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India minister says economic reform a 'long journey'
[NEW DELHI] Reforming India's flagging economy will be a "long journey", the country's finance minister told foreign investors on Wednesday, playing down the prospects of "big-bang" changes.
Arun Jaitley warned there were no quick fixes for India's economic woes, telling delegates at the India World Economic Forum reform was not "really about one or two big-bang ideas".
Instead, the government would "consistently pursue the reform agenda and doggedly move in one direction", he said.
Critics have accused the right-wing government elected in May of lacking boldness in eliminating regulatory and bureaucratic hurdles to doing business as it seeks to attract crucial foreign investment.
The government has launched some reforms to overhaul byzantine labour rules in a bid to turn India into an industrial powerhouse like China to provide jobs for a burgeoning young workforce.
But these have been mostly low-level changes. The labour law amendments, for instance, are mainly to streamline procedures rather than to ease rigid hire-and-fire rules.
Mr Jaitley said he supported reform of complex land-acquisition laws, seen as a key barrier to building factories and spurring manufacturing vital to employing India's army of young job entrants.
But he set no timeline, and added he supported fat compensation payouts unpopular with business, terming past payments to landowners inadequate.
"Reform is the art of the possible," said Mr Jaitley, whose government has steered clear of more contentious reform proposals such as slashing massive welfare subsidies that could alienate voters.
"When you have 30 per cent of people below the poverty line, where you've large numbers at a bare subsistence level, it's far more challenging for a government to market reforms," he said.
Mr Jaitley said the government was open to privatising some loss-making state firms, calling this a "better alternative" to closing them.
He did not name any of the dozens of so-called "sick companies," some dating from the era of British colonial rule, but analysts question whether there is any investor appetite.
Foreign investors deserted the country in droves under the previous left-leaning Congress government, discouraged by a string of corruption scandals as well as India's notorious red tape.
But despite slow reforms, shares have touched record highs on investor hopes that the government will put the economy back on track for brisk growth.
"People have started looking again at India, which had fallen off the global radar... There's a certain amount of buzz," Mr Jaitley said.
But industry leaders said the government must act soon on election pledges to be more business-friendly.
"The pressure is on them to walk the talk, and see the talk becomes action," Anand Mahindra, managing director of outsourcing-to-tractor conglomerate Mahindra, told AFP.
The government is seeking to spur the economy, which expanded last year by a near-decade low of 4.7 per cent - half the scorching pace seen during India's boom a few years back.
Economists say eight-to-nine percent growth is a minimum needed to generate employment for millions of new job-seekers.
"India is looking like an oasis in a fairly dry landscape of (global) growth," said Harvard University economics professor Gita Gopinath.
But the government "can't escape some big-bang reforms," Ms Gopinath added. "These decisions must be taken sooner rather than later." AFP