Economic reforms introduced in 2015-16

The global economic environment is facing unusual volatility. There are fears that the global recovery may be faltering with rising risks of extreme events. Amid global instability, India stands out as a stable economy and an outpost of opportunity. India’s growth is amongst the highest in the world. India’s micro-economy is stable because of various factors as follows:

• Government’s commitment to fiscal consolidation,
• Declining current account deficit and fiscal deficit,
• Low inflation, and
• Government spending towards needed public infrastructure.

The Indian achievements are remarkable because they have been accomplished in the face of global headwinds and a second successive season of poor rainfall. India’s economic performance can be measured against two distinct benchmarks: India versus other countries; and India versus its own medium-term potential.

On the first, the Indian economy has fared well; on the second, steady progress is being made and there is still scope for translating potential into actuality.

For an economy where exports have declined due to weak global demand and private investment remains weak, India’s economy is performing remarkably well.

Some of the near future challenges to Indian economy are:

• Sustaining the present growth in the country amidst increasing difficult global environment.
• The benign outlook for inflation
• Widening output growths.
• The uncertainty about the growth outlook.
• Over-indebtedness of the corporate sector.
• Reviving the private sector investment.

What needs to be done for Indian Economy to realize its full potential?

• The economic survey notes that India moved away from being anti-market and pro-state to being pro-entrepreneurship and sceptical about the state. But being pro-industry must evolve into being genuinely pro-competition, and the legacy of the pervasive exemptions Raj and corporate subsidies highlights why favouring business (and not markets) can actually impede competition.
• Key to creating a more competitive environment will be to address the exit (the Chakravyuha) problem which is an impediment to investment, efficiency, job creation and growth.
• Second, major investments in people – their health and education – will be necessary to exploit India’s demographic dividend. It would seem important to focus on “mother and child,” involving maternal health and early life interventions.
• Third, the delivery of essential services is a gargantuan challenge. With increased devolution of resources, states will need to expand their capacity and improve the efficiency of service delivery.
• That will require them to shift their focus from outlays to outcomes, and to learn by monitoring, innovating. Fourth, while dynamic sectors such as services and manufacturing tend to grab public attention, India cannot afford to neglect its agriculture.

Important Economic reforms introduced in 2015-16

• Corruption at the centre has been meaningfully addressed. It is being reflected in transparent auctions of public assets and non-interference in regulatory decisions.
• Liberalizing foreign direct investment (FDI) across-the-board, including by passing the long-awaited insurance bill.
• Vigorously pursuing efforts to ease the cost of doing business, this is being reflected in the unprecedented dynamism of the start-up and e-commerce sectors.
• Restoring stability and predictability in tax decisions, reflected in the settlement of the Minimum Alternate Tax (MAT) imposed on foreign companies.
• Implementing a major public investment program to strengthen the country’s infrastructure and make up for the deficiency of private investment.
• Instituting a major crop insurance program to cushion farmers against adversity.
• Elevating to mission mode the financial inclusion agenda via the Jan Dhan Yojana by creating bank accounts for over 200 million people within months.
• Advancing the game-changing JAM (Jan Dhan Aadhaar Mobile) agenda. LPG witnessed the world’s largest direct benefit transfer program, with about 151 million beneficiaries receiving a total of R 29,000 crore in their bank accounts.
• Attempting to change social norms in a number of areas: open defecation, and voluntarism in giving up subsidies.
• Power sectors reforms (especially the UDAY scheme).