Reforms poised to put India on a strong, sustainable and inclusive growth path: OECD


India is projected to grow at 5.4% in FY2015 and 6.6% in FY2016


According to the OECD Economic Survey : India 2014, the Indian economy is coming out of some tough times in recent years, with a steep decline in growth, stubbornly high inflation and a wide current account deficit, but the situation is now improving. The report also highlighted that the Indian economy is showing signs of a turnaround and is expected to grow at 5.4% in current fiscal year, by 6.6% in 2015-16 and by 6.8% in 2016-17. New reforms, some of which are included in the package presented by Prime Minister Narendra Modi, need to be implemented to put the country on a path to strong, sustainable and inclusive growth.


The main findings of the Survey study are enumerated below:


¨       Improving the macroeconomic framework to support sustainable and inclusive growth: Activity has rebounded in 2014 and is projected to accelerate but the implementation of reforms is critical. The government efforts to simplify regulations and administrative procedures should enhance rule of law. Large energy and fertiliser subsidies and delays in passing key tax reforms constrain the public investment in physical and social infrastructure, including education and health, needed for long-term growth and lower inequalities.


¨       Raising employment and valued added from the manufacturing sector: The manufacturing sector could contribute more to income, export and employment growth. In recent years, structural bottlenecks have affected the manufacturing sector more than services. Labour and tax regulations are complex and raise cost of doing business above a certain size. Manufacturing firms therefore tend to be small and their productivity is low. Firms often cannot find employees with the right education and training. Frequent power outages, difficulty in acquiring land and poor transport infrastructure also make it difficult for firms to be competitive and reach new markets.


¨       Increasing female economic participation: Female economic participation is low, reducing growth and living standards. A host of factors constrain women in the labour market, including cultural norms, safety concerns, lack of child care and poor infrastructure. At the same time, high unemployment among educated women, revealed preference for work in surveys, and low net job creation point to demand problems.


¨       Improving health outcomes for all: Health outcomes have improved substantially but remain below countries at a similar level of development. Lack of access to a clean water supply, nutrition deficiencies and smoking all lower health but the recent initiative on sanitation should help. The low level of public resources invested in health, the lack of health care professionals, poor regulation of health services, large out-of-pocket payments and inequality in access to health care are serious issues, in particular for the poor and those living in rural areas and urban slums


The Key recommendations given by the Survey are enumerated below:


  1. The macroeconomic framework to support sustainable and inclusive growth

·         Implement flexible inflation targeting.

·         Pursue fiscal consolidation while avoiding one-off measures and cuts in growth enhancing spending.

·         Shift public spending away from energy subsidies towards investment in physical and social infrastructure. Implement a national value-added tax (GST) with only limited exemptions.

·         Strengthen bank supervision by early recognition of asset deterioration and stricter provisioning standards.


  1. Raising employment creation and valued added from the manufacturing sector

·         Reduce barriers to formal employment by introducing a simpler and more flexible labour law which does not discriminate by size of enterprise.

·         Continue improving access to education, especially at the secondary level, and better focus on the quality of education at all levels. Provide better and earlier vocational training.

·         In the infrastructure sector, impose clear timelines, rationalise documentation, and implement single-window clearance.

·         Continue improving the business environment and opening up the economy.


  1. Increasing female economic participation

·         Extend female quotas to state and national parliaments.

·         Further modernise labour laws to ensure equal work opportunities for women.

·         Enhance the implementation of gender-related laws.

·         Expand secondary and higher education for women and skills training for female entrepreneurs.


  1. Improving health outcomes for all

·         Increase public spending on health care with particular focus on preventive and primary care, especially in rural areas and urban slums.

·         Expand the number of health professionals and up-skill professionals located in rural areas.

·         Strengthen the management of public health care facilities and ensure that private facilities and their employees meet minimum quality standards.



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