Speeding up of reform process is always good news to foreign investors and the domestic business is always happy if the government spending is increased. The proposed outline for pleasing two pressure groups and achieving higher growth rate is as follows:
To start with, the prime minister has promised that the amendments in the labor laws will be tabled in the winter session of the parliament. Economic reform and liberalization in India started in the mid-eighties and went into fast-forward mode in 1991. This included reduction in income tax, customs, excise duties, central government expenditure and deregulation of industry, banking, foreign exchange and foreign investment. One area left out was changes in the labor laws.
At present many activities are reserved for the small scale sector and this was standing in the way of multi-national from entering these. Mr. Vajpayee promised removal of reservations in small scale sector with export and employment generation potential. Stock market and financial sector reforms were put on the back burner for some time. The major reason for this was the government's failure to handle economic ministries and the resultant chaos. The prime minister was bold enough to announce speedy implementation of financial sector reforms; the question is his ability to walk the talk.
Other areas marked for immediate action are railways were the reform process is to be implemented at a fast pace. National Highway Development Project is to benefit from speedy implementation. Removing hurdles in the implementation of the major airport projects and tackling the legal hurdles in the construction sector are also included in the list of promises.
To monitor progress, a new monitoring mechanism under the ministry program implementation is to being set up. The Cabinet Secretary has been asked to prepare a blueprint for faster approval mechanism to cut downtime and cost overruns for all major projects.
On the face of it, the new initiative for the revival of the economy looks fine. But the present government, under the leadership of Mr. Vajpayee, has a very poor record of doing what they say. In last February, the government had come with a detailed blueprint for second generation economic reforms to fight slowdown in the economy. Six months have passed and there has been no action; instead the prime minister has announced another set of promises.
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