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7th September 2022 (6 Topics)

The next Economic Reforms

Context:

  • For a stronger economy, India needs economic reforms beyond liberalisation.

Robust Economic Recovery:

  • Indian economy recovery has been better than that of most countries. The credit in this case goes to the appropriate counter-cyclical policy but it wouldn’t have worked if the reforms might not reach a threshold of adequacy. But we need to have a balance while focussing on the structural reforms and smoothing the economic shocks.

India’s interest and concerns of citizens:

  • International institutions such as the IMF-WB are inclined to ensure advantages of India’s growth, to other countries, which includes their main financiers who are the large capital-exporting countries. IMF-WB mandate requires freer markets and fewer restrictions on all types of capital flows, which also favours India’s interests. But a democracy cannot ignore the concerns of its own citizens as in the past market-opening reforms have harmed many domestic citizens.

Liberalisation has reached a point of diminishing returns:

  • Economic success from the era of liberalisation is past now. The need of the hour is organic reform happens, that when states have healthy competition among themselves. Presently the centre policies must be guided by feasibility and pragmatism and ensure that benefits accrue to a majority.
  • A special focus on the digital aspect is a must because India has a definite comparative advantage over the others. Attention should be given to developing skills and capabilities, improving employability, augmenting infrastructure, and reducing logistics and other business costs through better Centre-state coordination. Instead of wasting political capital on reforms that encounter large resistance and shock the system, reforms should enhance favourable trends.
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