The Hindu : Front Page : Survey for bold steps to expedite labour reforms

Online edition of India's National Newspaper
Tuesday, Feb 28, 2006

Front Page

Front Page

Survey for bold steps to expedite labour reforms

Ashok Dasgupta

Calls for measures to boost the country's infrastructure to global standards

NEW DELHI: With the economy on a roll in the current fiscal, the Economic Survey 2005-06 advocates bold initiatives to expedite tax and labour reforms, while calling for measures to boost infrastructure to world-class standards so as to sustain and improve upon the high growth momentum.

Projecting a "moderate" inflation level in 2006-07 despite the surge in global oil prices, the Survey, tabled in Parliament by Finance Minister P. Chidambaram on the eve of the Union budget on Monday, however, cautions that there are certain risks such as hardening interest rates, higher inflation and fiscal deficit in the wake of the oil crisis.

In keeping with the policy prescriptions, Mr. Chidambaramgave the assurance that the deficits would be pruned as per the FRBM Act stipulations and the problems of oil price surge as also the upward pressure on interest rate dealt with.

On key infrastructure sectors such as power, which is plagued by peaking and energy shortages, the Survey warns that unless the attendant problems are tackled, moving on to a higher growth trajectory of 8-10 per cent will be difficult to achieve. On the fiscal side, it has prescribed that the industry be unburdened from the high level of taxes along with the "distortive exemptions," which tended to provide "perverse incentives."

The Survey calls for levying of user charges for various services rendered as also pruning of unwanted subsidies in various sectors.

It also favours simplification of tax administration, a pre-requisite for a transparent and hassle-free system.

Cautioning that "the danger of an unprecedented price increase was ever-present," the Survey, however, notes that the worry about growing imports and the burgeoning current account deficit is "somewhat misplaced." It is unlikely to pose a balance of payments problem.

Critical of the labour laws, the Survey says the "Indian labour laws are highly protective" and proposes drastic reforms, taking the cue from the Chinese enactments. Lauding the pick-up in farm sector growth, estimated at 2.3 per cent by the end of the current fiscal, the Survey argues for a further push in reforms along with improved credit flow. In particular, it lays stress on faster agricultural and rural development in horticulture, floriculture, organic farming, genetic engineering, food processing, branding, packaging and futures trading.