Tackling recent economic slowdown

The Indian economy has been in a grip of worrying slowdown. The problems affecting the country include global economic uncertainties, specific structural reforms, lack of investment and emphasis on human capital.

Fixing the economy

The Government needs to allow the States more room and ability to spend money towards priorities such as education and urban infrastructure. The centre can discipline the states’ spending by investing in strengthening fiscal management and accounting systems rather than trying to punish or reward them on the basis of fiscal deficit targets.

The Centre may need many dimensions of openness. The government needs to do more to attract foreign investment by liberalising restrictions. There has been hostility towards trade measures supporting integration of domestic manufacturing with regional networks.

Progress on opening up higher education to domestic and foreign entrants can go a long way to address human capital gaps. A vital component of the education policy would be to create an institutional environment where foreign faculties can spend substantial period in India.
Another dimension of openness is looking to gather inputs on economic policy from an array of people with expertise. Currently, the government appears regressed.

The government also needs to focus on creation of robust infrastructure for digital communications. It implies the approach to building and improving communication networks. Currently the sector is plagued with inefficient government owned firms and predatory private sector entity. Public-private partnerships are required for investment. Policies need to be designed carefully to yield benefits to every part of the economy.

Topics: GS-III: Indian Economy Issues Relating to Planning