Ur­gent Im­per­a­tives for the Econ­omy

The new govern­ment has to pri­ori­tise tasks

The Economic Times - - The Edit Page -

The in­com­ing govern­ment led by Naren­dra Modi faces a heavy bur­den of ex­pec­ta­tions. It is not easy to van­quish in­fla­tion, cre­ate jobs by the mil­lion and boost eco­nomic growth to Chi­nese lev­els, all of a sud­den. But some things are sim­pler than the rest. The sim­plest of all is an an­nounce­ment that Re­serve Bank of In­dia gover­nor Raghu­ram Ra­jan will stay at his job and will have the back­ing of the new govern­ment. In­vestors would cheer. The UPA govern­ment got its Cab­i­net Com­mit­tee on In­vest­ment act to­gether a lit­tle late in the day. So, while the com­mit­tee cleared 6,00,000 crore worth of in­vest­ments, no projects rolled out. Some were stalled by un­avail­abil­ity of land. Some have been held back purely by po­lit­i­cal un­cer­tainty. The re­newed po­lit­i­cal man­date at the Cen­tre should take care of this con­straint on growth.

Chang­ing the land ac­qui­si­tion law is tough. En­cour­ag­ing states to in­no­vate so­lu­tions at their level — such as leas­ing of land from farm­ers — is one so­lu­tion. But mov­ing ahead with the goods and ser­vices tax is rel­a­tively easy, con­sid­er­ing the spade­work and con­sen­sus among states al­ready achieved on the sub­ject. An­other vi­tal but rel­a­tively easy step is to push through the Bill pend­ing in the Ra­jya Sabha since 2003 to al­low mer­chant min­ing in coal. Scrap­ping state mo­nop­oly in coal and auc­tion­ing off coal blocks to pro­fes­sional min­ers would boost in­vestor sen­ti­ment, crys­tallise in­vest­ment and re­move a bind­ing con­straint on the In­dian econ­omy. The Congress and re­gional par­ties might not be averse to giv­ing the govern­ment a help­ing hand on this front.

A stronger ru­pee in­hibits im­ported in­fla­tion and makes it eas­ier to phase out diesel sub­sidy. If the govern­ment finds the courage to scrap fer­tiliser sub­sidy and switch to di­rect cash trans­fers for food sub­sidy af­ter hik­ing sup­port prices to com­pen­sate for the rise in fer­tiliser prices, con­tain­ing the fis­cal deficit would be rel­a­tively easy. What these steps call for is po­lit­i­cal courage, which would be in plen­ti­ful sup­ply at the be­gin­ning of a sta­ble govern­ment en­joy­ing pop­u­lar good­will.

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