Structural reforms in building an integrated Bharat


By CA (Dr) Aman Chugh

Picking up where we left off in the previous article, we will discuss the main structural reforms made to the Indian economy since 2014 and their impact.

As a reminder, the economy was facing multiple challenges at that time, such as the lack of real GDP growth due to the adoption of WPI & not the CPI which was the need of the Indian economy as per its trajectory movement, the formation of an asset bubble which had artificially inflated many asset prices with money from unverifiable sources, a weak employment and an entrepreneurial spirit, a stagnant manufacturing sector, a consumer-driven economy, and foreign elements overshadowing opportunities for economic growth.

To solve the above problems, a series of reforms have been introduced and here I would like to make it clear that the views presented in this article are free from any political inclination. Not crediting any specific political party for any of this, as some of these reforms were even designed by the previous government(s), but as a true patriot of the nation, I want to recognize and appreciate economic reforms that may have evolved structurally. our Indian economy in a new Bharat. Here, we just want you to understand and appreciate the reforms as a real Indian, because of the good they have brought to our economy, rather than looking at them from a political angle.

The series of reforms introduced were aimed at physically and technologically strengthening the Indian economy as follows:-

1. Adopting the consumer price index as the yardstick for inflation and managing it to be within a range of 4% plus minus 2% on average over the years, correcting our measure of growth of real GDP.

2. Prevent unaccounted money from expanding asset bubbles through developments such as demonetization, the implementation of RERA, and a stricter law on Benami transactions.

3. Made in India, Startup India programs have been launched to encourage entrepreneurship and develop a job creator mindset rather than a job seeker mindset.

4. A number of initiatives have been taken to digitally empower India such as Digital India and the introduction of digital payments associated with Jan Dhan Yojana enable every Indian to have access to technology and formal banking.

5. Exit from India RCEP (Regional Comprehensive Economic Partnership) in 2020 to be able to further strengthen the manufacturing sector and introduction of Incentive schemes linked to production for targeted strategic industries such as pharmaceuticals, electronics, semiconductors, drones and ACC batteries, etc. to ensure that India becomes the manufacturing center of the world.

6. Construction of strategic and sustainable infrastructure at critical locations and across the board to ensure all-weather and last-mile connectivity across the country.

seven. Creating an amicable investment and business environment by integrating the tax structure through the implementation of the GST Act and also providing corporate tax breaks, showing the world that India could serve as a commercial basis.

All these reforms were aimed at creating an Integrated Bharat, both Physically and Technologically:-

ØIndia’s physical integration has resulted in an increase in the number and length of highly durable roads, especially national highways to ensure strategic advantage when needed. In fact, India has doubled the total length of its national highways over the past 10 years. Even in the rail network, more and more trains and routes are regularly introduced. Additionally, an increase in air traffic which has recently grown at a CAGR of 16% per year with gradually decreasing airfares has ensured greater connectivity.

India’s tech revolution has also stirred, with Digital India, UPI and the introduction of Big Data and Data Analytics ensuring that upcoming startups and tech-focused companies train technocratic managerial skills to achieve sustainable growth. as a growing number of smartphone users equipped with high-speed internet and owning digital bank accounts has presented a great opportunity in the form of a vast market.

To counter Chinese aggression, especially with their formation of Pearl of Strings, physical and technological integration is growing, which, although it does not directly impact GDP growth, certainly brings more abilities to counter aggressively rather than defensively. Although India has the best armed forces, these logistical capabilities are an important aspect in case a war-like situation arises.

Technologically integrated India stands out with one of the lowest broadband internet data costs in the world, the largest number of digital payments in the world and a thriving digital economy. As of June 2021, there were 50,000 recognized startups in India contributing nearly 5.5 lakh of jobs.

India has become one of the hottest FDI destinations in the world, with a total FDI inflow of USD 319 billion from 2014 to 2019, about 50% of the total FDI inflows of the past 20 years. Furthermore, FDI inflow in the first 4 months of FY 2021-22 was around $27.37 billion indicating that the world is now seeing India’s growth potential, which in turn would help build an infrastructure-driven economy in the years to come.

Overall, the government has made drastic changes in the way the Indian economy used to operate and some of the positive impact is already visible, and it can certainly be said that the best is yet to come in the form of new & follow the structural reforms in the next budget of February 1, 2022.

(Dr. Aman Chugh is a qualified Chartered Accountant and is a well-known name in financial markets, portfolio management and derivatives. Opinions are personal.)

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