It is a fact of economic policy-making in India that bold reforms only take place during difficult moments rather than in ideal conditions. "It is said India reforms only in crisis," former RBI Governor Raghuram Rajan wrote once. In 1991, the economic liberalisation drive by then Finance Minister Dr Manmohan Singh and then Prime Minister Narasimha Rao unleashed the latent animal spirits in the economy. Many economists say those developments would not have taken place without the debilitating balance-of-payment crisis at the time. Even the Atal Bihari Vajpayee administration's strategic sales of state-run companies such as ITDC and VSNL came at a time when the country was reeling under severe US sanctions, following the 1998 nuclear tests. India has once again lived up to reputation of using a crisis to reform itself.
The black-swan event of coronavirus outbreak pushed the global economy to its worst slowdown since the great recession of 1929, forcing India to impose a nationwide lockdown between late-March and May, leading to a huge jump in unemployment, exodus of migrant workers from cities, and collapse in private consumption and investment demand. Prime Minister Narendra Modi's government used the opportunity to drive wide-ranging reforms.
The government consolidated 44 labour laws into four codes under the Wage Code Bill, Industrial Relations Code 2020, Occupational Safety, Health & Working Conditions Code 2020 and Social Security Code 2020.
The new labour codes will facilitate industrial growth and ease of doing business. Employers will find it easier to get contract workers on board and the new laws make it mandatory for workers to give a 60-day notice to strike work across all industries, compared to a 4-6 weeks' notice required earlier. In a worker-friendly move, the new labour codes would cover workers across the organised, unorganised and self-employed sector, widen the social security net of ESIC and EPFO to include all workers and self-employed sector as well.
The government shouldered landmark agriculture reforms to end the monopoly of traders and free farmers from restrictions on sale of their agriculture produce. The three laws -- the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, the Farmers (Empowerment and Protection) Agreement on Price Assurance and the Farm Services Act and the Essential Commodities (Amendment) Act -- will allow farmers to sell their farm produce at a price of their own choosing and even outside their respective states, thereby leading to better rural incomes.
The entry of private players will also bring much-needed private investment into farming.
Production-Linked Incentive (PLI) Scheme
Sensing an unprecedented opportunity to transform the country into a manufacturing hub, in wake of China's aggression and the resultant desire of western companies to look beyond China, the Centre has given a renewed impetus to the Make-in-India programme.
The government has rolled out the production-linked incentive (PLI) scheme for 10 sectors, covering a wide gamut of products and technologies, to encourage the domestic manufacturing sector, promote exports and make the country an integral part of the global supply chain.
Foreign Direct Investment Reforms
The government increased FDI in defence manufacturing under the automatic route from 49 per cent to 74 per cent with the aim of promoting indigenisation of defence production under its Make-in-India initiative. It also amended existing consolidated FDI policy to restrict opportunistic acquisition of domestic companies.
Commercial mining of coal
The government opened up the mining sector to private players, effectively ending the state-owned Coal India's monopoly over mining and selling of coal. Finance Minister Nirmala Sitharaman, as part of the fourth set of announcements under the Rs 29.88 lakh-crore stimulus package for the coronavirus-battered economy, also announced auctioning of 500 mining blocks, including combined auctioning of bauxite and coal mineral blocks.