Structural reforms for sustainable development : India’s GDP growth reached 5 percent in the first quarter (Q1) of the financial year 2019-20, it is notable that this is the worst performance of the Indian economy in the last 6 years. Also, many experts have expressed concern that India’s overall GDP growth rate may be 6 percent or even less in the current financial year (2019-20). Former Reserve Bank Governor Y. V. Reddy considered the cyclical and structural factors jointly responsible for the current economic slowdown or slowdown, the prime example being the automobile sector. But contrary to this fact, if the RBI believes, the current economic slowdown is only influenced by cyclical factors and structural factors are not responsible for it.
Cyclical lethargy is mainly for the short term and its effects are seen at regular intervals in the economy. This type of slowdown is usually visible due to changes in the business cycle. It usually uses fiscal and monetary measures to revive a sluggish economy and regulatory changes if necessary.
In contrast to cyclical lethargy, structural lethargy is a long-term concept and its side effects on the economy are relatively long-term. The main reason for this type of slowdown is considered to be the changes in current structural patterns.
Need for structural reforms
A steady decline in the country’s domestic demand is being recorded, which may be considered a major cause of sluggishness in the country, besides the global uncertainties have further exacerbated the problem. In the last few days, the government has announced several measures to improve consumption and investment in various sectors. Recently, the announcement of deduction in corporate tax is also an important step taken for this purpose.
This will not only increase the private investment of the country but will also help in giving impetus to the private sector, but this move of the government will reduce the country’s revenue and will also increase the fiscal deficit. It is worth noting that all such incentive measures and monetary policies can only boost the country’s economic development to some extent in the near future, if we think that with these we will again get the reputation of the fastest growing economy. So this will not be possible. According to experts, long term and investment based development requires structural reforms. For this work, it is necessary to mainly focus on the following structural reforms
- Infrastructure Development
- Increase human capital
- Revival of rural economy
Meaning structural reform
Structural reforms are the means of long-term measures by which the efficiency of the economy is enhanced and its competitiveness is enhanced by removing the inefficiencies of all sectors of the economy. Several efforts have been made so far in India in terms of structural reforms, among which the LPG reforms done in the year 1991 are notable.
It is generally said that if a country wants to develop, it must first develop its own infrastructure, this helps not only cyclical factors but also structural factors. In the 2000s Indian economist I.G. Patel had said that India should keep its GDP growth target at 6 percent until we can fully develop our infrastructure or infrastructure. Also former RBI Governor Y.V. Reddy had also mentioned in one of his speeches that lack of infrastructure in India can pose a major obstacle in the development of the country. While it is also true that many notable steps have been taken for the development of infrastructure in India so far, but almost all indicators in this context make it clear that the infrastructure of urban and rural areas of India is significantly higher than in countries like China. Is weak.
Economic experts say that in the present scenario it is necessary for the government to boost cash in the economy to take care of both cyclical and structural factors. This work can also be done through measures such as disinvestment and increase in tax base without compromising the fiscal deficit. Recently, the government has announced to invest 100 lakh crore rupees in the next five years for the development of the country’s infrastructure, which is an important step but till now it is not clear from where the government will arrange funds for it. And what will be the role of private investment in it. Experts believe that in this context, the recommendations of the Vijay Kelkar Committee on PPP may prove useful.
Vijay Kelkar Committee
- A committee was formed for the development of the country’s infrastructure under the chairmanship of Vijay Kelkar, former chairman of the Finance Commission, which submitted its report on the PPP model in the year 2015.
- Key recommendations of the committee:
- In the case of contracts, more attention needs to be paid to service delivery rather than financial benefits.
- There should be proper identification and allocation of risks to all stakeholders.
- Given the urgency of demographic change in the country, the government should try to give PPP a new direction.
- The cost effectiveness of risk management needs to be assessed.
- There is a need to encourage the use of PPP in areas such as railways.
Increase human capital
To promote economic development in the country, the second structural issue is to increase human capital, for which work in the field of health and education is necessary. A few years ago, the Deputy Prime Minister of Singapore warned about schooling in India, saying that “Schools are the biggest crisis in India today and this has been going on for a long time.” The shortage is well known, Niti Aayog’s statistics show that currently only 2.3 percent of India’s workers have formal skills training, while in other countries this figure is 70 to 80 percent. The nearby percent. Based on these figures, the need for the development of human capital in India cannot be denied, because with the reduction of human capital, there is never a demographic advantage. It is a well-known concept that from agriculture to non-agriculture and organized sector to the unorganized sector, structural reforms require education and skill.
Revival of rural economy
Nearly 70 percent of India’s population lives in rural areas, where their income is relatively low, due to which long-term demand growth in the country cannot be expected, if the government wants to increase the demand, it will be given a revival of the rural economy. Will have to try. Agricultural marketing reforms should be given priority for this task. To find better value we need to develop value chains related to wholesale, warehousing, logistics, processing and retail. Similarly, water management in rural areas can also be another priority. Along with this, agricultural exports should also be encouraged with various policies.
To achieve high economic growth rate, immediate and long-term structural reforms are required. The country should seriously consider the development of infrastructure, increase in human capital and revival of rural economy in the country to get a sustainable growth rate of 7 percent to 8 percent from the current slowdown and take steps as soon as possible. Should go
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