Reforms make it a Happy Indian Diwali

Indian Express has a special column by Vijay Kelkar, Advisor to Finance Minister, and Ajay Shah, Consultant, Dept of Economic Affairs, which traces the source of the optimism to the reforms that have been done in the past decade, and says that there is still a lot of work to be done.

Today we are at a point where we too can play this game, in terms of rapid growth in exports of both goods and services. Our entry is well timed, in being able to exploit the incipient massive growth in global services trade, based on computers and communications. Through this outlook for exports growth, we seem to be within sight of a big leap in development strategy.

When we look at all these changes, it appears clear this is not something superficial. It is not just the monsoon playing out right this year. It is crucial to ask: what caused these changes? In every element, the answer that comes back is: the reforms did it.

the answer to the Indian macroeconomic whodunit seems to be clear: the reforms did it. For many years, the reforms process was criticised as pain and no gain. The results are now manifestly visible.

These experiences have shown us India can execute far-reaching reforms, not just tinker at the margins of old institutional mechanisms and old ways of doing things.

We have tasted the fruits of these labours. We must now come together and put our shoulders behind similar far-reaching reforms in other areas.

There is plenty that remains to be done. We need to go through with a transformation of our income tax system, replacing the culture of exemptions by a simple, impersonal, fair tax system. We need to take control of our fiscal problems through improved tax collection and better focus on expenditures.

In the 1970s, India grew at 3.5 per cent per year, which meant that GDP doubled every 20 years. In the 1980s, we accelerated to 5.2 per cent per year. In the 1990s, we went up to six per cent.

What will we achieve in the coming decade? If we stay focused on executing fundamental change, eight per cent is certainly within reach. This will give us a doubling of GDP every 8.6 years!

I know Ajay Shah – he was a year senior to me from IIT-Mumbai, and then did a Ph. D from UCLA, before returing back to India. He is one of those rare people who shifted from industry to the government to bring about change from the inside, rather than just talking or writing about it. India needs more people like Ajay – in their hands, the government can be a very positive instrument of change.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.