There’s a crying need for reforms to boost the pace of economic growth in India

Reserve Bank of India’s former Governor Raghuram Rajan has again warned that without the suitable aid of the much-needed reforms, the pace of economic growth is bound to slow down steeply. It is true, too. Without the right set of reforms and more of the political turmoil and infighting that always keeps happening in India, it is likely it’ll grow too slowly. However, the big question still remains as to how the country gets to that higher pace of reforms. Rajan, speaking at a Standard Chartered event in Singapore recently, said: “We have in place a Government that’s attempting those reforms. But unfortunately, perhaps because a consensus for those reforms hasn’t been reached widely, there is a lot of opposition and those reforms haven’t played out — for example, on agriculture these were effectively rolled back.” On November 19, following months of massive and nationwide protests by farmers to the three new farm laws, Prime Minister Narendra Modi announced that the Government would repeal them. Such ad hoc, kabhi haan, kabhi naa approach is bound to rattle the Government’s reforms agenda and depict it in a rather poor light in the eyes of the electorate.

While India’s GDP is estimated to have grown by 8.7 per cent in FY22, it was on the back of a low base, with the economy having contracted 6.6 per cent in FY21. Besides, growth is seen slowing down to 7.2 per cent in FY23 and closer to 6 per cent in the medium term. The former RBI boss, however, pointed out to the recent reports of bank privatisation and said the Government may not be done yet with reforms. “If that can be done reasonably, it offers an opportunity because the banking sector at this point, on net, is holding back the economy rather than propelling it. Credit growth has to be much stronger,” he added. But how is India seen abroad as an investment opportunity? Of course, it has a great deal of potential because of its young population and with a great need for infrastructure. However, a point of concern remains in terms of India’s ‘drag consumption’ which could in the long term mean that while India may be a $3-trillion economy, it is a long way from being a substitute for China, which is five times larger.