The challenge of overcoming an extended crisis in our economy

Context: Governance obstacles between the intent of policy and its realization must be recognized and removed to kick-start growth.

Governance obstacles in the realisation of reforms/policy

•  Non-involvement of States: 

• The ambit of the 1991 reforms confined to just three ministries - finance, commerce and industry.

• States were not involved as land and labour reforms were untouched. 

• However, due to mutual interdependence, the situation is different now, which necessitates cooperation. 

• Issue with Centre-State Cooperation: Since the recent power sector reform would involve borrowings with the debt obligation falling on the states, states’ cooperation remains dicey.

• For E.g. UDAY aims at power sector reform, foundered at the last stages when states did not pursue the tariff restructuring needed.

• Inter-ministerial conflicts: can successfully kill reform initiatives. 

Government recent steps to kick start economy: 

• Garib Kalyan Rozgar Abhiyaan (outlay of ?50,000 crores) specifically targets reverse-migrant labour.

• MNREGA will receive an additional ?40,000 crore as a part of the Atmanirbhar programme.

• The present package does away with the binding rule while retaining its applicability to other types of asset creation.

• Performance-linked incentive mechanism for manufacturing (domestic production of electronics hardware, medical devices, active pharmaceutical ingredients). 
• Power sector initiative that will make good unpaid dues to independent power producers (?90,000 crores) and thereby provide the banking sector relief as well.

Way forward: 

• Center-state cooperation: MGNEREGA (New Package) and Power sector reform initiative requires state cooperation.  
• Resolving Inter-ministerial Conflict: It is necessary since the new Rozgar scheme’s budgetary allocation is originating from as many as 12 central ministries.