India's new government has pledged to pursue a broad economic reform agenda focused on creating jobs through a mixture of public and private investment. In his address to the Indian parliament on June 9, President Pranab Mukherjee said tackling food inflation and putting the economy back on track were the top priorities for the recently elected BJP-led government.
The president added Prime Minister Narendra Modi's administration would introduce a general sales tax, encourage foreign investment and speed up approvals for major business projects. Asia's third-largest economy has been growing at under five percent for the past two years, while inflation is running close to nine percent.
In a DW interview, Charan Singh, economist and Reserve Bank of India Chair Professor of Economics at the Bangalore-based Indian Institute of Management, says that if properly implemented, the reforms are set to increase economic growth to an annual rate of eight percent or more, potentially lifting millions of people out of poverty.
DW: What are the strong points of Narendra Modi's economic program?
Charan Singh: This is an ideal resolution made by a government which was brought to power with a thumping majority. The recently elected PM - who has been credited with driving Gujarat's economic growth as chief minister - is a man of experience. His no-nonsense attitude to reforms and governance is known to all.
The strength of the program lies in the fact that it is a well balanced approach, combining support for agriculture as well as large, medium, small and micro businesses, including tourism. It also focuses on good education, better job opportunities, better energy management and above all better infrastructure.
For instance, in a country which is still highly dependent on rain for its agriculture and drinking water, projects involving the harvesting of this rainwater and the linking of rivers to provide dry areas with water access are good suggestions. Better sanitation facilities and the provision of enhanced health care are also indicated in the reform plan.
India takes pride in the 5Ts - Tradition, Talent, Tourism, Trade, and Technology – illustratively, the application of which is enshrined in the new health policy under which the practice of yoga takes center stage.
What are the shortcomings of this reform plan?
This is a very exhaustive list of intended reforms. However, I would have considered a few more initiatives. For instance, I would have preferred more rivers to have been included into the river cleaning plan, in addition to the holy Ganges, especially in other parts of India.
Similarly, issues regarding universal pension, the right to food and housing could have been included. Furthermore, given the rich political mandate, a time-bound framework for a results-oriented approach would have been useful for monitoring.
In terms of economic development, would this plan put India back on the right track?
If, as planned, the government invests in roads, rivers and rail networks, establishes more centers of excellence in education and technology, India will be back on a strong track of economic development. India's GDP might be able to grow at a rate of more than eight percent if these measures are implemented as planned.
What will be the main challenges in terms of implementing this ambitious program?
The most important challenges will be the lack of infrastructure, installed capacity in industry, the lack of trained individuals, and inertia.
Will this program be able to deliver what it promises and lift millions of Indians out of poverty?
Certainly, the proper implementation of these reforms would place the country in a position to easily release millions from the cycle of poverty. Growth triggers, what late economist John Maynard Keynes described as "animal spirits," and the latest election results indicate that Indians are raring to deliver.
How do you think this program will be regarded by foreign investors?
Foreign investors will appreciate the reforms. The global economy is beginning to recover and India will contribute in it by actively participating in creating more demand for global products. With its rich demographics, India serves as a reservoir for immigration.
A well-trained and healthy workforce is useful for a recovering global economy. Also, a large and stable democratic country is an additional factor in a sensitive and fragile geo-political situation in South Asia.
Charan Singh is Reserve Bank of India Chair Professor at the faculty of economics and social sciences at the Indian Institute of Management in Bangalore.