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 analyze this question in our opinion would be to take a stock of what all the Modi government has achieved since it assumed office. The reforms since 2014 can be bracketed in nine segments and in each segment a significant number of reforms have taken place.
1. Making India a preferred investment destination:
A series of reforms have made India in our opinion an 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 – Reforming and codifying labor laws; putting in place a structured privatization plan with the showpiece privatization of Air India done; a progressive and new stable and well preforming Goods and Services Tax making India one common market; rationalizing corporate tax; 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 a level playing field; abolishing the controversial angel tax; abolishing the dreaded retrospective tax and giving relief to large numbers of investors.
2. Facilitating flow of FDI (Foreign Direct Investment) 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 53 billion dollars in FDI. In the first six months of the current financial year (April 2021 – September 2021), India has attracted 42.8 billion dollars, which is 4 percent higher, year-on-year and again despite a severe second wave of the pandemic Covid-19.
3. Enacting Institutional Reforms:
A host of reforms have been undertaken to strengthen financial markets, fiscal and minority policy framework and institutionalize economic governance rather leave it to discretionary processes.
Some of these measures are:
Enacting the modern insolvency and bankruptcy code; 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.
4. Agriculture 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.
5. Reforms to create Sustainable Infrastructure:
The infrastructure sector has arguably seen the most activity in Modi’s tenure, some of these are allowing commercial coal mining; amending mineral conservation and mining rules; reforming the real estate sector with the progressive Real Estate Regulatory Authority (ReRa) legislation; opening the Indian Railways to private sector; reforming the port and cargo handling with the Major Port Authorities Act.
6. Enabling a Digital India:
Digital India, launched in July 2015, has become inarguably the most successful measure under Modi government. One of the results of this is in 2021, India has produced the largest number of unicorns – startups that are valued at more than 1 billion dollars – in the world.
7. Building Social Assets for Large Economic Class:
Unlike the western consensus, which only defines reforms as those that affect the upper class or the industrial base, the meaning and definition or reforms has also been expanded under Modi government to include the poor and the underprivileged and those sections of the society that have been left behind.
8. Future Proofing or Reforms:
Future proofing reforms means understanding the essence that reforms are a process and not an event. Therefore, the future generation must be sensitized from now on and made future ready so that when their time comes, they are ready to be decision makers.
9. Prioritization of New Age Sectors:
The defense sector has seen a series of reforms – such as setting up the long-discussed Chief of Defense staff structure; the push for defense manufacturing in India with orders worth 75 billion dollars.
Overall, it can be seen that the Modi government has established itself as the most reformist government in India in the last four decades. Modi’s government has established a record by living up to its mantra.
The future for India looks in our opinion bright for this reform journey to continue and Calvin•Farel will take a deeper look into the continent in the coming year.