GG News Bureau
New Delhi, 11th June. India is the fastest growing economy in the world. Even during a once-in-a-century crisis, India has weathered the disruption and bounced back with many high-frequency economic indicators in better shape than even in the pre-pandemic era.
The swift recovery can be attributed to extending adequate support to various sectors of the economy and a string of structural reforms since 2014. These reforms strengthened the Indian economy and enabled it to withstand the drastic effects of the pandemic’s disruption.
The moment the word ‘reform’ was uttered, Air India used to come to the minds of many people who used to consider it a sort of litmus test. In 2021, the historic reform of disinvesting Air India was achieved. However, Air India’s disinvestment is just one example of the multitude of reforms that have been seen in the last few years. After all, the Modi government was perhaps the only major government in the world that was working on reforms even during the peak of the pandemic! The Modi government brought reforms in every step of the business and industrial cycle.
Reforms to make India an investment destination
Investment is the first step of a fruitful economic cycle that creates jobs and spreads prosperity. There are many reforms that created a better investment and banking ecosystem.
The Modi government inherited a severely incapacitated banking sector that had been wantonly misused by the previous government. To improve the health of the banking sector, multiple reforms were implemented. The merger of 10 public sector banks into 4 large banks was an important step in this regard.
The amalgamation resulted in the creation of 7 large public sector banks with scale and national reach with each amalgamated entity having a business of over Rs. 8 lakh crore. It helped create banks with a scale comparable to global banks and capable of competing effectively in India and globally.
Importantly, this consolidation was good news for the economy since it also increased the banks’ ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity.
The creation of a ‘bad bank’ allowed cleaner balance sheets for other banks, giving an impetus to lending. Meanwhile, the ‘bad bank’ can focus solely on the recovery of loans that had become NPAs.
While these measures improved the domestic investment ecosystem, a lot has been done for foreign investors too.
National Single Window System for approvals & clearances for investors and businesses has made investments in India an attractive proposition due to its simplicity. Foreign direct investment caps have been liberalised and increased up to 100% in many sectors. In defence, it went from 26% to 74%, in railways infrastructure from 0% to 100%, and so on. Increased FDI limit for insurance, which was long considered an important reform has also been achieved.
Reforms that boost ease of compliance
The recent labour reforms ensure just one registration, one inspection and one return for central labour laws. 29 labour laws have now become just 4 codes, while nearly 1,400 sections in them have been subsumed into 480. There used to be 542 different kinds of minimum wages which are now just 12.
Along with the reduction of 25,000 compliances, decriminalisation of 48 sections of the Companies Act and the repeal of over 1,400 old and unnecessary laws, many avenues of harassment over compliances have been reduced. This boosts ease of compliance.
Shutting down a business has become easier with the Insolvency and Bankruptcy Code, which has been a world-renowned reform in this space.
Aiding expansion
Expansion of enterprise is being aided by opening up new domains for the private sector and talent of the enterprising youth. For the first time ever, a proper disinvestment roadmap was created. The government will completely exit from non-strategic spaces and co-exist with the private sector in strategic spaces.
There has been massive liberalisation in the drone sector, opening up opportunities. Similarly, the space sector and commercial coal mining were opened up for private participation.
Tax reforms
Taxation is becoming faceless, seamless and hassle-free. The retrospective tax was scrapped and so was the angel tax. Corporate tax for existing companies was reduced to 22%, while it was cut to a historic 15% for new manufacturing companies. Due to the reduction of corporate taxes, companies invested additional money into their businesses. Also, the taxes paid by the companies actually increased despite the rate reduction! While the number of taxes and tax rates went down due to GST, GST collections have surged beyond Rs 1 lakh crore mark for months together!
Reforms lead to poverty reduction
Reforms bring in investment. Investment boosts businesses. Businesses grow and hire more people. With greater hiring in direct jobs, the number of indirect jobs grows and more people get a chance to break the shackles of poverty. (narendramodi.in)
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