The big bang has come

The big bang has come

Modi government has ushered in Reforms 3.0, which will lead to the creation of a new India.
Nearing the stroke of the midnight hour tonight, when India fulfils its tryst with GST in full measure, it is opportune (समयोचित) to highlight the big bang economic reforms that have been accomplished by the NDA government. In these three years the NDA government has unleashed (शुरू किया) Reforms 3.0, which follow Reforms 1.0 (the liberalisation of 1991 set into motion by PM Narasimha Rao's government) and Reforms 2.0 (the sweeping reforms from 1998-2004 undertaken by PM Vajpayee's government).
Reforms 3.0 have already transformed (तब्दील किया) five macro aspects of the Indian economy and there is more to come in the reforms pipeline. Bill Gates often quotes Amara's law about technological change: we tend to overestimate its impact in the short run and underestimate it in the long term. And so it is with Reforms 3.0. Reforms 3.0 are dramatically transforming India's economy and in the long term will position it to be a globally competitive, innovation-driven economy. Six structural reforms have already been accomplished (पूरा किया) : (1) ending discretionary (विवेकाधीन) allocations of public resources; (2) massive formalisation of the economy; (3) sweeping (व्यापक) changes in India's fiscal policies; (4) an entirely new method for setting monetary policy; (5) moving from a bank-led to a more equity-led financing approach; and (6) a revolutionary set of social security programmes. Each of these is a macro-level change impacting virtually all sectors and industries.
Discretionary allocations of public resources have bedevilled (सताया हुआ) the Indian economy leading to major excesses of crony capitalism. Bank loans, spectrum, land, coal blocks, major construction contracts, bilateral seat rights ¬ in the past these public resources have been awarded in an opaque manner, which has led to allegations that some players have been favoured over others. Early in its tenure, the NDA government ended all discretionary allocations of public resources and ensured that these resources were auctioned off in a transparent manner to maximise public welfare. As a result, MNC confidence has dramatically increased and there has been a huge increase in FDI.
GST, demonetisation and digital payments will greatly assist in formalising India's economy. Digital invoicing for GST will ensure accurate matching of revenues and expenses across the entire supply chain. This is being mediated and made much easier through the wide-ranging digital payments infrastructure established through the India Stack which builds on Aadhaar and UPI. Formalisation (औपचारिक) means (a) tax collections go up and more resources are available to the state; (b) friction in the economy goes down boosting noninflationary growth; and (c) citizens are able to establish credit more effectively as transaction records and financial activities are digitised.
In three years, fiscal architecture has been utterly (सरासर) transformed with bottom-up development and accountability prioritised. Untied monies (ranging from Rs 15 to 25 lakh per panchayat per year) now directly reach the panchayat level, which enables mukhiyas and pradhans to carry out all minor works that are needed at the village level such as building roads, bridges, wells and community facilities. The Planning Commission, Five Year Plans, and many central schemes have been abolished so that the states can put money to work towards their specific priorities.
By fully accepting the 14th Finance Commission's recommendations, the Centre is now transferring 42% of fiscal resources in an untied fashion to states. Finally, through GST the indirect tax structure has been completely transformed: 17 central and state taxes have been consolidated into just one uniform tax.
RBI now has a singular focus: maintaining consumer price inflation (CPI) in a tight band of 4% +2%. Inflation targeting frees up RBI from multiple, sometimes conflicting, objectives of maintaining currency stability, promoting growth and reducing unemployment. This change has already had a massive impact with CPI dropping from double digits during the UPA to below 4% now. As our monetary policy becomes more predictable, the rupee has stabilised and both debt and equity foreign fund flows have surged (बढ़ा) .
Several policy changes are fostering a more equity-led financing approach for India's companies. New equity financing channels have been opened up and the cost of equity financing brought down; paradoxically (विरोधाभास से) , this has also brought down the cost of debt financing because creditors are now assured of higher levels of equity financing. Alternative investments have been opened up by providing clear tax pass-through, capital market regulations have been streamlined, there has been a clampdown on the usage of participatory notes, long-term pension fund money is now being invested in the equity market through NPS and EPFO. With bankruptcy and insolvency law rebalancing promoter and creditor rights and masala bonds providing new financing options, debt financing is becoming less risky and cheaper.
The central government is also leveraging its budgetary resources better: rather than just offering grants, it has equity financed new institutions that support infrastructure (National Investments and Infrastructure Fund), irrigation (Long Term Infrastructure Fund), education (Higher Education Financing Authority) and start-ups (India Aspiration Fund).
The Jan Dhan, Aadhaar, Mobile (JAM) trinity is powering a revolution in Direct Benefit Transfer (DBT). Social security programmes such as the Ujjwala Yojana, MGNREGA payments, old age and widow pension, maternity support, life insurance and health coverage are now being provided through this DBT platform. Thousands of crores have been saved by weeding out ghost beneficiaries and cutting out middlemen. Over time, more programmes will be migrated to this platform establishing a robust safety net for deserving families.
These six big-bang structural reforms are positively impacting every Indian and have been hailed (स्वागत) by global experts. There is much more to come. The scale and scope of Reforms 3.0 will thus likely surpass the long-term impact of Reforms 1.0 and 2.0 and will truly enable us to build a New India.