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Sunday, September 27, 2020

Ideas Explained: Why India needs bold economic reforms

Covid-19 economic pain will pass but we need to create enduring change for firms and citizens with reforms, writes Manish Sabharwal.

By: Explained Desk | New Delhi | September 3, 2020 8:48:21 am
coronavirus news, indian economy, india jobs, india unemployment, india migrant labour, coronavirus india udpate, indian expressA man sleeps on a handcart parked on a road divider during lockdown, in Bengaluru, July 5, 2020. (AP Photo: Aijaz Rahi)

In his latest opinion piece, Manish Sabharwal, Chairman, Teamlease Services, writes that “COVID has created a policy window for overdue reform”. He says that the last quarter was unique and the short-term is unmodellable till we have answered three questions.

“Are we at the start, middle, or end of the virus? This matters because life will be tentative until companies and individuals know where we are.

“Will companies and individuals be frugal or hedonistic after the virus — that is, will they save for a rainy day or live for today?” This matters because lower demand is fantastic for the environment but fatal for the economy.

“Finally, do we have an effective solution for professions that can’t be done without social distancing until the vaccine arrives?” This matters because the fastest-growing segments of India’s labour markets — sales, customer service, logistics, hospitality, and construction — are these professions.

All policy can do in the short run is ensure that disease doesn’t lead to death, unemployment doesn’t lead to hunger, and working capital problems don’t lead to bankruptcy. But, the long term is different because India is the only big country with decades of growth left.

“This luck is something to be built on,” he says. He argues for bold economic reforms.

“Our problem is not jobs but productivity. This needs compliance reform (taking an axe through our 67,000 compliances and 6,700 filings), labour law reform (China’s factory refugees will not come if our employment contract is marriage without divorce), banking reform (raising our credit to GDP ratio from 50 per cent to 100 per cent by licensing more banks and fixing existing ones), education reform (bring forward the Poorna Swaraj for universities and schools proposed by the wonderful new National Education Policy from 15 years to 5 years), ease-of-doing-business reforms (reduce the number of ministries from 52 to 15) and civil service reform (cut the number of people in Delhi with the rank of Secretary from 250+ to 50),” he writes.

Also read | Explained Ideas: Why merely more govt spending will not help Indian economy

“Let’s ignore the breathless demands for the government to borrow 10 lakh crore by stealing from our grandchildren. Let’s, instead, create climate change for our entrepreneurs, firms, and citizens with reforms that will give them economic Poorna Swaraj. And take our per capita income of $2,500 to $10,000 in five years. If not now, then when?” he writes.

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