New Delhi: India is in dire need of more reforms, particularly that can beat rigid land and labor laws and protectionist trade policies that have been hindering investment in India, according to World Bank.
Even though the government has made efforts to improve the ease of doing business, it’s going to take more than low corporate taxes to lure investors to India Bloomberg reported.
“What inhibits are restrictive regulations which affect its land, labor, logistics and also its policies which affect trade and goods and services,” said Aaditya Mattoo, an economist with the World Bank and co-author of the World Development Report 2020 on global value chains. That’s why the production that has relocated from China due to the trade war “has not gravitated toward India,” Bloomberg reported quoting him.
Companies operating in India have little flexibility in hiring and firing workers, while acquiring land is not easy. The labor laws are something Prime Minister Narendra Modi wants to address in new legislation as he ramps up reforms to bolster a slowing economy.
Mattoo said the trade war is weighing on growth prospects, and if increased global policy uncertainty curbs investment, India’s income and exports would both decline by about 1 percentage point.
Late October, even World Bank President David Malpass had said that reforms in land management and enforcing contracts could be the next big measures through which India can better its Ease of Doing Business ranking.
Malpass also added that India needs to provide adequate resources to commercial courts at the district level for judgments to flow faster. “Small claims courts are needed to help people enter into contracts which they know can be enforced,” he had said.