How reforms are building momentum for ‘India’s century’

News: The repeal of the three farm laws is seen through different lenses. Some see it as a sign of stepping back from progressive laws, while others see it as something in the interest of farmers.

Despite taking back some progressive steps, to reform certain sectors like agriculture, due to lack of political consensus, many positive steps have been taken by the government for structural improvements in the economy.

What are the steps taken for the economy’s structural shift?

Reforming banking sector:

-Insolvency and Bankruptcy Code(IBC)-Since its enactment in 2016, it helped recover Rs 2.5 trillion from corporate defaulters, yielding a recovery rate of 36% as of June 2021.

-Government recapitalized banks and empowered debt recovery tribunals(DRT). A dedicated Stressed   Asset Management Vertical was formed.

Reforming infrastructure:

–Asset Monetisation Program for revenue generation, Productivity Linked Incentive(PLI) Scheme to boost 14 sectors, was launched. Recently, work has started on Asia’s biggest airport in UP.

–National Infrastructure Pipeline(NIP) envisages infrastructure investment of Rs 111 lakh crore over 5     years(FY 2020-25). This huge cost is expected to be met through asset recycling and monetisation and by creating a ‘development finance institution’.

Reforming PSU’s: Air India’s privatization and others lined up.

What factors are driving the economy’s uplift?

Lesser covid restrictions-Corporates resume capital expenditure across sectors. Core sectors and  IT, pharma, are taking the lead in investments.

Government push for PSU’s to buy more in order to create a demand and supply cycle. Also, the reduced corporate tax rates with the elimination of many compliances, have made reforms easier.

On the Monetary front– The low-interest rates, an accommodative monetary policy has instilled confidence among corporates to invest more.

The quick resolution of commercial disputes by making mediation the preferred route rather than judicial litigation.

What is the significance of these reforms?

The reforms in the infrastructure sector are vital for overall economic growth and recovery.

-Due to its backward linkages, infrastructure reform creates core sector demand. It creates employment too.

These reforms would pave the way for a ‘digital economy’, and green economy, which will help India to rise over the next decade.

Source: This post is based on the article “How reforms are building momentum for ‘India’s century” published in the Indian Express on 2 Dec 2021.