The Indian economy is in a bad shape. GDP growth has decelerated for five quarters in a row. The growth slumped to 5 per cent in the first quarter of the current fiscal. Economists and analysts are struggling with fiscal math as a means for revival of growth. In fact, in the past few months the government has announced a series of measures to revive the economy. Most of them revolve around fiscal steps.
Fiscal and monetary options have been largely exhausted. There is little headroom left. So juggling with fiscal math is unlikely to have any significant impact on the economy. What is required at this juncture is the structural governance reforms. Improvement in capital efficiency can have huge positive impact. Capital is limited. In the current economic condition the government cannot boost investments. But it has the ways and means to improve the efficiency. In several sectors bureaucracy is the biggest hurdle. It needs to be reformed.
There is also a need to improve the capacity utilisation of the existing capital. Ayushman Bharat is a good example. With better monitoring, the capacity utilisation of healthcare infrastructure has gone up several notches. Our cover story tracks the journey of Ayushman Bharat in one year. The report is based on field studies and survey conducted by our team to gauge the grassroots level impact of the scheme. Besides the tremendous improvement in health services, the scheme has led to the creation of new jobs and business opportunities in health technologies and related sector.
Services accounts for more than half of the Indian economy. Majority of the services are in the small and medium sector. There is need to protect and promote this sector through preferential treatments. Our suggestion is that it must be made mandatory to procure at least 30 per cent services, that the government takes, from the Indian small and medium firms.
A lot of capital gets stuck with tax authorities. Even if the income tax refund is due with the tax department, the companies are required to deposit the other dues like TDS. Small companies are the worst hit. All the government dues should go in a common wallet. It should factor both refunds and liabilities. If a company’s money is due with the government, it should not be asked to pay under another head without adjusting the balance amount. It can substantially boost the velocity of money.
I have listed here some of the pressing structural reforms required to revive the economy. There is a lot more. The government must press the peddle on reforms. This is the only way through.