India is at a turning point. The first set of reforms undertaken in 1991 have run their course and minor tinkering around the edges is not yielding the desired outcomes anymore.
The GST has finally made India into one market instead of 28 separate state markets but it is a spaghetti of complexity. There is a demographic dividend possible but in the absence of jobs it could end up into a demographic disaster.
The China , US rivalry is now structural (inspire of the current ceasefire) and long term and global supply chains are looking for a new home as an alternative to China. But the beneficiaries of this huge but one time opportunity so far have been the south East Asian countries.
The markets are waiting with bated breath on whether this government will bite the bullet and undertake the second generation of difficult but much needed reforms or lose heart and revert to spin. Whether this slow down becomes structural or cyclical depends on the choices that are made with regards to unleashing the pent up entrepreneurial energies by the government of the day.
The 10 most important steps that need to be undertaken are:
- Judicial reforms to ensure that the justice system has the capacity for quick justice thereby making India a place where there is rule of law and contracts can be easily and quickly enforced.
- Simple and low direct and indirect taxation
- Bureaucratic reforms (including hiring from outside at each level) to ensure that it’s not an ossified and self perpetuating hydra
- Privatisation of ALL PSU’s including banks and railways
- Single window time bound clearance for all businesses
- Unfinished land reforms and more importantly land to be made available for factories and infrastructure
- Education sector to be opened up completely for private participation. Vouchers for ensuring universal primary education
- Vouchers for ensuring universal primary health availability
- Labour reforms to allow full flexibility of hiring and firing. But this then necessitates the need for a social safety net for the losers.
- Debt markets opening up to FDI
There is no doubt that there will be short term pain and resistance but if we need 20 years of strong growth, this is the bitter pill that needs to be swallowed and it would require true leadership and vision to do that. There have been some very good steps such as banking reforms, GST, bankruptcy code, aadhar and using digital tech for direct benefits and focus on hard infra but paraphrasing Walt Whitman – “there are miles to go before we sleep” ; the unfinished agenda is a steep climb ahead beyond which is India’s real tryst with destiny and the promised land.