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PM says growth will be 7%. Pundits say reform this and reform that. But there are some little-discussed changes that can boost growth. Here's a list. And given our political economy, we also identify the spoilers and estimate the difficulty index:
CUT DEBT/GDP RATIO TO 25%
Why Because the ratio now is 66%. High debt through high borrowings increases inflation and interest rates and reduces private investments.
How By ramping up disinvestment and near-eliminating tax exemptions.
Nothing else will work given subsidy, wages, interest payments and capital expenditure. Subsidies will only be paid out of the National Investment Fund, which is supposed to receive all the funds from sale of public assets.
Impact: on GDP A big switch from public spending to private investment and consumption will add 1% to growth.
Spoilers: Most politicians. Industry.
Difficulty Index: Very, very tough to do. Too many big and powerful players opposing this.
MAKE OUR TAX RUPEES DO MORE
Why Because if our taxes are spent as efficiently as all expenditure reforms suggest they can be, every rupee spent can be 50% more effective. This will upgrade all public services.
How By following dozens of excellent reports, including the one from second Administrative Reforms Commission. First reforms can include decentralising welfare spending, making schemes work on zero-based
budgeting and empowering the Delivery Monitoring Unit.
Impact on GDP Better quality public goods and services can increase growth by 1%.
Spoilers: Administration heavyweights and those whose business it is to filch public funds.
Difficulty Index: Very tough, requires real political bravery
BUILD ROADS, POWER PROJECTS
Why Because the case for both power projects and roads is obvious.
How By, for roads, upgrading land acquisition procedures and giving the nodal body, NHAI, an activist chief.
Clarity on land issues will also help power projects, which also need a new mining law and faster environment clearances. Clear projects in or before 300 days, as has been proposed. The land and mining bills aren't perfect, but their becoming laws will help.
Impact on GDP Government estimates suggest 1% increase in infrastructure stock can raise growth by 1.5%; 1 % from power and 0.5% from roads.
Spoilers: No heavyweights against this. But NGOs will protest.
Difficulty Index: Not-so-tough and quite doable.
REFORM LEGAL SYSTEM
Why Because smarter laws change the relationship between citizen and government and between business and government and boosts economic activity.
How By following many existing blueprints. The 2003 Malimath committee report on criminal justice reform, for example. Lokpal agitations hit a popular nerve because of low conviction rates. That's a clue for the government.
Impact on GDP Studies point out an efficient legal system can increase growth by 1%.
Spoilers: No one, really, at least no one with enough clout.
Difficulty Index Easy to do, needs political imagination.
TWEAK NREG
Why Because it is not helping village economies. More productive assets need to be created. And NREG labour doesn't learn any skills.
How By reducing the stipulated proportion of expenditure on wages. And by making skill formation a part of NREG. Fewer people will be employed, but they will be better trained and will create useful things.
Impact on GDP A tweaked NREG will be a small, but vital, part of demographic dividend, which can add 2% to growth.
Spoilers: Congress leadership, National Advisory Council.
Difficulty Index: Easy to do, provided the Congress brass and NAC do not stand on ego.
SCRAP BHARAT NIRMAN
Why Because that's the wrong focus. Focus on rural reform and urbanisation. Bharat needs to shrink. NSS data says this is happening anyway.
How By allowing corporate investment in farming, freeing internal farm trade, persuading states to scrap restrictive laws. May be, the Congress-ruled states can start the reforms to show the way.
Impact on GDP Done comprehensively, rural reforms can add 1.5% to GDP growth.
Spoilers: Many across the political class, some states, old-style farm traders.
Difficulty Index: Very tough to do, unless Congress starts a bold experiment in states it rules.
MAKE RBI INDEPENDENT
Why Because monetary and exchange rate calls will be free from official influence. Financial reforms will get an impetus.
How By amending the 1934 RBI Act. How will RBI brass be appointed? May be a variation of the process through which positions like CVC are filled. RBI governor should be accountable to Parliament in this system.
Impact on GDP No direct estimate possible. But an independent central bank can't but boost growth.
Spoilers: Senior political figures who understand the political value of a non-independent central bank. Bureaucracy.
Difficulty Index: Tough to do, big players in opposition
FIX TIME FOR LAW-MAKING
Why Because setting aside a fixed time per session for passing bills may make MPs feel they have less wiggle room.
How By MPs agreeing to this.
Impact on GDP Impossible to quantify. But imagine reformist bills passing quickly. GDP is bound to get boosted.
Spoilers: The current Opposition perhaps?
