By Rana Kapoor

The Narendra Modi government has entered its fourth year. Three years ago, the country was running the risk of a sovereign ratings downgrade (to junk status) that could have potentially snowballed into India’s isolation from global capital markets.

Today, the situation is rife with speculation about the possibility of a sovereign ratings upgrade. Avid investor interest is chasing India with its conspicuous arrival on the international high table, in the middle of a successful transformation of the economy from one of the ‘Fragile Five’ among the Brics economies in 2013 to a ‘Global Macro Hot Spot’ currently.

This transformation is a culmination of several decisive policy decisions taken by GoI over the last three years. Focusing squarely on the objective of economic plumbing, policymakers embraced the principle of festina lente — make haste slowly. In the process, over the last three years, GoI has touched upon various facets of reforms.

A key facet of these reforms has been the whole new ‘IDEA’ (International collaboration, Domestic reforms, Ease of doing business, Active consensus building) behind them.

International collaboration: Through determined policy engagements, this government is leveraging the diplomatic channels for enhancing trade and commercial linkages. In the process, it is carving out an active role for India on the geopolitical map.

-Domestic reforms with outcome orientation: Structural macro reforms like the goods and services tax (GST), Make in India, Skill India, fuel price deregulation and the re-contouring of the Fiscal Responsibility and Budget Management platform will pave way for boosting India’s potential GDP growth by at least 1.5 per cent in the medium term.

Ease of doing business: This was one of the first objectives of the new government. Various policies like GST, foreign direct investment (FDI) liberalisation and digitisation have been tailored around this theme. Also, the government has ensured that this trickles down at the state level through competitive fiscal federalism.

Active consensus building: Consensus on critical policies like GST, the Bankruptcy Code and FDI brings out the importance of political unison and the concept of ‘Team India’ in a meaningful manner.

Licence to Skill

The reform agenda has made considerable progress in the last three years. The next few years will see a laser focus on reviving private investments and boosting job creation. As programmes like Skill India take flight, we will see an impetus to employment, which will be key to reap the benefits of the demographic dividend that India is expected to enjoy until 2040.

Very soon, people born in the new millennium will start entering the labour force. Against the backdrop of the changing nature of jobs in a world that is currently at the crossroads of globalisation, Industrial Revolution 4.0 and protectionism, policy focus on boosting employment and nurturing micro, small and medium enterprises (MSMEs) as an extension of existing policies will yield the desired outcomes.

The NDA government is now in power in 16 states. Reforming labour laws should be accorded top priority. States like Rajasthan, Gujarat and Madhya Pradesh have already made abeginning with labour market flexibility. These initiatives trickle down to other states in order to bring out the best practices.

Further, states also need to amend archaic provisions in the Factories Amendment Bill, the Industrial Relations Code, and the Shops and Establishments Bill to synchronise it with the needs of a modern economy.

The MSMEs generate close to 45 per cent of the total industrial employment and are critical for the ground-level consummation of the ‘Make in India’ project. While GST will provide a shot in the arm, cluster-based development will further help MSMEs reap economies of scale.

Further, a specific focus financing for MSMEs through attractive corporate tax structures, and the building of a robust ratings and exchange trading culture, will go a long way in strengthening these enterprises.

Stand Up, for You’re Right

Vocational training under skill development is critical in a world where disruption and exponential change is the new paradigm. In addition, we should see the policy emphasis on DICE (Design, Innovation, Creativity & Entrepreneurship) getting further energised through the Stand-Up India and the Startup India programmes.

The economic energy in the existing team of policy architects is palpable and infectious. After renovating the house, the government is now ready to take the next leap. India took 31years to increase the size of its economy by 10 times to its current level of $2.3 trillion.

Now, armed with the four tectonic changes in the form of IDEA, India’s next phase of 10-fold transformation to a $20-trillion economy will take less than half the time.

(The writer is managing director, Yes Bank)