Reforms will pick up after 2014 general elections: Kaushik Basu

Acknowledging that economic reforms in India have slowed down and may remain that way till the next general elections in 2014, India's Chief Economic Advisor Kaushik Basu has said they will gather pace thereafter and from 2015 India will be among the world's fastest growing economies.

Relatively less important bills might go through Parliament but major economic reforms would hit the road block, Basu said, adding they are unlikely to happen before the next Parliamentary elections.

At the same time, he said there are some reforms that need to go into fast gear and identified the opening up of the retail sector as one key reform in waiting.

India, he said, also needs to address the issue of massive subsidy leakage and that of poor infrastructure.



The new government, if in majority, would start with the reforms in a big way because there is a sense that it needs to pick up, he added.

Basu said there is a slowdown in decision making.

The unearthing of a series of corruption and scams, he argued, is having its own impact on the psyche of the bureaucracy, who are not willing to take risks.

Reforms, he said, have also slowed down because of the coalition government. Another reason for the slowdown is the battle against inflation and drop in agricultural production.

India, he said, acted on both the fiscal and monetary policy. Finally, India too is impacted by the global economic slowdown.

"We are going through a difficult year," Basu said, adding that India is trying to go back to fiscal consolidation.

Basu has issued a statement clarifying his comments. He said, "As the Chief Economic Adviser I have often expressed opinions which are not necessarily that of the Ministry of Finance or of the Government of India. This is one of the strengths of India that it allows us to generate and discuss new ideas without the Government having to first endorse them."

He added: "At the Carnegie lecture the gist of my argument was that 2014 was an important year because numerous European banks would have to begin to repay 1.3 trillion dollars worth of loans that they had received from the European Central Bank.  This could precipitate a major global economic crisis-a third round of crisis after 2008 and 2011. I also asserted that despite India's current slowdown (growth in 2011-12 was 6.9%), we will see Indian growth picking up slowly initially. But soon after the possible European crisis of 2014, we could see India as the world's fastest growing economy, faster than even China."

"I mentioned also, as I have done several times in India, that, thanks to coalitional democracy, there is some slowdown in economic reforms and decision-making. I specifically mentioned that the problem with the GST reform was that the opposition realized this is a good reform. Therefore, it was reluctant to let it happen under the current regime. A single-party majority government would not face this problem. If there is a single-party majority in the next election, that will facilitate such reforms. I argued that some reforms, such as FDI in multi-brand retail, were likely to happen sooner because in principle they did not need the support of the opposition; and this will give a boost to the mood of the economy."