Indian of a stable political regime and a

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Last updated: March 23, 2019

Indianeconomy has continued to witness a sustained period of growth since the widelyacclaimed economic liberalization of the country in 1991.

While the countrymight have gained its hard fought political freedom in 1947, India trulyemerged from the shackles of stifling bureaucracy and let loose the reigns ofeconomic development in 1991. With the opening up of key sectors to foreigninvestment and end of license raj, Indian growth story has continued to capturethe imagination of leading economists. Today,in the wake of a stable political regime and a host of economic reforms, itcomes as no surprise that leading institutions such as HSBC and Morgan Stanley arepegging India to become the third largest economy in the next 10 years while Fitchestimates India’s GDP growth to be the highest among ten major emergingeconomies.  Thisoptimistic view is a result of a host of reforms undertaken by the presentgovernment to infuse foreign investment, restructure public debt, widen taxbase, increase spending on public infrastructure, bring in efficient taxreforms (GST) and revive manufacturing. The combined effect of these reforms isexpected to offset the temporary hiccups faced as a result of demonetizationand GST, and is likely to result in a growth of 7-8% in the next five years.

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 Encouragingforeign InvestmentAstable political setup that rides on the promise of sustained growth of acountry is closely tied to how well a country can achieve its developmenttargets. India is no exception to this rule and is favorably placed with astable political regime that won with an absolute majority since 1984 electionsand started the “Make in India” campaign. This initiative, targeting bothmultinational and domestic companies to set up manufacturing units in India, isgeared towards encouraging in-flow of funds in the economy. In view of this,government has made sustained efforts to improve the business climate, whichhas resulted in improved ease of doing business. India’s ranking on “WorldBank ease of doing business report 2018” rose to 100 from130 in 2017. Thegovernment also recently liberalized rules for FDI in single brand retail,power exchanges and construction. InfusingCapital into PSBs to encourage lendingInrecent months, government has announced plans to infuse nearly Rs.

2 lakh crorecapital into PSBs over a period of next two years, a move that is likely to unlocklending for private investments and hence have a positive impact on India’sgrowth numbers.  Efficienttax reformsThemuch-awaited Goods & Services Tax (GST) was rolled out in July 2017 with aview to introduce a uniform tax system and expand tax base. This new system, asstated by IMF in its 2017 report, is expected to improve the businessenvironment fostering both employment and innovation. Though the country didunderwent initial hiccups with businesses trying to adjust to the new regime, GSTis likely to have a positive effect on India’s growth by brining many informalbusinesses under the purview of formal sector.

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