World optimistic about India but expects speedy reforms: Hal S Scott

Q&A with Nomura Professor and Director of Program on International Financial Systems at Harvard Law School

Hal S Scott, Nomura Professor and Director of the Program on International Financial Systems (PIFS) at Harvard Law School, believes there is a lot of optimism globally about India. But, he insists the implementation of reforms process is needed to spur the growth further.

In an interview with Sanjay Jog, Professor Scott, who was in Mumbai to participate in a global meet, notes that India will benefit in the falling oil price.

Prime Minister Narendra Modi says India is poised for a quantum jump and the NDA rule has taken the country to the top of the global league. What is your take?

I think there is an optimism globally about India and it is reflected in change in leadership and unquestionable potential of India. We have example of China which changed its direction and succeeded.

There is tremendous potential in country that is largely untapped. There is lot more demand and supply, you got incredibly able population here. At the same time, there is lot of poverty but there is also incredible amount of talent in the country.

That talent can be put to work for the benefit of the people. The government needs to give an opportunity for those talented people to make money that is what Modi is doing and that is good for the people because that will spur economic growth.

Modi government is proceeding in the right direction to have more capitalism and less socialism. That is good for the Indian economy and the people at large. I am very optimistic about India's future. I strongly believe that India will become much more important player in the world economy.

What kind of reforms do you expect the government should push?

Modi needs to give more attention to basic infrastructure, legal systems, courts, red tape in the bureaucracy other wise his policies won't work.

Government is trying to unleash the market forces to help economic development in the country that is a good thing. Its move towards more capitalistic economy and I think rest of the world is optimistic as that will produce more growth in India. 

Attitude of the leadership is another key reform.

Modi election has been trigger in the change in the attitude. Global finance people see the potential of economic growth fuelled by more capitalism that's what actually China did. Same kind of thing can happen in India. You can follow the China model while having a democracy. Use of English which is international language of trade in India is a big positive.

While carrying out China what it first address the basic issues relating to redtapism, legal and court system and bureaucratic reforms. India needs to do it quickly.

Modi needs to further open up the financial sector by promoting more private sector participation. Bond market needs to be further opened up while restrictions be removed for equity markets.

India has been too dependent on state owned banks but Modi wants to promote private banks thats a big reform he has undertaken. Though reforms are being formulated they are not being implemented. He needs to implement those reforms. We however, need to see what happens. 

However, global investors complain about higher taxes and lack of consistency. What is your comment?

Tax rates especially corporate taxes will have to come down in India. It will spur the economic activity. There will be less revenue in short term but in longer term more revenue. There will be churn in the economic activity in the lower tax regime . Tax collection will in fact increase because you have higher level of economic activity. That is a good policy.

Will rapidly falling oil prices impact India's growth story?

In my view cheap oil is good for India. Business needs oil but have to pay less. This will increase profits. Take the example of automobile industry in India. People are buying more and more cars which ultimately produces more economic activity. Any country like India depending on importation of oil, decrease in prices is a good thing though it is bad for Saudi Arabia.