Difficulty Index: Easily done, if all House leaders see sense.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PM says growth will be 7%. Pundits say reform this and reform that. But there are some little-discussed changes that can boost growth. Here's a list. And given our political economy, we also identify the spoilers and estimate the difficulty index:
CUT DEBT/GDP RATIO TO 25%
Why Because the ratio now is 66%. High debt through high borrowings increases inflation and interest rates and reduces private investments.
How By ramping up disinvestment and near-eliminating tax exemptions.
Nothing else will work given subsidy, wages, interest payments and capital expenditure. Subsidies will only be paid out of the National Investment Fund, which is supposed to receive all the funds from sale of public assets.
Impact: on GDP A big switch from public spending to private investment and consumption will add 1% to growth.
Spoilers: Most politicians. Industry.
Difficulty Index: Very, very tough to do. Too many big and powerful players opposing this.
MAKE OUR TAX RUPEES DO MORE
Why Because if our taxes are spent as efficiently as all expenditure reforms suggest they can be, every rupee spent can be 50% more effective. This will upgrade all public services.
How By following dozens of excellent reports, including the one from second Administrative Reforms Commission. First reforms can include decentralising welfare spending, making schemes work on zero-based
budgeting and empowering the Delivery Monitoring Unit.
Impact on GDP Better quality public goods and services can increase growth by 1%.
Spoilers: Administration heavyweights and those whose business it is to filch public funds.
Difficulty Index: Very tough, requires real political bravery
BUILD ROADS, POWER PROJECTS
Why Because the case for both power projects and roads is obvious.
How By, for roads, upgrading land acquisition procedures and giving the nodal body, NHAI, an activist chief.
Clarity on land issues will also help power projects, which also need a new mining law and faster environment clearances. Clear projects in or before 300 days, as has been proposed. The land and mining bills aren't perfect, but their becoming laws will help.
Impact on GDP Government estimates suggest 1% increase in infrastructure stock can raise growth by 1.5%; 1 % from power and 0.5% from roads.
Spoilers: No heavyweights against this. But NGOs will protest.
Difficulty Index: Not-so-tough and quite doable.
REFORM LEGAL SYSTEM
Why Because smarter laws change the relationship between citizen and government and between business and government and boosts economic activity.
How By following many existing blueprints. The 2003 Malimath committee report on criminal justice reform, for example. Lokpal agitations hit a popular nerve because of low conviction rates. That's a clue for the government.
Impact on GDP Studies point out an efficient legal system can increase growth by 1%.
Spoilers: No one, really, at least no one with enough clout.
Difficulty Index Easy to do, needs political imagination.
TWEAK NREG
Why Because it is not helping village economies. More productive assets need to be created. And NREG labour doesn't learn any skills.
How By reducing the stipulated proportion of expenditure on wages. And by making skill formation a part of NREG. Fewer people will be employed, but they will be better trained and will create useful things.
Impact on GDP A tweaked NREG will be a small, but vital, part of demographic dividend, which can add 2% to growth.
Spoilers: Congress leadership, National Advisory Council.
Difficulty Index: Easy to do, provided the Congress brass and NAC do not stand on ego.
SCRAP BHARAT NIRMAN
Why Because that's the wrong focus. Focus on rural reform and urbanisation. Bharat needs to shrink. NSS data says this is happening anyway.
How By allowing corporate investment in farming, freeing internal farm trade, persuading states to scrap restrictive laws. May be, the Congress-ruled states can start the reforms to show the way.
Impact on GDP Done comprehensively, rural reforms can add 1.5% to GDP growth.
Spoilers: Many across the political class, some states, old-style farm traders.
Difficulty Index: Very tough to do, unless Congress starts a bold experiment in states it rules.
MAKE RBI INDEPENDENT
Why Because monetary and exchange rate calls will be free from official influence. Financial reforms will get an impetus.
How By amending the 1934 RBI Act. How will RBI brass be appointed? May be a variation of the process through which positions like CVC are filled. RBI governor should be accountable to Parliament in this system.
Impact on GDP No direct estimate possible. But an independent central bank can't but boost growth.
Spoilers: Senior political figures who understand the political value of a non-independent central bank. Bureaucracy.
Difficulty Index: Tough to do, big players in opposition
FIX TIME FOR LAW-MAKING
Why Because setting aside a fixed time per session for passing bills may make MPs feel they have less wiggle room.
How By MPs agreeing to this.
Impact on GDP Impossible to quantify. But imagine reformist bills passing quickly. GDP is bound to get boosted.
Spoilers: The current Opposition perhaps?
Difficulty Index: Easily done, if all House leaders see sense.
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