The withdrawal of the three pro-farmer bills by the Indian government, announced in a televised address to the nation by Prime Minister Narendra Modi, has generated much debate on the trajectory of the economic reforms in India. While the small section of people agitating against the laws have welcomed it, a large section of people, especially those who value economic reforms, have wondered on the impact that this move will have on existing and future reforms.
One way to analyse this question would be to take a stock of what all the Modi government has achieved in the past seven years, since it assumed office. This would give some base to assess the reform credentials of the Modi government and thus an ability to assess the future trajectory.
The reforms since 2014 can be bracketed in nine segments and in each segment a significant number of reforms have taken place.
First, Making India a preferred investment destination.
A series of reforms have made India and attractive investment destination. These reforms cover a wide spectrum and have either facilitated new business environment or significantly eased compliance burdens. Some of these measures are —
A series of new labour laws
Reforming and codifying labour laws; putting in place a structured privatisation plan with the showpiece privatisation of Air India done; a progressive and now stable and well performing Goods and Services Tax making India one common market; rationalising corporate tax to among the lowest in the world and fixing tax rate for new manufacturing units at just 15%; making taxation hassle free with faceless taxation and assessment, solving legacy tax disputes with one time settlement plans, a first of its kind taxpayers charter, remission of duties and taxes on exported products providing level playing field; abolishing the controversial angel tax; abolishing the dreaded retrospective tax and giving relief to a large number of investors; repealing thousands of old and defunct laws that hindered business environment; decriminalising 48 sections of companies act thereby enabling further ease of doing business; hugely successful Production Linked Incentive (PLI) schemes across 13 key sectors such as electronics manufacturing, automobiles, drones, speciality steel, textiles etc; and national single window system for investors and businesses for environmental and other such approvals.
Second, Facilitating flow of FDI in India.
The inflow of FDI into India has been a remarkable success story under Modi’s tenure with India emerging as the number one nation in the world attracting FDI in greenfield projects.
Each year has been a historic high and the trend continued even during the pandemic year 2020-21 with India attracting more than $83 billion in FDI. In the first six months of current financial year (April 2021-Septmebr 2021), India has attracted $42.8 billion, which is 4% higher YoY and again despite a severe second wave of pandemic. Some of these measures are —
Rationalising local sourcing norms for FDI in single brand retail and allowing single brand retail to operate online; opening almost all sectors to automatic 100% FDI approval route including such sectors as biotechnology and pharmaceuticals, railway infrastructure, roads, ports, etc, renewable energy, and so on. Critical sectors such as defence manufacturing now have 74% FDI limit with automatic approval while it is case-by-case basis for even 100% and the FDI limit in insurance has been raised to 74% fulfilling a long-standing demand of investors.
Enacting Institutional Reforms
Three. Enacting institutional reforms. A host of reforms have been undertaken to strengthen financial markets, fiscal and monitory policy framework and institutionalise economic governance rather leave it to discretionary processes.
Some of these measures are:
Enacting the modern insolvency and bankruptcy code with strong legal framework to allow exit of financially unviable firms; reforming public sector banks including setting up the professional bank boards bureau for selection of top management and national financial reporting authority as independent regulator; legal framework for bilateral netting thereby releasing large sums of locked up capital; formalising the Monetary Policy Committee (MPC) that decides monetary policy and the system has worked well since its formation; amending the Discal Responsibility and Budget Management Act (FRMB) to use debt as primary target and fiscal deficit as operational target; allowing direct listing of Indian companies in foreign stock exchanges; revising definition of MSMEs thereby facilitating growth of MSME sector; merger of banks to enable emergence of Indian global scale banks; asset monetisation of diverse assets of central public sector enterprises to unlock almost $100 billion dollars of revenue; creation of commercial courts; institutionalising the process of lateral entry in civil services thereby bringing in fresh talent into policymaking; institutionalising e-auction of natural resources; deregulation of petroleum prices including diesel; and reforming the natural gas marketing framework.
Fourth, Agricultural Reforms
Even before Modi became Prime Minister, he had a very impressive record in the agriculture sector as Chief Minister of Gujarat. For more than a decade, the agriculture sector grew at close to double digits thus making a hitherto water challenged state into an agricultural powerhouse. As Prime Minister, he has taken forward the legacy.
Some of the reform measures are:
Setting up the agricultural infrastructure fund with an investment of almost $14 billion to scale up agricultural logistics; reforming the fertiliser landscape with such measures as neem coating urea thereby ending pilferage and ensuring seamless supply to farmers; institutionalisation of the Direct Benefits Transfer (DBT) paradigm in payments of Minimum Support Price (MSP) for agricultural produce thereby eliminating leakages through middlemen; creating the electronic National Agricultural Market (eNAM) to facilitate a common, national market for the farmers to sell their produce at the best price they could discover; and setting up a world class Crop Insurance scheme which has benefited millions of farmers.
Fifth, Reforms to create Sustainable Infrastructure
The infrastructure sector has arguably seen the most activity in the seven years of Modi’s tenure with a series of reforms along with a host of schemes. The reforms have broken past shibboleths and enabled new age sectors. Some of these reform measures are —
Allowing commercial coal mining, a reform which was once considered too difficult to even attempt but has now become a reality; amending mineral conservation and mining rules to allow private sector greater freedom to operate including for commercial purposes; reforming the real estate sector with the progressive RERA legislation; opening up the Indian Railways to private sector including in running of trains; reforming the port and cargo handling with the Major Port Authorities Act; a series of reforms in the civil aviation sector including opening up locked up defence airspace sector; notifying a futuristic drone policy with easy regulation and facilitating role of private players and entrepreneurs; opening up the cartography and geospatial map sector to private players which was hitherto a government monopoly; a hybrid annuity model to encourage PPP in highway construction; giving infrastructure status to housing sector thus enabling better financing options; enactment of the new hydrocarbon exploration policy; expansion of SEZs and land banks for plug and play infra; establishment of national GIS-enabled land bank system; a series of reforms in the Telecom sector including allowing up to 100% FDI and resolving the legacy tax issues; replacing a hundred year old legislation with the new Inland vessels bill; and reforming the government procurement norms by doing away with the dreaded L1 (lowest bidder) system that precluded quality.
Enabling a Digital India
Sixth. Paving way for a digital country. Digital India, launched in July 2015 has become inarguably the most successful measure under Modi government. A series of forward looking, progressive measures put India firmly on the world digital map. One of the results of this — in the year 2021, India has produced the largest number of unicorns — Startups that are valued at more than $1 billion — in the world. At last count this number was 34, far exceeding the established ecosystem in either the US or China.
Overall, it can be seen that the Modi government has established an enduring image of itself, backed by performance, as the most reformist government in India in the last four decades. It therefor stands to reason that this record will continue and the line-up for the coming Parliament session only confirms the belief.
Reform, Perform and Transform is the mantra that Prime Minister has put forth. Modi’s record establishes that his government has been able to live up to this mantra. The future, which can be judged only on the basis of the trends established in the past and the present, therefore looks very bright for this reform journey to continue.
Akhilesh Mishra is the CEO of Bluekraft Digital Foundation and was earlier Content Director fo MyGov India.
Source: Gulf News