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Concern over slow pace of reforms

By K. T. Jagannathan

CHENNAI JULY 6. A just-released study on "Making Indian Manufacturing Globally Competitive" by well-known consultancy firm, Accenture, has warned that the country may see further erosion in its weak competitive position in view of the slow pace of reforms.

Dismayed that the "reforms are currently taking an inordinate amount of time," the study calls for a sense of urgency in implementation so as to avoid further weakening of India's competitive position.

The study basically underscores the need for the Government to set the tone for flexibility in the labour market, facilitate efficient resource allocation by correcting market distortions and ensure the availability of quality inputs at fair prices. It wants the Government to build a greater consensus on the need to attract FDI as a major source of additional capital investment. The Accenture study shows that reforms, be it in the infrastructure sector or financial field, should reduce operational cost, in particular, and capital cost, in general.

Significantly enough, the study has suggested that the Government should strive to reduce distortions between manufacturing and non-manufacturing activities so as to ensure market-determined deployment of factor resources across economic activities. In this context, it has suggested a common income tax and power tariff, irrespective of the nature of economic activity. It has also called for a reduction in preferential credit to priority sector and disparities in taxation of output. Even as it called for an overhaul of Industrial Disputes Act and Trade Union Act, the study sort of suggested a movement towards contract-based employment.

In such a scenario, a mechanism can be put in place to help workers protect their rights. The Government, ipso facto, will have a less role in such an arrangement. Nevertheless, it wants the Government to develop a mechanism that could facilitate labour swap between surplus and deficit regions.

Interestingly enough, the study suggests that there should be an increased accountability of financial institutions for performance. Basically, it wants the institutions to ensure their interests are in tact by facilitating industrial revamp within a specified period.

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