Centre readies roadmap for steady reforms, broad framework likely in Union Budget

New Delhi: The government is set to unveil in the coming months the reforms approach that will guide its economic policy making over the longer term to sustain high growth rates, said a person aware of the deliberations on the matter. The broad framework may find a mention in the February 1 budget with details being announced later, he added.

The framework will likely lead to policies that could incentivise private investment proposals having employment potential, enable greater public-private partnerships in infrastructure projects through upfront government support, help draw patient capital for long-gestation projects by removing policy hurdles through regular reviews of rules and regulations, among others, he told ET.

"Low-hanging fruit" would be targeted regularly in between more difficult reforms, so that the momentum doesn't get lost, he said.

The economic framework, mooted in the July 2024 budget, will focus on how the government will determine reforms in key sectors and areas, including in factors of production, institutionalising an architecture for regular reforms. States would be key partners in this initiative.

Infrastructure Push
“Work on firming up the economic policy framework had, in fact, started before the last budget. The framework would encompass details of what, as a nation, we would like to do regularly to be a developed country by 2047,” the person said. “Every successful economy has undertaken reforms regularly to be successful; reforms can’t be a rare phenomenon. A responsive and responsible policy framework is what is being planned.”

Finance minister Nirmala Sitharaman had said in the last budget that the government would firm up a financial sector vision and strategy document to help expand the sector in terms of size, capacity and skills.

It would set the agenda for the next five years and guide the work of the government, regulators, financial institutions and market participants, she had said.

To take advantage of multinational corporations looking to shift operations away from China, the policy framework would entail seeking regular feedback from and meaningful engagement with industry and multilateral bodies to make it even easier to operate here. Prudent energy transition without hurting growth prospects would also be a key focus area.

As for land reforms, economic affairs secretary Ajay Seth had said, in a post-budget interview to ET, that the government would facilitate development without taking it away from the owners.

ET has learnt that infrastructure development and financing could be a critical part of the government’s reforms agenda.

While the government isn’t looking at a long-term, incentive-driven architecture for infrastructure, some projects may be extended upfront support in the initial stage to help them turn viable and bankable.

The finance ministry has already studied various models adopted by the metro rail authorities in cities, such as Bengaluru, Hyderabad and Pune to see if their best practices can be adopted elsewhere, another person said.

For instance, to draw investors, metro projects in some of these cities are clubbed with a certain amount of developed real estate that has steady cash flow potential.

User charges could be considered in some sectors—a model that has worked well in areas, such as telecom, port and airports. In some others, a finance-plus model, involving technical and other expertise, could be looked at.

According to a November 2022 World Bank report, India needs to invest $840 billion over the next 15 years in urban infrastructure alone.

The government stepped up the focus on infrastructure development dramatically in the aftermath of the pandemic, sharply raised its own capital expenditure to spur growth and employment, betting on a high multiplier effect.

The economy has grown at an average of over 8% in the past three years. The growth is projected to decelerate to 6.4% in FY25, mainly due to a slowdown in public capex during and immediately after the 2024 general election.