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Focus areas for the new government
Thu, 15 May Pre-Open

The general elections are over and if opinion polls are anything to go by, the country will have a stable government. This would be good news, as a clear majority would enable it to take the tough decisions needed to revive the economy quickly. Indeed the new government will have to hit the ground running as it were. It will have about a year to implement its agenda before its honeymoon period ends. So what should the key areas be that the next government should focus on?

As per the deputy chairman of the planning commission Montek Singh Ahluwalia, it should not be too difficult for the next government to get the GDP growth rate back up to 7-7.5%. This will be possible if it were to focus on reducing the fiscal deficit, improving the total investment to GDP ratio and rapidly rolling out the Goods and Services Tax (GST). These measures are crucial to improving the fundamentals of the economy as well as boosting investor sentiment.

It is true that a broad consensus has developed among political parties on these issues. Every party realizes that to overcome the economic slump that the country finds itself in, some hard choices will have to be made. For example, every party would like to win over the youth vote but this will be impossible without creating employment. But creating employment will mean that corporate investment will have to be brought back. This will be easier said than done. The new government will have no choice but to focus on several measures at the same time to boost growth. Merely focusing on a few measures will not be enough.

To conclude, we do not believe that it will be as easy as it is being made out to be, for the next government. It will have its task cut out from day one. Getting back to 7-7.5% GDP growth will require significant reforms, a reduction in the deficit as well as removing the bureaucratic hurdles that have impeded the economy over the last few years. It could be a while before GDP growth returns to levels above 7%.

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