RESOLUTE REFORMER
From the infrastructure push to simplifying the tax regime to overhauling the banking system, Prime Minister Narendra Modi’s tenure has witnessed some big-ticket economic reforms
BLACK MONEY: PM Modi’s tenure has seen five big moves against black money: the Black Money and Imposition of Tax Act (2015); the Income Declaration Scheme and PM Garib Kalyan Deposit Scheme (both in 2016), aimed at disclosure of unaccounted-for incomes; the Benami Transactions (Prohibition) Act (2016); and rigorous tax surveys/ searches. Modi said in Aug. 2017 that black money worth Rs 1.25 lakh crore had been unearthed.
DEMONETISATION: The Modi government’s surprise decision, on Nov. 8, 2016, to declare Rs 500 and Rs 1,000 notes null and void achieved limited success. The RBI reported that over 99 per cent of the demonetised currency eventually returned to the banking system. Demonetisation squeezed cash out of the economy, hitting micro and small enterprises and the country’s informal sector hard and caused widespread job losses.
DIRECT BENEFIT TRANSFER: The move to disburse all welfare scheme benefits directly to the bank accounts of beneficiaries has meant substantial savings for the exchequer. In other expenditure reforms, the Union budget was advanced by a month and the railway budget merged with it. This has expedited the movement of funds as ministries can start planning for the expenditure from April 1.
CODIFYING LABOUR LAWS: Industry has always been apprehensive of the maze of labour legislation. In 2019, the Modi government announced four codes to streamline central labour laws. While the Code on Wages has been enacted, the other three—on Industrial Relations, Social Security and Occupational Safety—are with the standing committee of Parliament.
REAL ESTATE REFORMS: Though introduced by the UPA government in 2013, the Real Estate (Regulation and Development) Bill was passed by Parliament under the Modi government in 2016. The law aims to protect consumers, promote fair play in real estate deals and ensure timely execution of projects.
INFRASTRUCTURE PUSH: Roads, highways and railway have seen big reforms since 2015. The measures include restructuring of the Railway Board, redefining the financial models and streamlining project implementation, reworking
the methods of allocation of highway projects and cutting down risks to make projects more viable. Though railways still faces issues related to availability of funds and slow decision-making, overall, infrastructure is back on a trajectory.
GOODS & SERVICES TAX: The single indirect tax, merging 17 levied by the state as well as the Centre, came into effect in 2017. GST not only moved India to an integrated tax jurisdiction but also simplified taxation for entrepreneurs. The execution of GST has gone through teething troubles, but it is gradually finding its groove.
BOOST FOR FDI: Since September 2016, India has opened up foreign direct investments in almost all sectors. To cut red tape, the Foreign Investment Promotion Board (FIPB) was abolished in 2017 and the respective ministries were made nodal agencies. Things, however, slowed down in some sectors under the pressure of domestic lobbies.
PROMPT CORRECTIVE ACTION FRAMEWORK: In 2017, a comprehensive plan was put in place to clean up the books of public sector banks reeling under mounting non-performing assets. Their asset quality and operations were closely monitored and cleaned up.
INSOLVENCY AND BANKRUPTCY CODE (IBC): Notified in 2016, it codified insolvency resolution processes for individuals and companies and made the process time-bound. IBC has made it easier for lenders, such as banks and other financial institutions, to liquidate collaterals to recover debt and broken corporate houses’ habit of seeking evergreening of debt.
MERGERS OF PSU BANKS: It all began with the merger of the State Bank of India and its associate banks in 2017. On Apr. 1, 2020, 10 PSU banks were merged into four large entities, bringing the number of state-owned banks to 12 from 27 in 2017. Bigger banks are not only operationally more efficient but are also better-placed to fund mega projects.