Productivity and long term growth

Going for Growth 2018 - India note

 

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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year -- in both advanced and emerging economies -- on policy priorities identified in the previous issue of Going for Growth.

Country highlights

GDP per capita is growing faster than in most other developed and developing countries, with labour productivity being the key driving force. However, the decline in labour force participation rates, mostly of women, has resulted in a negative contribution of employment. Absolute poverty has declined steadily but inequality remains high. Adding to high wealth and income inequality, there is a large rural/urban divide in access to key public services.
Creating more and better jobs should be a priority to make growth more inclusive. This requires simplifying and modernising labour laws. Access to secondary education should improve while the quality of primary education and training systems should be raised to equip job seekers with relevant qualifications and better match labour demand.

Going for Growth 2017 recommendations include:

  • Simplify and modernise labour laws to create more and better jobs for all by reducing barriers to formal employment further, with a simpler and more flexible labour law which does not discriminate by size of enterprise and by gender. Ease provisions requiring government approval to terminate employment contracts. 
  • Reduce administrative and regulatory burdens on companies by further simplifying administrative and regulatory procedures, imposing maximum timelines to regulatory approval processes and implementing one-stop-shops more widely. 
  • Enhance access to, and quality of, the education system by continuing improving access to education, especially at the secondary level; providing vocational training earlier in the cursus; and expanding secondary and higher education for women and skills training for female entrepreneurs. 
  • Undertake wide-ranging financial sector reforms by easing bank portfolio restrictions including gradually reducing the share of government bonds held by banks and establishing a plan to phase out priority lending. 
  • Improve infrastructure by reducing time and cost overruns in implementing large infrastructure projects. Ease land acquisition by reforming the land acquisition law and simplifying the regulatory approval process for environmental and other clearances and imposing clear timelines.

Recent policy actions in these areas include:

  • Administrative burdens have been significantly reduced with the implementation of the Goods and Services Tax.
  • Banks’ portfolio restrictions have been eased as the statutory liquidity ratio, requiring banks to hold a share of their portfolio in government bonds, has been reduced from 20.75% at the end of 2016 to 20% in July 2017.

India: Latest Economic Forecast 

India: Latest Economic Survey

 

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