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Measures to revive indian economy

, August 6, 2013, 0 Comments

The Indian Economy is gradually sliding into an economic crisis. Here we discuss some measures which could lead to revival of the Indian Economy.  These can’t be considered to be a complete list of reforms required but a sample which the writer considers vital.

Reduce Fiscal Deficit and CAD:  About a year ago the concern of the Finance Minister was about the Fiscal Deficit. Today he has to worry about both the fiscal deficit as well as the Current Account Deficit. These are deficits, which if they persist, discourage foreign investors as well as throw the entire finances of the country into disorder and destabilize our external economic fundamentals.

Increasing Diesel Prices: A major factor contributing to the twin deficits is our dependence on crude oil imports. In this regard steps are required to discourage consumption of petrol and diesel. Pricing of petrol is fortunately already decontrolled and oil marketing companies have the freedom to increase petrol prices in tune with international prices. This, however, is not the case with diesel prices. The under-recovery of oil companies on account of diesel prices is today about Rs 10/L. This alarming situation should be corrected by an immediate increase in diesel prices of at least Rs 5/L.

Dealing with the falling Rupee All efforts by the RBI and the government have not been able to bring about a correction in the sliding Rupee. Rather, these measures have only made matters worse for the economy. The government and RBI should stop reacting to the Rupee’s fall. The Rupee should be allowed to fluctuate and find its own equilibrium in the foreign exchange market. Efforts to prop up the Rupee can lead to adverse consequences as it already has.

Legislative Reforms Important legislative reforms such as passing the pension and insurance bills, the Direct Tax Code and Goods and Service Tax Bill needs the special attention of the government.

Simplifying Rules and Regulations The economic legislation governing the country is draconian. It is shortcomings in such legislation that is leading to so much delay in concluding the Jet-Ethiad deal. Such legislation has played havoc in the telecom sector. Transfer pricing norms lack clarity. The Revenue Department is imposing tax claims one after the other and all these cases will go into litigation. This is all because there is no clarity in our economic legislation and tax rules.

Every law that is brought about is accompanied by a large number of frightening conditions which makes these provisions un-implementable and unacceptable to Indian and foreign investors. Such legislation defeat the very purpose for which they have been brought about and ultimately makes the country ungovernable.

Reforming PDS The Food Security Bill is being brought about at a most inappropriate time. The introduction of the Direct Cash Transfer Scheme has introduced several possibilities which would have eliminated the need for having the gigantic and corrupt food procurement and distribution scheme as it exists today. In case it is decided not to replace PDS with direct cash transfers at least the possibility of introducing the food coupons scheme in PDS should be considered.

Abolish Planning Commission The Planning Commission in Government of India is a white elephant which duplicates the work done by other departments of government. Every department – industry, agriculture, labour, transport, etc. have their corresponding representative division in the Planning Commission. If these divisions in the Planning Commission does not exist it will only make matters that much easier for the corresponding government departments. The present system of duplication of work only leads to swelling the size of the government bureaucracy. The Planning Commission should be abolished and its essential functions should be transferred to a Section in the Economic Division of the Finance Ministry which functions under the Chief Economic Adviser.

Down-sizing of Government Abolition of Planning Commission will itself be a major exercise in down-sizing of government. Efforts should be made to carry the job forward with an objective to creating a leaner, responsive and more efficient government machinery.