we would do well to tap into this sector, which could well become our biggest strength. Automation of traditional methods of farming and incentives to encourage farmers can help to boost this sector.

The time is ripe to initiate a slew of other reforms like easy access to inputs like raw materials, technology, finance, and insurance. Increased leasing of land and cooperative sharing of resources will improve efficiency while simultaneously cutting costs. Connectivity, both logistic and virtual, will help bridge the gaps between farmers and the end-users.

The takeaway

These measures are only a fraction of the initiatives that will eventually put our country back on the road to economic recovery. A holistic, 360-degree approach that simultaneously focuses on uplifting demand and maintaining supply, on improving failing sectors while supporting thriving industries, and on kick-starting growth while steering clear of inflation - that is what India needs at the moment. It is a balancing act and a journey of a thousand miles, but we need to begin with a few steps in the right direction.