The one thing the government can and should do is to get the goods and services tax off the ground. This alone can add close to two per cent to GDP growth.
With the Reserve Bank’s mid-review of key policy rates due next week, there is a growing clamour for a cut in interest rates.
This is more so as growth impulses in the economy remain weak and the Asian Development Bank and foreign brokerage houses are all predicting that growth will be below six per cent in 2012-13. It is hard to imagine that a quarter or even half per cent interest rate cut will spur investment as trade and business outfits imply. It may just boost sentiments for a day or two, and then it will be back to square one till at least the next big credit policy announcement in January.
The government’s recent success in winning the endorsement of both Houses of Parliament on allowing foreign direct investment in multi-brand retail has raised hopes of further reforms going through. A former RBI governor has said many bills now pending in Parliament are not critical to economic growth. This is true, except for the land reforms bill that will, one way or another, decide the criteria on how land should be allotted for “development”, and also perhaps the insurance bill.
The one thing the government can and should do is to get the goods and services tax off the ground. This alone can add close to two per cent to GDP growth. If the government had shown the same grit and determination as it did to get FDI through in Parliament despite the opposition of so many parties, there is no reason why it cannot get GST through after all these months and years. Perhaps Kamal Nath, now the UPA’s most efficient negotiator, should be put on the job immediately. The head of the GST committee has repeatedly said the few remaining reservations can easily be dealt with. So what holds the government back?
Another issue that can be tackled without Opposition aid is to get key power and infrastructure projects going. But putting off formation of the National Investment Board shows the government is not all that serious about this. Several upright bureaucrats nowadays appear reluctant to fast-track vital pending projects as they fear this could invite vigilance attention or they might be accused of corruption. The various major scams that have seen top officials being sent to jail has unnerved the bureaucracy. That was expected and that’s why the NIB is important.
There can be no growth without investments, and high interest rates are not the only hurdle. If the government is really serious about taking decisions on long-pending issues, investments will begin to come in and spur growth.
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