India needs to grow at around 8 percent a year through the next few decades to become a developed nation by 2047. This is an ambitious goal given the track record of other countries in this regard and India’s own historical growth rates.
In the past, only a few countries such as China, South Korea, Hong Kong and Singapore have managed to sustain a growth rate of over 8 percent for a 25-year period. India’s own growth rate has been 6.3 percent per annum between 2001-02 and 2023-24 and 6.7 percent excluding the Covid period.
Continuous reforms can help unlock India’s growth potential and place it firmly on the required 7.5 - 8 percent growth trajectory. India’s focus on reforms even during the tumultuous pandemic has been one of the key drivers of the nation emerging as the fastest growing major economy for three consecutive years in a row.
The Confederation of Indian Industry (CII) has suggested many reforms and initiatives across multiple sectors of the economy as part of its proposals for the Union Budget 2025-26. Here, I focus on five key ones.
One, most of the next-generation reforms lie either in the concurrent domain or in the states’ domain, and require consensus building among states and the Centre. The GST Council has been a shining example of consensus building on a very important reform.
Therefore, the government could consider constituting GST-like councils or an empowered group of secretaries, chaired by the cabinet secretary and comprising the chief secretaries of the states and relevant central secretaries to take forward factor market (land, labour and power) reforms as well as for reforms related to education, agriculture, climate action and fiscal sustainability.
The Union budget 2024-25 had announced the establishment of a comprehensive economic policy framework focusing on increasing productivity and market efficiency by addressing issues related to factors of production, including land, labour, capital and entrepreneurship. The GST-like councils could be set up under this framework.
Two, unlocking public capital from the central public sector enterprises s and operational brownfield projects will enable the government to raise resources for other developmental needs of the economy, leading to more efficient allocation of the capital.
The government had earlier announced a PSE disinvestment policy, under which some progress has been made, the successful privatisation of Air India being one example. The government may like to continue with the calibrated disinvestment of CPSEs. As per CII estimates, bringing down government stake in the 80 listed PSEs to 51 percent can generate about Rs 10.3 lakh crore even while keeping majority ownership and control with the government.
This can be done in two phases, with PSEs in which government stake is 75 percent or more can be taken up in the first phase, and the rest in the second phase.
There is always the issue of “when” and “which” as far as PSE disinvestment is concerned, since it pertains to the equity market. Therefore, a task force or expert committee, composed of eminent experts from the private sector/retired government officials could be set up to suggest which PSEs to disinvest and the timeframe for the same. The Department of Investment and Public Asset Management , in consultation with the concerned line ministry of these PSEs, could formulate a 5-year road map, with well-defined targets for each year.
An earmarked disinvestment fund could be set up to collect the disinvestment proceeds, which could be efficiently managed and used to retire government debt and invest in infrastructure with emphasis on social and agri-related infrastructure.
In addition to disinvestment, the government could also consider launching the National Monetisation Pipeline 2.0, building on the success of the NMP 1.0 (2021-2025).
Three, like other economies, India faces many geopolitical challenges. To mitigate some of these and safeguard its strategic interests, India could consider creating a Sovereign Wealth Fund for making investments in overseas strategic assets, like ports, logistic corridors, technology, reserves of critical minerals, etc. Part of the disinvestment proceeds could be used to set up this fund.
Four is the area of irrigation. The Indian economy is prone to the vagaries of monsoon both in terms of rural demand, food inflation and overall growth. To reduce the dependence of Indian agriculture on the increasingly unpredictable monsoons, investments in irrigation facilities should be enhanced, to bring 80 percent of gross cropped area under irrigation by 2030. This will help improve agricultural productivity and build climate resilience, boosting farmer incomes and mitigating climate-related uncertainties for farmer incomes.
Five, the thrust on ease of doing business must continue. Much progress has been made in this area; however, more initiatives are required. The emphasis should be on simplification, rationalisation and digitisation of all compliances and approvals. In fact, all central and state compliances and approvals should be made through the national single window system. The Jan Vishwas Bill 2.0 should be expedited to decriminalise more business-facing laws.
Another important reform that should be brought to its logical conclusion is the implementation of the four labour codes, as they balance the interests of both employers and the employed.
Chandrajit Banerjee
Director General, Confederation of Indian Industry (cb@cii.in)
(Views are personal)