June 28, 2014
WE ARE ALL NEOCONOMISTS NOW:
New Hope for India (Martin Feldstein, 6/27/14, Project Syndicate)
Posted by Orrin Judd at June 28, 2014 7:18 AMThe newly elected prime minister, Narendra Modi, campaigned on a platform that promises to deliver to India as a whole the rapid growth in employment and income that the state of Gujarat achieved when he was its chief minister. Under Modi's leadership, Gujarat became a business-friendly state that expanded economic activity, and attracted business investment from both Indian and overseas companies.A remarkable feature of the recent election is that Modi's Bharatiya Janata Party (BJP) received an absolute majority in the national parliament, an almost unprecedented achievement in India. As a result, Modi will not have to compromise with the other national or regional parties to pursue his legislative agenda.Two key officials will help Modi manage his economic program. The new finance minister, Arun Jaitley, is an experienced political leader who served in ministerial positions in previous BJP governments. Jaitley is also known as a strategic thinker who is sympathetic to business interests. The head of the Reserve Bank of India (the central bank) will continue to be Raghuram Rajan, a distinguished economist who has already shown his desire to reduce India's near-double-digit annual inflation rate, and to reform some of the inherited counterproductive restrictions on the country's financial sector.The measures needed to stimulate economic growth will take time to implement and to produce results. But anyone who wants to see whether the new government is acting to achieve faster long-term growth should examine whether progress is being made in the following ten policy areas. [...]Tax reform. India's complex system of national and state sales taxes distorts domestic trade. Replacing these taxes with a national value-added tax and using revenue-sharing to the states has been long debated and should now be enacted.
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