February 27, 2016

India trying to reform to reach its economic growth potential

India’s robust growth rate is likely to level off in the coming year and could drop to as low as 7 per cent in an “increasingly grim” world economy, according to Arvind Subramanian, the government’s chief economic adviser.

Releasing India's annual economic survey on Friday ahead of next week’s budget, Mr Subramanian said India had the potential in the medium term to grow at 8-10 per cent a year — matching the rates of China and east Asia’s “tigers” in previous decades.

India is implementing a number of meaningful reforms, each incremental, but collectively meaningful:

• Anti-corruption efforts
• Liberalizing foreign direct investment (FDI) across-the-board
• Vigorously pursuing efforts to ease the cost of doing business
• Restoring stability and predictability in tax decisions, reflected in the settlement of the Minimum Alternate Tax (MAT) imposed on foreign companies, and increasing substantially the limits beyond which the tax department will file appeals;
• Implementing a major public investment program to strengthen the country’s infrastructure and make up for the deficiency of private investment;
• Instituting a major crop insurance program to cushion farmers against adversity;
• Limiting farm interventions which had a first-order effect in moderating overall inflation;
• Elevating to mission mode the financial inclusion agenda via the Jan Dhan Yojana by creating bank accounts for over 200 million people within months. Financial inclusion will also be furthered by the licensing of 11 payments banks and 10 small banks;
• Advancing the game-changing JAM (Jan Dhan Aadhaar Mobile) agenda. LPG witnessed the world’s largest direct benefit transfer program, with about 151 million beneficiaries receiving a total of R29,000 crore in their bank accounts. The infrastructure is being created for
extending the JAM agenda to other government programs and subsidies;
• Attempting to change social norms in a number of areas: open defecation, and voluntarism in giving up subsidies.

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