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Photo: Aniruddha Chowdhury/Mint
Photo: Aniruddha Chowdhury/Mint

Bold reforms needed to change the orbit of India’s growth for the future

The Union government needs to support its industries and consumers

India witnessed its steepest decline in gross domestic product (GDP) growth for Q1 FY21 due to the covid-19 pandemic. The lockdown enforced to save lives adversely impacted livelihoods across sectors. Barring agriculture, every sector witnessed sharp de-growth. We don’t have the luxury to say that countries, such as the US, Japan, and the UK, despite giving multiple times higher fiscal stimulus than India, have witnessed steeper or similar decline in GDP. We also don’t have the luxury of developed world to spend money by increasing fiscal deficit without consequences from rating agencies. We need to overcome the current crisis like the 90s FX crisis—through bold reforms.

A few suggestions worth implementing are:

–Support our abhimanyus (entrepreneurs) to break the chakravyuh of uncompetitiveness. We need to lower logistics cost by removing subsidy of passenger fare from freight charges and lower power cost by removing subsidy of free agriculture power from industrial power. Indian businesses can cater to the world if their power and logistics costs are brought to global levels.

–Roll out the red carpet model of Sanand where Tata Motors could set up a plant at a record pace for firms shifting out of China. Leverage preferential access to domestic market of 1.36 billion consumers to lure them to India. Learn from the information technology (IT) and business process outsourcing (BPO) industry, which propelled us from being the back office to the world to becoming the manufacturer of the world. Our benchmark should be to encourage global companies to prosper here, just like Vietnam, where Samsung contributes to over 28% of its GDP with a $62-billion turnover.

–The government needs to support industries and consumers. We don’t have the luxury of increasing fiscal deficit manyfold. We must raise non-tax resources by divesting custodian of enemy property assets, and surplus land from railways to defence sectors, and bring an attractive gold amnesty scheme to not only boost tax collection, but also shift gold in tijori, or black economy, to the white economy to strengthen balance sheet of India Inc, besides pursuing strategic divestment rather than market divestment to get better value for governments holding in public sector units.

Our strategy should follow what former UK prime minister Margaret Thatcher did to turn around the economy through privatization and cost cutting.

–Create a separate judicial infrastructure for faster resolution of commercial disputes. Rule of law is a prerequisite for entrepreneurs to invest.

–More than two-thirds of our population depends on agriculture. Amul made India from a milk-importing country to the largest producer of milk. We need to create many Amuls in other parts of agriculture to support them. Our benchmark should be Netherlands, which, despite half the country below sea level, exports over $80 billion in agricultural produce. We should become food suppliers to the world.

Covid-19 is a major crisis, which we must overcome with such bold reforms to change the orbit of India’s growth for years to come.

Nilesh Shah is president and managing director at,Kotak Mahindra Asset Management Company Ltd.

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