Productivity and long term growth

Going for Growth 2014: India


Economic Policy Reforms 2014

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Going for Growth  |  Indicators of Product Market Regulation data tool

India has rebounded swiftly after the global economic crisis, but is experiencing a slowdown in economic growth since 2012. In order to maintain robust growth, India needs to address its infrastructure shortfalls, pervasive state control in business activities, and unequal access to quality education. It also needs to reconsider overly stringent labour regulations which hinder job creation in the formal sector and leave most workers with no formal labour contract and social coverage.

Previous Going for Growth recommendations include:

  • Increase the provision and efficiency of education services by enhancing teacher effectiveness and increasing teaching resources and autonomy in schools.   
  • Reduce the onerous dismissal restrictions applied to large firms in order to increase dynamism and formal employment in labour market.
  • Reduce barriers to foreign trade and investment by reducing foreign ownership restriction in various industries and pursuing common tariff rate among manufactured products.
  • Promote more effective infrastructure-related regulation by streamlining land acquisition process and reducing regulatory uncertainty to promote private investment.
  • Undertake wide-ranging financial sector reforms such as easing bank portfolio restriction and allowing greater participation of foreign investors in financial services sector.

Actions Taken: Notable reforms in these areas over the past two years include:

  • Addressing the infrastructure bottleneck: a cabinet committee focusing on speeding up the approval of large infrastructure projects was appointed. The reform of land acquisition law reduces uncertainty associated for investors by setting clear compensation guidelines and by lowering the required threshold of consent from people to be displaced.
  • FDI restrictions have been relieved in various sectors, including in multi-brand retail and civil aviation.

The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, rebalancing the current account and reducing income inequality). In the case of India, a more inclusive education system would help reducing severe poverty and inequality, while labour market reform would help reduce informality.


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