Revival of the central government′s reform agenda in response to the coronavirus pandemic shock has the potential to raise India′s medium-term growth rate, said Fitch Ratings on Friday.
In a report titled -- India′s reforms could support medium-term growth -- Fitch Ratings suggested there will be downside pressures to growth and said the process of reform in India "remained especially complex and implementation at times proved difficult". "Raising medium-term growth rates under these circumstances will require reforms to support investment and boost productivity," the report stated, adding that it will take time to assess whether the reforms are implemented effectively.
It said several reforms passed by the parliament since the pandemic set in which could lift medium-term growth prospects. The report noted that the agricultural reforms announced by the parliament could give more flexibility to the farmers to sell their produce.
"The agricultural reforms brought by the parliament to give farmers more flexibility to sell their produce is notable. Stripping out middlemen, as the reform allows, could improve farmer incomes while reducing consumer prices," it stated.
Commenting on the labour reforms introduced by the government, the report stated: "Their intent, among other things, is to improve worker access to social security, strengthen occupational safety requirements, speed up the resolution of labour disputes and ease migrant workers′ ability to move between states. In addition, employers will now only need prior state government approval for redundancies if they have over 300 workers, up from 100 previously and state governments may raise this threshold."
"These changes could support the formalisation of India′s labour market and improve its flexibility, with positive efficiency gains, but our assumption is that in practice their impact will be modest," the report read.