Reforms cannot have start and end dates. They are a continuum. But often, depending on what's keeping the government at the Centre busy, that continuum tends to slow or stall. This regime has also had its moments of excitable bursts such as IBC, RERA, a hurried GST, and long stretches of distraction.
India needs dream reforms to crack open the ossified corners of the economy. In financial services, to realise the Rs 100-lakh crore infrastructure spend, there is need for development financial institutions and a robust debt market. Overdependence on banks, who borrow short term to fund 25-30-year-long infrastructure projects, causes massive asset-liability mismatch and is fraught with danger. This is evident from banks' NPA pile in areas such as power, telecom and real estate.
If India has to fulfil its dream of becoming a global hub, it needs to rid manufacturing of procedural delays, bureaucratic snafus, high power, logistics and capital costs. Not to forget the long-winding dispute resolution process.
In labour reforms, where 90 per cent of the workforce is from informal sector, there's need for a social security cover, unemployment benefits, skilling and formalisation.
These are the easy ones though. For others, there are often subtle reasons why the most obvious reforms never took place.
In taxes, can Centre take a dispassionate decision to delink direct tax changes from Budget, just like GST? For policy certainty, can there be a roadmap and a pre-declared band within which taxes would operate? Can rich farmers be taxed on their agricultural income? The former will take down a fiefdom, the latter is a political hot potato with direct bearing on votes on one hand; on the other, it needs approval of the very people who exploit the exemption - the politicians.
There's many a slip between the cup and the lip. For instance, the APMC reform to free the farmer and let him sell his produce to whoever he wishes to (not just to the local or state mandis) has been in the works for nearly two decades. The reason it hasn't materialised is because agriculture being a state subject, state and local politicians exercise a vice-like grip over the farmer. Intermediaries pocket all the profit and burden the farmer with usurious charges in APMC mandis which could be as high as 18 per cent of sale value.
Again, in defence, fat commissions in deals ensured that India had an apology of a defence-manufacturing industry even seven decades after Independence. Anything that was manufactured was dumbed down and the industry was relegated to making spare parts and vehicles for defence services - at best. It's a miracle that ISRO is a product of the same system. That's because, one, no space power was willing to sell rockets to let India launch own satellites. And two, ISRO was always structured to be administered directly by the prime minister of India, cutting a lot of bureaucracy in between.
Hence, Atma Nirbhar Bharat programme's ambitious proposals for farmers and local defence manufacturing need to tread with caution. Entrenched vested interests will scuttle every step of the way. The plan needs to steam ahead.
In the following pages, Business Today's specialists explain what more needs to be done through continuous reforms to unshackle the economy. Tune in?