In terms of growth, the Indian economy has been on a downward slide in the last few years. It wasn't a long time ago when the economy was growing at about 9% a year. Now those days, seem to be history. The reasons are not hard to find. Policy paralysis, a multitude of scams, high inflation, poor job creation, delayed project clearances, bureaucratic/judicial hurdles and high interest rates have all contributed to the mess. It appears that growth will pick up only after a new government is sworn in.
However, many of the problems facing the economy are structural in nature. They won't go away just because we have a new government in New Delhi. Problems like land and labor reforms, real estate regulation, disinvestment, energy security, pricing of various goods, services and commodities and agricultural reforms are all very serious and need to be urgently addressed. A clear long term vision will be needed to tackle these issues successfully.
According to an article in the Hindu Business Line, many of the long term problems plaguing the Indian economy can be solved by corporate investment. Employment is a case in point. The software sector has created large scale employment in the country. It has improved the standard of living of many people. However, corporates won't invest in the economy unless they are offered a better environment. Only far reaching reforms, in various sectors will be able to attract corporate investment. In addition to this, several structural reforms will also be required. These pertain to reforms in the bureaucracy, judiciary and electoral politics. Infrastructure will also have to be upgraded across the country to encourage investment.
While structural reforms and corporate investment are two important aspects of getting growth back on track, there are other aspects that deserve attention too. India has many problems that are unique to the country. Therefore blindly copying western economic policies may not be a good idea. India will have to develop its share of home grown solutions for its economic problems. Another aspect is the fiscal deficit of the central government. It has been observed globally that countries fail to grow at a fast pace for very long while running high deficits. In the case of India, while individual state governments have, by and large, managed to balance their budgets, the central government has fallen woefully short in this regard.