The first year of NDA government under the prime ministership of Narendra Modi has made a mark in checking the deteriorating environment for business and reviving the economy. There is an upward momentum in many of the economic indicators of the economy. The investors find that Indian economy is gaining momentum and it appears that business confidence is getting revived.
It is expected that by the end of 2015, India’s economic growth would outstrip that of China. The IMF forecast tells us that India will achieve economic growth of 7.2 per cent by 2015, reversing the sluggishness of the past. Similar trend is also indicated through the recently upgraded credit rating of India by Moody’s (from stable to positive) and by a PwC Survey of CEOs (Indian bosses to be the most optimistic in the world).
This has been possible because of many big-ticket reforms announced and partly implemented by the new government. These include developing infrastructure, ensuring ease of doing business, attracting FDI, building a predictable taxation regime, doing away with retrospective taxes, empowering masses with financial powers and reinforcing the federal spirit of the Indian polity.
While corruption has been seemingly eliminated at the top level, it is expected that the same would be possible at the lower level with the reforms in the tax procedures. The change over to digital India would certainly aid in this direction. Efforts of the government to check black money are also in the right direction. Also, the flagship programmes of investment in infrastructure – Make in India, Skill India, and Digital India – would certainly help develop industry and employment in the years to come.
In the international scenario, Modi has reactivated India’s foreign policy that seeks to take bilateral relations forward by focussing on the potential of trade and economy. This has made India emerge as a global leader.
While the above reforms have created the base for furthering growth, in the short run, some reforms have to be attempted without delay. Here, we have to keep in mind that Modi has faced serious difficulties in passing a few important legislations (such as land bill, GST Bill, etc.) because of lack of majority in Rajya Sabha.
This has arrested some major reforms at the ground level. However, in the coming year, the Modi government needs to create public opinion to get these bills passed so as to go ahead with its reforms agenda. Some of the reforms mentioned below need to be implemented at the earliest:
Special Industrial Cell: Modi’s innovative idea of Make in India has had a great appeal for industrial growth as also for the creation of lakhs of jobs that would be needed for our young population. However, the Indian scenario is different. Indian corporate sector complains about available facilities at ground level. In a recent interview, industry leader Deepak Parekh said that there was no real change in the ease of doing business in India and that a little impatience was creeping in.
Access to PM, ministers
The government should not give a feeling to the industrialists that they have no access to the prime minister or to the ministers. There are issues with individual projects that have to be ironed out. It would be useful if the Modi government appoints a Special Industrial Cell to consider the difficulties faced by the domestic industrialist.
As proposed by Modi for other countries (say Japan or South Korea), a domestic cell be created for the domestic industrialists. This cell should be manned by the senior ministers concerned along with the related senior bureaucrats and could be chaired by the PM. This will take care of all the issues related to the domestic industrialists.
Tax Reforms: The proposed goods and service tax is important to make a unified India and also for inviting FDI. However, certain reforms in its structure as well as operations are need of the hour. We hope that the standing committee would look into these aspects and the structure of GST would be robust when implemented. Also, all the issues of MAT as well as that of retrospective taxes should be sorted out as early as possible.
Black Money at Home: While the efforts of the government to check black money stashed abroad are in the right direction, generation of black money at home is interwoven with the overall tax system of the country. It is high time that the government pays special attention to the digitised procedures under the overall tax system of the country. It is all the more important under the proposed GST regime.
While recognising the fact that the Modi government has done extremely well in initiating overdue reforms (like GST) in the first year of its regime, it needs to realise that the structural changes in the socio-economic fabric require a continuing action over a longer period. The first year of this government has well begun; it has built the base. Now, further efforts have to be made to go ahead with full swing.
(The writer is Director, Foundation for Public Economics and Policy Research, New Delhi)
Published 26 May 2015, 17:14 IST