Elections 2014: 10 reforms that need urgent attention

The biggest challenge for India's next government will be to pull the economy out of its deepest slump in decades. Here are 10 reforms that need urgent attention. (Text: Reuters)

1) GOODS AND SERVICES TAX (GST): India's most ambitious indirect tax reform would replace existing state and central levies with a uniform tax, boosting revenue collection while cutting business transaction costs.GST, which could boost India's economy by up to two percentage points, has so far faced resistance from various states, including those governed by the Hindu nationalist BJP who fear loss of their fiscal powers.The reforms need broad backing because they require a change in the constitution.

2) RESERVE BANK OF INDIA: A central bank panel in January proposed key changes including targeting consumer price inflation and making a committee responsible for monetary policy, and not the RBI governor alone. This would require changes to the RBI Act.Inflation targeting will be a tough sell for RBI Governor Raghuram Rajan.

3) PRIVATISATION: A new government is likely to focus on selling its holdings in state-run firms that could raise much-needed revenues to trim India's ballooning fiscal deficit and boost economic growth.The government has announced plans to raise $9.3 billion through asset sales in 2014/15. This could help it achieve its lower fiscal deficit target of 4.1 per cent of GDP. These estimates may be revised by the next government.

4) SUBSIDIES: India's next government would need to examine how it subsidises basic commodities if it is to contain the fiscal deficit and avoid a ratings downgrade.Subsidies cost an estimated 2.2 per cent of India's GDP in 2013-14. Total outlays on food, fertilisers and fuel subsidies are expected to reach $40.95 billion this fiscal year.

5) LABOUR: Inflexible labour laws, which employers say tie their hands if they want to reduce the size of their workforce, need an overhaul if India is to create the tens of millions of new jobs it needs to become a low-cost manufacturing centre.Companies are hiring more contract workers to circumvent these stringent laws, leading to pay disparities and a lack of job security for the unorganised workforce.

6) DEFENCE: More foreign investment in defence would help India reduce imports, modernise weapons systems and speed up deliveries of hardware it needs for operations and training.India, the world's biggest arms importer, now allows 26 per cent foreign ownership in defence, and proposals to exceed that limit are considered only for state-of-the-art technology.

7) INSURANCE: Attempts to raise the cap on foreign investment in India's $45 billion insurance sector, to 49 per cent from 26 per cent, have met resistance from employees at state-controlled insurers and their political backers.

8) BANKING: The next government will need to help state-run lenders battling rising bad loans caused by the slowing economy, rising interest rates and project delays.Stressed loans in India - either bad and restructured - total $100 billion, or about 10 per cent of all loans. Fitch Ratings expects that ratio to reach 14 per cent by March 2015.The interim budget in February set aside $1.83 billion to help the sector meet key capital ratios, but analysts say more steps are needed.

9) COAL: Reforming coal mining would help contain India's trade deficit and aid the stretched power sector. Despite its vast coal reserves, India has to import the fuel as mining is hobbled by corruption and legal battles.The new government could lease coal blocks to private companies on a contract basis, which would ease legal problems and help boost production in the short-term.

10) POWER: A BJP-led government may implement the so-called Gujarat model of distributing electricity that has been widely praised for delivering reliable 24-hour power supplies in the state.Narendra Modi, Gujarat's chief minister and the BJP's candidate for prime minister, provided different power feeds to farmers, households, and companies instead of a uniform feed.