Two major economic reforms finally get legislative
approval
Andy Mukherjee notes –
“Two major economic
reforms in India that have been pending for more than a decade were done over
just two days this week. First, New Delhi persuaded Mauritius to stop allowing
domestic Indian money from leaving the country and coming back in the garb of
tax-free foreign investment. Now, India's parliament has passed the
much-awaited bankruptcy code, finally embracing a modern solution to the twin
problems of corporate indebtedness and loan under-recoveries. Put the duo
together, and India should have the basic elements in place for a capital
market that's got less dodgy money and treats gains on capital equally,
regardless of whether the investors are locals or foreigners.”
RBI governor and former University of Chicago economist
Raghuram Rajan offers his insights on the Indian economy –
“In their efforts to stimulate demand by pursuing
increasingly aggressive monetary policies, advanced economies have been
imposing risks on emerging-market countries such as India. Indeed, one day we
face surging capital inflows, as investors go into “risk-on” mode, and outflows
the next as they switch risk off.
India has responded to this external volatility by
trying to create a domestic platform of macroeconomic stability on which to
build growth. India’s latest central budget emphasizes fiscal prudence, adheres
to past commitments, and aims at structural reforms, especially in agriculture.
Fiscal consolidation has also helped to keep the current-account deficit under
1% of GDP. Moreover, inflation has been brought within the official target
range. And parliament has created a monetary-policy committee for the Reserve
Bank of India (RBI), which should ensure that multiple views are embedded in
policy and improve continuity.”