NEW DELHI: Prime Minister Narendra Modi has unleashed a slew of reforms in the past week, scrapping fuel subsidies, simplifying labour rules and pledging to open coal mining to private players in a bid to kickstart the economy.
The reforms are seen as some of the most significant since Modi's Bharatiya Janata Party (BJP) in May scored the country's biggest electoral win in three decades.
But analysts say the reforms so far represent the low-hanging fruit, and warn Modi does not yet have enough upper house seats to push through more politically sensitive changes that are key to getting growth back on track.
Modi has faced criticism that he has been slow to act on his election promise to
revive India's lumbering economy and create much-needed jobs for its 1.2 billion
people.
"Modi is determined to make doing business in India more easy," Deepak Lalwani, India director at London-based consultancy Lalcap, told AFP. "That should attract foreign investment."
In a week Modi has reduced paperwork and inspections of factories to ease the burden of manufacturing in India, which is currently at an unenviable 134th on a World Bank ease-of-doing business chart.
In a bow to free markets, the government released diesel pricing from state control, ending a battle for eliminating subsidies on the largest component of fuel consumption.
It also cleared a delayed increase in domestic gas prices, hiking by one-third the amount the government pays natural gas producers to encourage exploration in the fuel-hungry nation.
Economists have long argued the country's potential will only be unleashed when it curbs subsidies, relaxes suffocating regulation and rigid labour laws and eases complex rules governing industrial land acquisition.
On Monday the government announced measures to pave the way for private companies to sell coal, helping to break the monopoly of one of the world's biggest mining giants, Coal India.
The government is also readying to sell a five-percent stake in state-run heavyweight Oil and Natural Gas Corp. in the hope of raising $3 billion, which would help trim this year's
fiscal deficit.
The country's share market has already reached near record heights as Modi pursues his mantra of "maximum governance, minimum government", seeking to jumpstart growth that fell below five percent last year - half the rate of just just a few years ago.
The government plans in the next parliamentary session to scrap nearly 300 outdated laws. It has already hiked defence and insurance foreign investment caps to 49 percent from 26 percent and announced plans for private-public partnership to build more roads, railway and other infrastructure.
While the reforms so far are the simplest economists say they will reduce red tape and increase India's appeal to investors.
The PM has already appealed to the world to "make in India" as the country seeks jobs for its army of young people.
However, the big-bang reforms, such as amending the industrial disputes act to make it easier to lay off workers, are untouched.
The government cannot push through tough changes yet because the BJP and its allies
lack a majority in the upper house of parliament, where state elections
determine seat share.
But the ruling party performed well in state elections last week s ..
Modi govt's big bang reforms coming post Diwali-Hindustan Times
The Narendra Modi government’s economic reform measures leading into Diwali — labour, diesel and coal — have lifted Indian stock markets by 3% in the last week alone. Now expect the trading New Year that begins Thursday to usher in bigger initiatives aimed at boosting investment and creating jobs.
On the cards are fresh moves to ease land acquisition rules, raise foreign investment limits in insurance and pension sector, introduce a country-wide goods and services tax (GST) and a separate labour law for small factories. The measures will likely be implemented in the Parliament’s month-long winter session to be held from the last week of November.
“We believe that policy reforms are much needed to ensure that India transitions out from stagflation to an environment of higher growth and lower inflation. Indeed, the decisive (Lok Sabha) election outcome suggests that the new government will be able to implement reforms at a faster than previously expected pace,” global investment bank Morgan Stanley said in a recent research report.
The recent wins in Maharashtra and Haryana elections will only add more political power to the ruling BJP and enable it to push through reform that stock markets are likely to cheer.
“A bulging young lower-middle income group in large and small cities, with strong aspirations for upward mobility, has swelled the middle class in India. Poor GDP growth of recent years has made the middle class more favourable toward reforms, which they increasingly see as necessary for rapid economic expansion and their own continued prosperity,” said credit rating firm Standard and Poor’s.
Easing land acquisition rules is likely to be among the first of the next round of reforms. Government sources told HT that the Centre is trying to do this without hurting farmers’ interests. The highly restrictive consent clauses are proving to be a major barrier for industry to buy land as costs have jumped more than three times according to the formula stipulated in the new law enacted by the former UPA regime.
A bill to amend the insurance laws to ease FDI limit in the sector to 49% from 26% will be introduced in the winter session, the sources said.
The move, however, comes with a rider that management control of these companies will remain with Indian promoters. The higher FDI ceiling will come into force after Parliament passes the Insurance Laws (Amendment) Bill that has been pending since 2008 for lack of political consensus.
Insurers need funds to maintain a healthy capital base, offer a wider bouquet of products, protect consumer interests against insolvency and deepen insurance penetration in India.
In another major move, the government will introduce a constitution amendment bill to initiate India’s biggest tax reform initiative—Goods and Services Tax (GST) — in the winter session.
If adopted, GST can dramatically alter tax administration by giving a one-shot solution by subsuming a string of central and local levies such as excise, value-added tax and octroi into a single unified tax and stitching together a common national market.
http://www.hindustantimes.com/business-news/big-bang-reforms-coming-post-diwali/article1-1278323.aspx
GST’s implementation has faced political hurdles as state governments fear it could rob them of fiscal powers.
The government is also planning a separate labour law for small factories, sources said.
This will be in addition to the string of labour reforms aimed at making rules simpler and employee-friendly, remove arbitrary inspections at factories, reduce cumbersome paperwork and turn India more investor friendly
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