Chief Economic Advisor (CEA) KV Subramanian on Friday said the Central government is taking steps to press on structural reforms to drive investment and growth cycle.
"For us to achieve a $ 5 trillion economy by 2025 and $ 10 trillion economy by 2030, we will have to press the pedal on structural reforms," said Subramanian while addressing an event of the Indian Economic Forum at the Constitution Club here.
"In the Economic Survey that we released in July this year, we laid out the strategic blueprint for us to become a $ 5 trillion economy by 2025 with special emphasis on investment and consumption," he said.
Stating that investment is the most important driving factor which drives growth and sets in motion the virtuous cycle, he said: "What has happened in the last three quarters that this virtuous cycle is not moving that fast and hence there is a need to look at structural reforms."
Subramanian further said that reduction of corporate tax rates is one step but there are other factors like simplification of legislation that governs the business environment, which will drive investment.
"We recognise that it is a risk/return tradeoff, which governs investment. This is the reason why that corporate tax was reduced. It is not the sufficient condition to increase investment so we need to look at other factors too," he said.
The CEA said that the Cabinet just approved the code on industrial relations. Up to this time, there were 40 odd legislations that governed these relations. This made compliance and enforcement difficult.
"The government has embarked upon the task to subsume these 40 odd legislations under four codes -- code on wages, code on industrial relations, code on occupational safety and code on social security," he added.
He further emphasised that legislation on bankruptcy and transparency has firmed up the business environment and will benefit in the long run.
"The government has brought in legislation on bankruptcy. Secondly, the Securities and Exchange Board of India (SEBI) has come up with a legislation a few days back that if a company has defaulted on its loans, it needs to reveal it to the exchanges. This is an important step. These deterrent measures will help the economy," said Subramanian.
"Overall, when these measures are taken together, the current system has enabled bringing in an environment to boost structural reforms which will have a positive impact on investments," he said.
India's economic growth slowed to 4.5 per cent in the July to September quarter from 7.1 per cent in the corresponding period of last year, the government data showed on Friday.
Earlier in the day, Subramanian expressed hope that the country's gross domestic product (GDP) is likely to pick up in the third quarter of the current financial.
"We are saying again that the fundamentals of the Indian economy continue to be strong. GDP is expected to pick in quarter three," he said.
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