'Only second generation reforms can tackle a slowing economy'

What should the upcoming budget’s priorities be? If you were to ask Dr Rana Kapoor, Founder, Managing Director and CEO, YES Bank, he would prefer to push for second generation reforms, increase investment in infrastructure, introduce Goods and service tax and rationalise revenue collection methods.

Push for second generation reforms

Second generation reforms would tackle the current crisis of a slowing economy and set the stage for strong growth in the next few decades.

The first generation of reforms in 1991 had pushed India to a high growth trajectory. The reforms marked an end to the licence raj era, opened up the economy to foreign investments, and introduced trade liberalisation and tax reforms. But Kapoor feels it’s time to look forward to new reforms.

Increased investment in infrastructure

With the investment rate falling particularly over the last three years from almost 34-35 percent to 30 percent, savings too have fallen, leading to lower capital formation. Kapoor says, with lower interest rates, market and business confidence should start restoring soon, reported Business Line .

“There is high expectations on infrastructure getting revived”, Kapoor said, adding that investment in infrastructure needs to be increased to compensate the lull it faced over the last one and a half years.

The increased infrastructure investments would provide further impetus to capital formation in other key sectors, including long-pending FDI liberalisation.

Introduce Goods and service tax

Kapoor feels tax sources must be increased to increase government’s revenue. “Goods and service taxes must be implemented,” he says. He also says direct tax code and other tax reforms must be implemented.

Rationalise revenue collection methods

According to the YES Bank CEO, rationalisation of revenue collection is another policy that the government must implement. To avoid the leakages in the government’s revenue that has increased over the last couple of years, Kapoor says there should be multiple methods to collect revenues.