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HindustanTimes Fri,19 Sep 2014

Government makes gradual, tough changes to fix a sputtering economy

Gaurav Choudhury, Hindustan Times  New Delhi, September 02, 2014
First Published: 00:11 IST(2/9/2014) | Last Updated: 18:07 IST(2/9/2014)

No flashy dismantling of woodwork but a gradual hard dribble to the net is what the Narendra Modi-led NDA government has chosen to get India’s slowing economy find its goal of higher growth and more jobs.

That finance minister Arun Jaitley chose fiscal prudence over grand schemes in his maiden budget clearly brings out the fact that India’s economy needs an overhaul after sputtering over haywire prices, low investment and a precarious fiscal situation.

Jaitley reiterated the government’s commitment to walk the talk on fiscal discipline pledging to keep the fiscal deficit at 4.1% of GDP.

In the last 100 days, there was also bold reformist intent in his speech. The easing of foreign investment caps in the defence, railways and intent to open up the insurance sector, which have been hobbled by lack of capital, are signs of the government’s goal.

It has also laid out a roadmap for reforming India’s subsidy regime to make it more efficient.

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“Special emphasis on infrastructure projects was visible in the budget; funding norms have been eased; FDI has been liberalised and ‘Make in India’ (manufacturing) is the new mantra. The reforms being pushed by the BJP government in Rajasthan on Labour, Land and Subsidies do make for a strong start,” broking and research firm Macquarie Research said in a recent research report.

“What fell short of expectations was the delay in gas price hike, no commitment on timeline for GST and half measures on FDI in Defence,” the report said.

The government, however, is grappling with the key question of spinning jobs for millions.

During 2005-12 India added only 15 million jobs. This is in stark contrast to the previous period when between 1999 and 2005 an additional 60 million jobs were created. Both Modi and Jaitley have made small factories central to the plan of absorbing job aspirants.

The government has also repeatedly pencilled-in skill development as a key priority area in the government’s new development paradigm.

The decision to replace the Planning Commission with a new contemporary body also goes hand-in-hand with the objectives of converting India into a manufacturing hub by asking investors — domestic and foreign — to “Come, make in India”.

Acche din, it is obvious, will come only after good economics.

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