Fiscal rectitude, unsatiated consumption and demand and increasing urbanisation are among the three driving factors that would set India on the path towards becoming a middle income country in terms of per capita income, N K Singh, economist and co-chair of the G20 expert group on reforming multilateral development banks, said on Saturday. The chairman of the 15th Finance Commission, however, said that a lot more needs to be done on the reform agenda to achieve this goal.
“Rarely has India been in a position where the track record of macroeconomic stability and the coherence and congruence of monetary and fiscal policy is so favourable as today,” Singh said while underlining how becoming a middle income country is within the realms of possibility for India.
He said that the big infrastructure investments have yet to be made is another big opportunity for India, especially towards renewable technology.
He also said that much more needs to be done for harnessing orderly urbanisation, which has historically been a catalyst for growth.
“We need to do much more in terms of enhancing the competitive efficiency of our export sector by not falling prey excessively to protect industries. I think that the policies pursued have been very, very judicious,” Singh added.
He said that India had a complex federal polity and the fact that India is one of those rare countries, which is in a perennial election mode does not help the predictability of the governance metrics. “This is an issue on which some thinking has certainly commenced.”
Talking about the challenges that India needs to address, he stressed the need for ensuring the sanctity of contracts across governance. “People who invest do so on the basis of a certain predictable cost of return. And if that is reviewed in a fundamental way, it does not add to business confidence. So what are the mechanisms which can be put together to ensure an orderly transition even if the metrics of the governance changes?” Singh said.
He said that states which consistently adhere to improving the overall environment for private sector investment, and moving away from excessive dependence on public outlays should be recognised and rewarded.
On increasing India’s exports, Singh said that becoming a viable credible export nation should be one of the quest for India. “Our competitive advantage positions as well to be able to achieve this goal.”
Singh also said that in the long run he expects that India will occupy a much bigger space on FDI.
