STRUCTURAL ECONOMIC REFORMS IN INDIA

• Recently, the US State Department released a report titled ‘2021 Investment Climate Statements: India’. The report lauded the structural economic reforms carried by the Government of India, in the wake of economic slowdown and Covid-19 pandemic.
• However, the report asserts that India remains a challenging place to do business.
• Earlier, the UK India Business Council (UKIBC) emphasized that some of the reforms under the Atmanirbhar Bharat programme could have negative consequences for the UK and all multinational companies.

Important points:

• In February 2021, the Government of India announced plans to raise $2.4 billion through an ambitious privatization program that would dramatically reduce the government’s role in the economy.
• In August 2019, the government announced a new package of liberalization measures and brought a number of sectors including coal mining and contract manufacturing under the automatic route.
• In March 2021, Parliament further liberalized India’s insurance sector, increasing the foreign direct investment (FDI) limits to 74% from 49%.
• Atmanirbhar Bharat Abhiyan: In order to combat economic slowdown pertaining to Covid-19, the Government of India launched Atmanirbhar Bharat Abhiyan.
• This programme envisages extensive social welfare and economic stimulus programs and increased spending on infrastructure and public health.
• Further, it aims towards cutting down import dependence by focusing on substitution while improving safety compliance and quality goods to gain global market share.
• The government also adopted production linked incentives to promote manufacturing in pharmaceuticals, automobiles, textiles, electronics, and other sectors.
• Insolvency and Bankruptcy Code: The introduction and implementation of the Insolvency and Bankruptcy Code (IBC) in 2016 led to an overhaul of the previous framework on insolvency and paved the way for much-needed reforms.
• Among the areas where India has improved the most in the World Bank’s Ease of Doing Business Ranking the past three years has been under the resolving insolvency metric.
• The Act contains provisions to deal with domestic and international arbitration and defines the law for conducting conciliation proceedings.
• Sovereign Wealth Funds: In 2016, the Indian government established the National Infrastructure Investment Fund (NIIF), touted as India’s first sovereign wealth fund to promote investments in the infrastructure sector.
• The government agreed to contribute $3 billion to the fund, while an additional $3 billion will be raised from the private sector.

Way Forward

• The Government of India should foster an attractive and reliable investment climate by reducing barriers to investment and minimizing bureaucratic hurdles for businesses.
• The Governments of India and the other countries should cooperate in areas such as standards, trade facilitation, competition, and anti-dumping practices.

SOURCE: THE HINDU,THE ECONOMIC TIMES,MNT