Proposed Steps by NITI Aayog to Slow Economic Decline in India

The Indian economy has experienced periods of slowdown, characterised by reduced GDP growth, weakening private investment, financial‐sector stress and subdued consumption. In response, NITI Aayog — the National Institution for Transforming India — has put forward a series of strategic measures aimed at slowing the economic decline, revitalising investment sentiment and placing India back on a sustainable growth path.

Background

During recent years, India’s economic momentum slowed due to both cyclical and structural factors. Weak consumer demand, sluggish exports, liquidity constraints in the financial sector, and rising unemployment collectively contributed to a deceleration of growth. NITI Aayog, serving as the government’s premier policy think-tank, emphasised that these issues required a combination of immediate stabilisation steps and long-term structural reforms. The institution identified private investment revival, financial-sector repair, demand stimulation, and structural modernisation as the four central pillars of recovery.

Encouraging Private Investment

NITI Aayog considers private investment the key driver of long-term economic expansion. It has therefore proposed several measures to restore investor confidence and stimulate corporate activity:

• Policy clarity and stability: The government should provide consistent policies and avoid frequent regulatory changes that create uncertainty.
• Ease of doing business: Simplifying licensing, reducing compliance burdens and ensuring faster dispute resolution are essential to make India a more attractive investment destination.
• Public–private partnerships (PPP): Encouraging PPP models in infrastructure and manufacturing would allow shared risk and sustained capital inflows.
• Investor assurance: Clear contractual enforcement, transparent tax administration and predictable decision-making are seen as crucial to build confidence among domestic and foreign investors.

Financial Sector Stabilisation

Recognising the central role of financial institutions in economic activity, NITI Aayog has called for decisive action to address stress within the sector. The focus areas include:

• Reviving non-bank financial companies (NBFCs): Liquidity infusion, governance reforms and better risk-management practices are necessary to restore their lending capacity.
• Resolution of non-performing assets (NPAs): Accelerating bad-loan recovery through efficient mechanisms such as the Insolvency and Bankruptcy Code (IBC) can enhance credit availability.
• Bank recapitalisation: Strengthening public sector banks with adequate capital ensures they can meet credit demand from industries and consumers.
• Financial inclusion: Expanding credit access for micro, small and medium enterprises (MSMEs) and rural sectors supports employment and consumption growth.

Boosting Demand and Consumption

A sustained slowdown in private consumption has been one of the major contributors to weaker growth. NITI Aayog suggests stimulating demand through targeted fiscal and monetary interventions:

• Income support and welfare transfers: Expanding direct benefit schemes to rural households to improve purchasing power.
• Tax reforms: Rationalising personal income taxes and providing selective tax reliefs to enhance disposable income.
• Employment generation: Promoting labour-intensive manufacturing sectors such as textiles, food processing and construction can boost household earnings.
• Housing and infrastructure spending: Investments in affordable housing and public works create both employment and multiplier effects on demand.

Structural Reforms and Market Liberalisation

The Aayog maintains that structural bottlenecks in land, labour and infrastructure hinder competitiveness. To overcome these, it has proposed:

• Land and labour reforms: Simplifying land acquisition procedures and introducing flexible labour laws to attract large-scale manufacturing.
• Infrastructure improvement: Prioritising transport, power and logistics networks to lower the cost of production and support exports.
• Digitalisation and innovation: Encouraging the use of digital platforms and new technologies to increase productivity and governance efficiency.
• Foreign investment liberalisation: Opening more sectors to foreign direct investment (FDI) and integrating Indian production into global value chains.

Balanced and Inclusive Growth

NITI Aayog’s framework highlights that economic growth must be geographically and socially balanced. It advocates:

• Regional development: Focusing on underperforming states and districts through special packages and targeted incentives.
• Agricultural reforms: Modernising agriculture, promoting value-added processing and improving rural supply chains to raise farmers’ incomes.
• MSME empowerment: Enhancing access to credit, technology and markets for small enterprises to promote widespread job creation.
• Human capital development: Strengthening education, vocational training and healthcare to ensure long-term productivity gains.

Implications for the Economy

The successful implementation of these measures could produce a virtuous cycle of investment, production, income and consumption. Reviving private investment would expand capacity and job opportunities, while stabilising the financial sector would restore the normal flow of credit to businesses and households. Structural reforms would enhance competitiveness, enabling India to attract global investment and achieve sustained growth above 7 %.

Challenges and Criticism

Although NITI Aayog’s proposals are comprehensive, several challenges persist. Implementation capacity at both central and state levels remains uneven, and resistance from vested interests may slow reforms in sensitive areas such as land and labour. Fiscal constraints limit the government’s ability to provide large-scale stimulus, and excessive short-term spending risks inflationary pressure. Furthermore, the benefits of reforms typically materialise over time, requiring sustained political commitment and policy consistency.

Significance for India’s Growth Trajectory

The proposed steps are integral to India’s ambition of becoming a high-income economy while ensuring inclusivity and resilience. By prioritising investment, financial reform and broad-based development, NITI Aayog aims to create conditions conducive to sustained economic expansion. The emphasis on both immediate recovery and long-term structural transformation positions these recommendations as a blueprint for steady and inclusive national growth in the coming decade.