 "Judicial reforms for strengthening contract enforcement next focus: Sanyal")
Weak contract enforcement is the "single biggest hurdle" for economic growth and the Narendra Modi government will be focusing on legal and administrative reforms in the remainder of its term till 2024, a senior finance ministry official said on Thursday.
Despite the political resistance, the government has not "backed down" on the farm laws and "there is no choice" but to accept the changes which seek to dismantle inefficient systems, Principal Economic Advisor Sanjeev Sanyal said at a conference organised by a brokerage.
He also said introduction of the Direct Tax Code (DTC) is the only structural reform left among the major changes which the government wanted to initiate.
The economist-turned-policymaker said in the short run, the government is ready with "fiscal ammunition" to respond to any impact which can be caused by a third wave of the pandemic, if it comes.
On the legal issues, he said much of the work has to be done by the judiciary but the government will play its part, like it did in abolition of nine different tribunals over the last fortnight.
Speaking at the event by Elara Capital, Sanyal said it takes time for disposal of legal matters which makes contract enforcement difficult, and called it the "single biggest hurdle" for economic expansion.
Asked specifically if judicial reforms will be the key priority of the government, he said, "To some extent yes...we will now move into the next phase where we will begin to do things related to administrative reforms and judicial reforms, yes."
He added that the government will also be focusing on privatisation, adding that it is one thing to announce intentions and another do it.
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Despite the resistance, it will go forward with the asset monetisation plan, he noted.
On the farm laws, Sanyal said there is no sense in cultivating paddy in a region where the stubble left behind by the crop is not preferred by cattle as feed, and added that the age-old mandi architecture is serving as an incentive for the farmers of Punjab and Haryana to continue growing it.
"You will have to dismantle the market system so that you can have long-term contracts for tomatoes and onions because under the older system of laws, those are not encouraged. We need to dismantle this agriculture policy architecture, and we remain committed about that.
"We have introduced changes but there is political pushback. But people will have to eventually do it, there is no choice. We have not backed down on it, if you have not noticed," he said.
He further said demand is not a constraint for the system at present, but it is largely a supply-driven problem, citing difficulties in arranging containers and ships to serve exports demand and COVID-related restrictions on the hospitality sector as impediments for growth of the sector.
The macroeconomic situation is in "good nick" at this point of time and the country also does not have to fear events like taper tantrums or a potential downgrade of the sovereign rating, he asserted.
Growth in the second quarter will also be strong, Sanyal hoped, stressing that despite the reverses of the second wave, the economy could post a 20.1 per cent growth, albeit on a lower base.
The government will focus on infrastructure development and capital expenditure, and does not believe in 'helicopter money' where it showers money for spending, he said.