Friday, March 22, 2019

Premium growth through structural reforms

OPINION— Former Niti Aayog Arvind Panagariya
India had been growing at an average of 7.5% over first 3 years of NDA govt. This was a period of bold but incremental reforms like liberalising FDIs, closing tax loopholes, financial inclusion, Aadhar + DBT, bankruptcy code, benami transactions, planning commission and monetary policy reforms, tight monetary & fiscal policy, PSUs & sectoral reforms, etc.

Demonetisation and GST were disruptive to the informal sector. They have brought down the growth rate a little, by perhaps 1%. The upside to these reforms should be a higher prospective growth rate of say 8% pa. India can grow for one or two decades at a high growth rate. But for this India must make 3 major reforms:
1) Labour laws
2) Land acquisition laws
3) Civil service reforms.

Comment:
Restrictive labour laws --> lack of formalisation --> small companies remain small --> failure to scale up, loss of competitive advantage & lower jobs growth -->
1. remove restriction, add safety net
2. facilitate MSME to flourish

Land acquisition laws --> poor EODB, corruption -->
1. digital land registry, Aadhaar, blockchain
2. guaranteed land title transfer
3. land from sick PSUs, land pooling, land leasing
4. streamline land laws, not reduce compensation

Tax evasion & corruption -->
1. clear norms, reduce opportunity
2. responsibility on taxpayer & official
3. collect data and prosecute
4. Aadhaar ID & blockchain
5. digitisation, formalisation

Poor quality --> faulty, compromised assessment—>
1. independent and honest administration board
2. frequent monitoring, Aadhaar ID, non human interactions
3. digital capture and data analysis, blockchain records
4. transparency and disclosure —reports, rankings
5. staff recruitment and training (incl ethics)
6. outcomes-based course correction

Poor quality --> faulty standards -->
1. policy is practical, realistic
2. formal training & certification
3. outcomes-based course correction

Poor quality --> faulty production -->
1. quality control over purchasing, storage
2. recruitment, training and incentives
3. quality enhancements in processes
4. quality control, reject substandard output
5. mechanisation & automation
6. competition and private sector
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