December 07, 2015

Slow and Steady at Midway

Dr. Vivek Dehejia, in this Mint column writes that the political economy appeared to have shifted noticeably after the BJP’s recent electoral debacle in Bihar.


Dr.Dehejia says " we are now midway into the policy-relevant tenure of Modi and his government. What is more, economic policy initiatives take time to work their way through the system and have measurable impacts on macroeconomic outcomes—at any rate, those which voters see and feel and might, perhaps, use as a basis for how they vote in an emerging consensus that the Modi government has pursued gradual, incremental reforms, not the sort of big-bang or shock therapy reforms that some of his more ardent supporters have advocated, or hoped for, both before and after the BJP’s big win last year. Creative incrementalism, the term coined by chief economic adviser Arvind Subramanian, is apt."


"If India is to realize Modi’s stated objective of catapulting India up the league tables in this area, then serious efforts in regulatory reform, rooting out corruption, and streamlining haphazard, opaque, and time-wasting bureaucratic procedures will be the order of the day. It is clear that Modi himself and those advising him understand this, and this reforms process is in train, if as yet incomplete."


"Other areas of success include the monetary policy framework agreement between the Reserve Bank of India (RBI) and the finance ministry, and the larger financial sector reforms process, of which it forms an important part, which, again, is a work in progress. The draft bankruptcy code is another key initiative that bears very directly on the ease of doing business...."

"If the BJP senses a shift in the political economy, and has reacted with an increased urgency to pursue reforms—as they can no longer be complacent about re-election prospects in 2019—perhaps the Indian National Congress, too, has sensed that another parliamentary session wasted through obstructionism will now backfire upon them politically."


"Placatory noises by both the BJP and the Congress.....suggests that the gridlock on the goods and services tax (GST) constitutional amendment may finally be broken during the current winter session of Parliament.......And if a GST with a sensible tax rate actually becomes law, that would be occasion enough to celebrate."



Topic : Transitions / In : OP-EDS
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