The medium term policy cum fiscal policy strategy statement,
that forms the part of the budget documents states that the "Government
has initiated structural reforms both on the supply and the demand side."
It is argued that these structural reforms "have fiscal implications and
are important tools to boost economic performance" and the "impact of
these measures initiated is anticipated to have spill-over effect in the next
financial year."
By implication, the government is claiming that the short term
growth has been sacrificed to cement the high growth trajectory in the medium
term. The statement claims that "the measures initiated by the Government
to cement the economic recovery are anticipated to have effects in the next FY
as well."
This leads me to revisit the debate whether the administrative
changes to improve efficiency & eliminate redundancies; and incremental
changes in the current practices, policies and programs could be terms as
"structural reform". Besides, it is also critical to examine, whether
the incremental changes made in FY20, are adequate to launch a sustained
economic recovery in FY21.
As per the Macro-Economic Framework Statement for FY21, the
government implemented the following measures that are claimed as
"structural reforms" in the medium term policy cum fiscal policy
strategy statement.
- Hike in minimum support price of agricultural crops for 2019-20;
- Reduction in corporate tax rate;
- Policy initiatives for development of textiles & handicrafts and electric vehicles;
- Outreach programme for growth, expansion and facilitation of micro, small and medium enterprises;
- Incentives for start-ups in India;
- Scheme to provide a one-time partial credit guarantee to public sector banks(PSBs) for purchase of pooled assets of financially sound non-banking financial companies (NBFCs);
- Recapitalization of public sector banks;
- Relaxation of external commercial borrowing guidelines for affordable housing;
- Realty fund worth Rs250bn for stalled housing projects;
- Additional tax deduction of interest for affordable housing;
- Merger of 10 public sector banks into four entities;
- Revised Priority Sector Lending (PSL) norms for exports;
- Streamlining of many labor laws at the central government level;
- Steps to boost manufacturing; employment generation; financial inclusion; digital payments; improving ease of doing business via schemes such as Make in India, Skill India and Direct Benefit Transfer; and
- Announcement of the National Infrastructure Pipeline (NIP) of projects worth Rs1.02trn, which will commence in phases from 2020-21 to 2024-25.In my view, most of these measures do not even pass the muster for being called reforms. Treating them "structural reform" would be a grave mistake.....to continue
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