How to save the Indian Economy?

India’s growth story ever since de-regulation in 1991 has been both awe-inspiring and meteoric. The pace with which the Indian Economy went on to expand its GDP made the whole world take notice of India’s economic juggernaut. Within a period of decade’s post-globalization, India along with China was labeled as ‘superpowers’ in the making. However, two decades have now passed since the end of the infamous license raj system in India and things seem widely improved but the year 2011 saw a slight dip in the growth rate of India Inc. Analysts say that this down stride is not to be taken lightly and if India Inc intends to keep the cash registers rolling they have to take certain drastic measures or else the alphabet ‘I’ will most commonly refer to Indonesia instead of India on the map of global economic affairs.
There are umpteen reasons behind the stalling or slowing down of the growth process in India. The first and the most evident one is policy paralysis or governance deficit. Leading industry players were the first ones who brought up this issue after an ample number of reformatory measures were put in the cold storage or on the backburner by the Government of India. It’s a world renowned fact that political instability leads to economic instability and India’s fractured polity doesn’t help the cause. Amidst a politically volatile environment, the over embattled Union Government of India has lost the appetite for reforms and a disrupting Opposition only adds to their woes. This problem of policy paralysis can be overcome only when all the stakeholders involved in the political spectrum of India rise above partisan politics and get back to the job of legislating. All parties need to be fully committed to getting the Indian Economy back on track and for this purpose; a broad consensus needs to be evolved among all the stakeholders on key reform issues.

Another major headache for the Indian Economy has been inflation or price rise. This has developed because of the imbalance in demand-supply proportions. Many a times, more of demand and less of supply escalates the price of commodities and items. Several corporations indulge in hoarding to artificially force the prices up in order to register higher profits. The Government needs to crackdown upon all those who indulge in hoarding to keep the prices in check. Secondly, the Government needs to build an investor friendly environment by doing away with complicated rules and regulations which promote red tape to pave the way for the entry of new firms in the industry to increase supply and to bring the spiraling prices down. The complex issue of the ever-growing fiscal deficit has also given sleepless nights to India’s economic policy makers. One of the solutions to the complex problem of fiscal deficit is by cutting down on various subsidies, be it food or petroleum. However, to enact this proposal the Government will need to muster a lot of courage as subsidies happen to be integral electoral issues in India and a reduction in them would mean a substantial vote swing away from the incumbent government.
A string of more problems faced by the Indian economy are primarily interrelated. They are the issuing of pink slips to employees, sharp fall in per capita income, foreign firms exiting the Indian market, etc. India needs to come up with landmark legislations to deal with these concerns. We need to open up the closed doors of promising Indian sectors like retail. This will bring in the necessary capital which will serve as a boost for the beleaguered Indian economy. The entry of foreign players into the market will also ensure hiring and some talented individuals are sure to meet the cut. The capital brought in by these firms will inject a fresh breath of life in the industry. This investment will be of high criticality and will save the economy from getting derailed. The entry of foreign players will also ensure the entry of better and more feasible technology. India is bound to benefit technologically by such measures. Overall the solution looks to be very simple on paper; open key enclosed sectors for foreign investment, they’ll bring in capital and technology, hire employees and will help in pushing up profits and per capita income. We also need to put a brake on the trend of foreign firms exiting India successively. This has been happening because of the lack of skilled labour in the industry. This concern needs to be tackled with a more holistic and far sighted approach. India needs to improve its education sector vastly and needs to inculcate technical know-how among all students attending the various temples of learning across the nation. This will improve the quality of students graduating from colleges and universities who in turn will turn out to be better skilled professionals in the field. But this is a long term measure and will require tons of patience.

Even though the year 2011 raised many critical questions for the Indian economy but the fact that the Indian growth story has ended eludes all aspects of truth. India is very much on the path towards inclusive growth and if we are able to resurrect certain faulty sectors within a feasible period of time, the Indian economy will very soon become an even more powerful force to reckon with.