Renewed reform push: India must speed up its growth to meet challenges

In his 13th Independence-Day address from the Red Fort, Prime Minister Narendra Modi laid emphasis on fast-tracking reforms to accelerate the country’s growth trajectory as it confronts external challenges, not least from the war in West Asia. Mr Modi stated that reforms were not a compulsion or a buzzword for his government, but were born out of conviction. Towards that end, he invoked the Sapta Dhara, or seven streams, on which the government intended to focus to boost growth: Manufacturing; agriculture and food production; technology and innovation; seamless and fast connectivity; defence power; green and blue economy; and soft power. These are expected to help India become a trusted hub for global supply chains, safeguard its economy against emergent threats like cybersecurity and the disruptive impact of artificial intelligence, protect its biodiversity, and project its cultural power to the world.

 

There has been a noticeable sense of urgency in the government’s recent pronouncements, coming as they do against the backdrop of the increased global uncertainty triggered by the war in West Asia and the resultant energy price shock. As the finance ministry recently told the parliamentary standing committee on finance, the continuance of the conflict could exert pressure on economic activities this financial year, and if oil prices remain high, it could result in a higher fiscal deficit than the target of 4.3 per cent of gross domestic product. Besides, as Mr Modi highlighted in his speech, talk of globalisation has receded the world over and countries are increasingly weaponising the resources available to them: From crude oil, to critical minerals, to semiconductor chips. Given this situation, it is hoped that the Sapta Dhara can push India towards a higher growth trajectory. The focus on trade and manufacturing in the speech will hopefully lead to faster reforms in these areas. Notably, he also talked about the government’s welfare policies, including the fertiliser subsidy. Some of the expenditure in these areas needs to be rationalised.

 

That a significant portion of the speech is noteworthy. Given the context of the student protests, an ameliorative measure announced by the Prime Minister on Saturday was the provision of free coaching classes for those preparing for competitive exams. This is expected to lift the pressure of coaching classes and lessen the financial burden on households. To be sure, the government has undertaken other measures too, like setting up a task force headed by Infosys cofounder Nandan Nilekani to suggest reforms in the testing system. Providing free coaching classes could bring significant relief if a high standard is maintained, considering the increasing costs that parents incur to ensure their children stand a chance to succeed. However, this is not a lasting solution. The government must focus on strengthening primary and secondary education. To assuage the anxieties of the youth and children, the country must broaden the avenues for gainful employment available to them and reduce the unemployment rate among graduates. Of course, this cannot be the government’s duty alone, as Mr Modi pointed out, but it has to take the lead. Speeding up the “reforms express” through the Sapta Dhara could help accelerate the economy to the required growth rate that may answer some of these concerns.