New Delhi: The Narendra Modi government faces the tough challenge of kick-starting the economy and creating millions of jobs, at a time when the external demand is subdued and domestic investment is yet to pick up.

With a million people joining the workforce every month and the growing pace of migration to cities, there will be challenges on multiple fronts, including sustainable urbanization, socioeconomic mobility, environmental degradation and infra deficit.

To discuss such challenges facing the Indian economy, the World Economic Forum (WEF) will organize a National Strategy Day on India, in collaboration with lobby group Confederation of Indian Industry (CII), on 3-4 November to set an agenda for sustainable development.

More than 250 national stakeholders and leaders from government, business and civil society will participate in a new, one-day format under the theme called Delivering Growth in the New Context, to be inaugurated by finance minister Arun Jaitley.

“Participants will deliberate on forces of change in India within the context of five of the World Economic Forum’s Global Challenges,including Agriculture and Food Security; Environment and Resource Security; Employment, Skills and Human Capital; Long-term Investing; Infrastructure and Urban Development; and Financial Inclusion," according to a WEF statement.

The significant slowdown in the Chinese economy, which has held back the prospects of a quick revival in global growth, has also impacted India’s growth outlook. Though India’s trade and investment exposure to China remains minimal, overall sheepish global demand scenario has had an impact on India’s merchandise as well as services exports.

India’s merchandise exports contracted for the 10th month in a row in September, cumulatively shrinking 18% to $134 billion in the first six months of the financial year.

India’s economy grew 7% in the first quarter of 2015-16.

The finance ministry expects it to pick up and grow in excess of 7.5%, even as most private and multilateral agencies have projected growth to be around or below 7.5%.

Standard and Poor’s (S&P) last month said while India’s growth is outperforming that of its peers and is picking up modestly, domestic supply-side factors will increasingly bind economic performance. “We note that the government has little ability to undertake counter-cyclical fiscal policy, given its current debt load," it added.

The World Bank also said in a report last week that a likely rise in oil prices, a drop in corporate tax rates and the burden of the Seventh Pay Commission will make it tough for government to stick to its fiscal consolidation roadmap starting 2016-17.

The centre has pledged to bring down fiscal deficit to 3.9% of gross domestic product (GDP) in 2015-16, and further to 3.5% and 3% in the next two years.

In such a scenario, analysts say that the government should undertake economic reforms at an accelerated pace to kick-start growth.

The World Bank in its report said a faster economic recovery hinges on the implementation of key reforms such as enacting the goods and services tax (GST), boosting the balance sheets of public-sector banks, rebooting the public-private partnership model, improving ease of doing business and amending laws on land acquisition and labour.

A. Subbarao, group chief financial officer of RPG Enterprises, said that the government should think about alternative sources for making land available to industry. “It is tough for the government to acquire fertile (agricultural) land for industry. There are several notified forest area where there is no forest. The government should make these lands available to the industry. Last, but not the least, it should implement GST as soon as possible," said Subbarao.

Firms are also looking forward to a simpler income-tax act and faster settlement of disputes. The promised revamp of the dispute resolution panels to ensure more non-partisan rulings could go a long way in stemming disputes.

They are also looking for some finality on the implications of retrospective amendments to tax laws. Promised amendments to the income-tax act at the earliest will help to finally bury the controversy over levy of a minimum alternate tax on foreign investors who do not have a place of permanent establishment in India.

With regards to transfer pricing, an area which has seen huge litigation, the twin impact of new computational methods and revamped administrative guidelines for handling of such cases should provide a reprieve to companies in the next round of transfer pricing audits.

Finance minister Jaitley has also promised to make Indian corporate tax rates more competitive. India proposes to lower corporate tax rates to 25% from 30% over the next five years.

To be sure, this will be accompanied by a corresponding phasing out of various exemptions that can also help in reducing the number of disputes.

On the indirect tax front, implementation of GST remains a key unfulfilled promise of the National Democratic Alliance.

With the constitution amendment awaiting legislative passage in the Rajya Sabha, the government’s roll-out date of 1 April 2016 is set to be missed. The government, however, can implement GST at the beginning of any month next year due to the transactional nature of the tax.

asit.m@livemint.com

P.R. Sanjai from Mumbai contributed to this story.

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