GST done, advisers bat for land, labour reforms

After the big-bang Goods and Services Tax reform, experts batted for increased thrust on process reforms with focus on ease of doing business and deregulation to put India on a sustainable high growth trajectory.

ET spoke to key policy advisers of the government and economists to get a sense of the reforms agenda. Their wish list included land and labour reforms, trade reforms, disinvestment and privatisation, judicial reforms, agriculture market reforms, end of inspector raj, rationalising ministries and decentralisation of financing with reforms going up to local bodies.

A senior government official, who spoke on the condition of anonymity, said all these reforms will lead to more efficiency, higher growth and employment, and hopefully towards achieving 2047 goals.


"While the list of reforms needed in the country is long, it is time we identify the low-hanging fruits as we aim towards ease of living for our people and ease of doing business," another official said, requesting not to be identified.

The Centre had last month set up two high-powered groups under Niti Aayog member Rajiv Gauba to prioritise the next-generation reforms in consultation with all stakeholders.

Prime Minister Narendra Modi, in his Independence Day address this year, underscored the need for next-generation reforms in the country.

Economists noted that India needs to push ahead with both domestic and trade reforms to unlock growth. The major hurdle identified was the pending measures to improve the ease of doing business and the high cost of doing business, which together restrict investment.

"The Industrial Disputes Act should be eliminated, not just diluted," said Laveesh Bhandari, president and senior fellow at the Centre for Social and Economic Progress (CSEP).

"Instead of protecting jobs, policy should protect worker consumption through employment or unemployment insurance, allowing firms greater flexibility in hiring without relying on contract or outsourced labour," he explained.

He further highlighted that land cost in India is very high and can be bypassed by building large, private industrial parks near demand centres, offering land and infrastructure at scale.

India's weak contract enforcement is another challenge that stems from judicial delays.

According to the World Bank Doing Business Survey, it takes 1,445 days on average to enforce a contract through courts in India.

Bhandari said tax authorities often reopen cases from 5-10 years ago, locking up future investment as firms hold funds in reserve; the tax regime must be simplified and litigation reduced.

Pranjul Bhandari, India chief economist at HSBC, noted that the new labour codes simplify complex laws into a few, but they haven't been notified, and that is crucial.

She said deregulation is crucial as setting up a business in India faces many supply and regulatory bottlenecks.

Experts also agreed that reforms cannot be one-size-fits-all and must extend to the state and local levels. She also emphasised the need to expand global capability centres (GCC) beyond metros to tier-2 cities, supported by dedicated special economic zones (SEZ) to boost IT exports. The government should also focus on disinvestment as it is a great way of raising fiscal revenue, noted Bhandari.

Pronab Sen, former chief statistician, said the focus of the reforms should be on micro, small and medium enterprises (MSMEs), and their issues can be sorted only at the state and local body levels as they face challenges unique to their region.

Sen also called for supporting MSMEs in skilling like done for the corporates.

On trade, HSBC's Bhandari recommended further lowering import tariff on intermediate inputs and greater openness to foreign direct investments (FDI), for example, from China, and fast-tracking trade deals with various countries.

India is actively pursuing 8-10 trade deals and reviewing the existing ones like the Asean-India Trade in Goods Agreement (AITIGA), ET reported earlier.