India - Ideas for the future..!
by Mr. RANA KAPOOR, YES BANK.
As
the Modi government completes three years in office, one must look back to
understand its policy trajectory and outcomes, and also the way forward. When
the government was sworn in in 2014, India was running the risk of a sovereign
rating downgrade (to junk status) which could have led to its isolation from
global capital markets. Today, the situation has turned around and there is
speculation about the possibility of a rating upgrade. India has successfully
cemented its position as a Global Macro Hot Spot, a far cry from the label of
Fragile Five which was assigned to our economy in 2013.
Decisive
policy actions by the government have been a cornerstone of this transformation
and policymakers have adopted the principle of festina lente — make haste
slowly. The key element of these reforms has been a renewed IDEA —
international collaboration, domestic reforms, ease of doing business and
active consensus building — for the future.
International
collaboration: The government has leveraged diplomatic channels and determined
policy engagements to enhance India’s trade linkages, while also establishing
an active role for India in the global geopolitical landscape.
Domestic
reforms with outcome orientation: The GST, Make in India, Skill India, fuel
price deregulation, and re-contouring of the FRBM are the structural reform
pillars which will enable boosting India’s potential GDP growth by at least 1.5
per cent in the medium term. The setting-up of the NITI Aayog, Monetary Policy
Committee (within the RBI), the codification of insolvency and bankruptcy
procedures, and the creation of the MUDRA Bank and RERA are the institutional
reform pillars which will help sustain 8-plus per cent GDP growth in the near
future and 9-10 per cent beyond 2020.
Most
importantly, the behavioural reforms undertaken by the government have stood
out. The JAM trinity helped to leapfrog financial inclusion. Additionally, the
bold reform of demonetisation is expected to drive swachh vitteykaran. It is
comforting to know that the country has added 9.1 million new taxpayers in
2016-17, representing an 80 per cent jump over the previous year. Going
forward, this is likely to boost India’s relatively low tax/GDP ratio of 11.3
per cent in 2016-17.
Ease
of doing business: It was one of the first objectives of the new government.
Various policies and reforms outlined earlier like the GST, FDI liberalisation,
digitisation, etc., have been tailored around this objective. Additionally, the
government has ensured that this impact trickles down at the state level
through competitive fiscal federalism.
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| Mr. Rana- Kapoor, MD &CEO ,Yes Bank |
Active
consensus building: Critical policies like the GST, Bankruptcy Code, FDI, etc.,
bring out the importance of political unison and the concept of Team India in a
meaningful manner. I believe that the focus for the next few years will be on
reviving private investment and boosting job creation. As programmes like Skill
India take flight, we will see an impetus to employment, which will be key to
reaping the benefits of India’s demographic dividend.
Soon,
people born in the new millennium will start entering the labour force. With
the changing nature of jobs in a world which is at the crossroads of
globalisation, industrial revolution 4.0 and protectionism, a policy
focus on boosting employment and nurturing MSMEs — as an extension of
existing policies — will yield desired outcomes.
MSMEs
generate close to 45 per cent of the total industrial employment and are
critical for the ground-level consummation of the Make in India dream. While
the GST will provide a shot in the arm, cluster-based development will further
help MSMEs reap economies of scale. Further, a specific focus financing for
MSMEs through attractive corporate tax structures, the building of a robust
ratings and exchange trading culture, will go a long way in strengthening these
enterprises.
Finally,
vocational training under skill development is critical in a world where
disruption and exponential change is the new paradigm. In addition, I believe
that we will see the policy emphasis on DICE (Design Innovation Creativity led
Entrepreneurship) getting further energised through Stand Up India and Start Up
India.
The
economic energy in the current team of policy architects is palpable and
infectious. After renovating the house, I am confident that the government is
now ready to take the next leap. India took 31 years to increase the size of
its economy by 10x to $2.3 trillion. Now, armed with the four tectonic changes,
in the form of IDEA, I believe India’s next phase of 10x transformation to a
$20 trillion economy will take less than half the time.
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