Friday, 16 May 2014
New Delhi: By the time you read this, you would already know which party is forming the government of India. Here are 10 things related to the economy and business we’d like to see the new government do.
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10. Kick-start the investment cycle
Long before India’s much vaunted consumption story began fraying, in the past 12-18 months, investments slowed. There’s some unanimity that the worst is over for the economy although there is also a growing consensus that the recovery will take time (and that the road will be hard). To really kick-start the investment cycle, the new government must encourage state-owned companies, especially the so-called Maharatnas and the Navaratnas to invest. Most of these companies are cash-rich, and an edict to them to, say, double capacities, could serve the cause of growth—and also of manufacturing.
9. Reassure investors
Under the United Progressive Alliance (UPA), and especially in that government’s second term, there was an air of impermanence over most policies. Still worse, new policies were often introduced with retrospective effect. The new government should, of course, change policies that need changing (and many do), but it must protect investors, both domestic and foreign, who have already invested on the basis of existing policies.
8. Reform tax laws, rein in the taxman
Sure, India needs to improve its tax-gross domestic product (GDP) ratio and all that, but raids and unreasonable tax demands are not the way to go about it. The new government should (and must) come down hard on tax evaders, but it should codify existing tax reforms—such as the goods and services tax (GST) and the direct taxes code (DTC)—and ensure that honest taxpayers, both individual and institutional, aren’t harassed.
7. Eschew dirty growth
In the past 10 years, India has swung from one end of the growth-environment debate to another, depending on the environment minister of the day. There are fears that a new government focused exclusively on development would completely ignore the environment, paving the way for so-called dirty growth. The new government should find a middle path.
6. Recapitalize banks
India’s biggest banks (which are still not very big by global standards) are still state-owned, and they all need capital. It is a requirement born of statutory requirements of capital, and the rising pile of bad debt on the books of banks. Sure, growth could help address the latter, but it would also mean an increase in demand for credit.
5 Review labour laws, resource-allocation process
Governments have always been averse to tinkering with the country’s labour laws out of fear of antagonizing a significant chunk of voters; but, over the past decade, it has become evident that these moribund laws have impeded India’s efforts to expand its manufacturing sector, hurt the country’s global competitiveness and, still worse, not served the very people they were meant to protect by forcing companies to hire temporary workers who are often not on their rolls.
Companies have also been hit by opaque rules related to the allotment of national resources—telecom spectrum, iron ore, and coal. These rules have favoured some companies over others and, sometimes, even over national interests.
The new government should review both sets of rules.
4. Work on a new energy policy
India has done little to address the issue of energy security, is yet to get a handle on contentious fuel subsidies, and has blown hot and cold on non-conventional sources of energy. It is alright for an economy that’s the world’s third largest in purchasing parity terms to not have enough energy; it isn’t alright for it to not have a cogent energy policy. The new government should come up with one—and implement it.
3. Create truly independent regulators
For almost two decades, India has been struggling to move from a government-dominated economy to one where private companies take over several things that were once the exclusive domain of the state—from provision of telecom services to running airlines and airports to building roads and power plants. Any such transition needs truly independent and empowered regulators. That’s one thing that has been missing from the Indian business landscape in the past decade. Yes, there are regulators, but are they truly independent? Are they truly empowered? Has the government of the day stayed away from the temptation of undermining their authority?
The new government should aim to create such regulators.
2. Don’t throw out everything the old regime did
In the past 10 years, if there are two things that the UPA can be credited with, it is the launch of a national urban renewal mission—urban was a four-letter word in the political lexicon before that—and the unique identification programme that has given 600 million Indians unique biometrically verifiable IDs. India needs more cities, and its existing cities desperately need an overhaul of infrastructure. And the ability to directly target benefits and subsidies at individuals using bank accounts linked to unique IDs isn’t something that should be sacrificed—no matter who its political progenitors are. The new government should keep both going.
The economy needs proactive management, not reactive firefighting. The new government should never forget this and do what it has been elected to do: Lead
Did we miss anything ? Kindly share your views.