Achieving economic potential: Easily doable steps Modi government can take to boost growth

NEW DELHI: As the euphoria over Prime Minister Narendra Modi-led NDA government ebbs, it's time for a reality check on the pace of reforms and the ability of the new regime to push through key steps to boost economic growth to the next level.

Delayed roll out of the Goods and Services Tax, government's back step on the key Land Acquisition Act, uncertainty on labour reforms and a washout of the Parliament's monsoon session have all added to the growing restlessness of India Inc.

Key global agencies and brokerages such as Moody's, UBS have trimmed India's growth forecasts citing slow recovery in industrial growth and investment. This is not to say that the Indian economy is not well positioned in the global scenario. Even as Chinese economy falters and Brazil is downgraded to junk, India is being seen as a bright spot in the emerging market story.

PM Modi recently held a meeting with economists and key players of India Inc, urging the latter to take risks and invest aggressively in the economy. PM is believed to have asked his ministers and industry leaders to convert China's slowdown into a growth opportunity for India. India Inc on its part has stressed on the need for faster clearances and policy clarity.

As the economy makes a slow and painful progress on the road to recovery, Economictimes.com has compiled the views of some economists and analysts to list some easily doable things that the Modi government can look at to speed up economic growth.

Indranil Sengupta, Economist at Bank of America Merrill Lynch:

One of the primary things the government should do is to set cyclical fiscal deficit targets. This will help the government expand or curtail the fiscal deficit according to the state of the economy.

Introduction of the goods and services tax or GST to help create a common unified domestic market across the country is another important measure."

Linking the FII G-sec limit to the gross issuance of bonds will help broaden the overall debt market. Especially, when we know that the RBI is already buying the bulk of the FX inflows to limit risks of outflows.

The other two measures we should push for are - limiting the subsidies given on say LPG, to only poorer sections of the society and making land acquisition easier for government and industrial projects while sticking to social commitments.

Dharmakirti Joshi, Chief Economist at CRISIL:

One of the biggest steps that the government can take is to strongly push for enhancing the ease of doing business in India. In this context the Bankruptcy Code is of paramount importance. With banks being stuck with a pile of NPAs, the government should look at quickly bringing in this code.

Yet another area that the government has been focusing on and should continue to do so is front loading public sector expenditure. Building roads and spending money on railways should be a priority. With oil prices remaining low, there is adequate fiscal room to front load investments and spend the budgeted amount.

A lot has been said about how India is relatively better placed than other economies, but the fact is that if you have to attract investments you have to get your house in order. There is a need for clarity on the taxation front, and in my opinion the government should look at burying the hatchet on retrospective taxation once and for all.

Agricultural sector distress is a key area that requires concentrated focus. Rains have not been good and managing the rural distress and providing a cushion through NREGA are some of the suggested measures.

Nitin Jain, CEO Global Asset & Wealth Management at Edelweiss:

One of the most important areas that the Modi government can look at is to introduce measures for counter-cyclical investments. There is deep stress in manufacturing and commodity sectors and balance sheets are stretched. Similarly, public sector expenditure, while admittedly good, requires more push.

Efficiency in providing clearances, with special emphasis on single-window clearances is of great importance. It will work as a big driver for investments in the economy. People want a stable and transparent policy framework from the government and minimum regulatory hurdles. Bureaucratic efficiency can work wonders for the system as a whole, especially in context to increasing investments.