Mandate 2019 is for doing big, bold reforms: Sanjeev Sanyal

NEW DELHI: With great election victories come great expectations! That would be the burden on Prime Minister Narendra Modi’s shoulder when he starts his second innings next week.

Economists and political pundits point out that beyond the euphoria of election victory lies a minefield full of challenges for the new government and it has nobody to blame but itself for all of those.

The economy is slowing and the government needs to quickly do something to remove the bottlenecks in order to be able to fulfil the hopes and aspirations of the voting public.

Add to that the agrarian distress and unemployment, and Modi’s palate would look full. These are the areas that require immediate attention from the new government.

The election verdict is “certainly is a very emphatic affirmation of faith in the leadership of Prime Minister Narendra Modi. But the fact of the matter is that it is also a mandate for doing big, bold reforms," said Sanjeev Sanyal, Principal Economic Adviser to the Finance Ministry.

He identified demand slowdown as the biggest challenge.

“There has been a slowdown in demand. So we need to think about this. The good news is there is a fair amount of leeway and things we can do, because inflation is well controlled and with a clear political mandate, we should be able to deal with it," Sanyal told ETNOW.

Asked if this slowdown warrants a fiscal stimulus for the economy, Sanyal said: “This may be a good time to do serious structural reforms.”

There may be things to be done on the fiscal side and the government will take a call on it, he added.

The tightness in liquidity has been a major concern for the financial sector and Sanyal thinks the NBFC sector needs to be regulated better.

“There is a case for paying more attention to regulating the NBFC sector, without overdoing it. Because the NBFC sector does fill certain spaces that the regular banks do not. Their asset-liability mismatch issues, especially when they become systemically large, do need to be supervised much more tightly,” he said.

The Modi government's first term saw some remarkable developments, including GST implementation, introduction of the Insolvency and Bankruptcy Code besides efforts to ensure macroeconomic stability.

Exports and private investment are expected to be in focus in the second term. “The next five years should be about the emphasis on growth, particularly driven by exports and private investment,” Sanyal said.

Economists think the government has the opportunity to initiate reforms right from the new budget.

A plan to kickstart private investment and stimulate demand has already been drawn up, as the incoming administration gets ready to present the full budget in July.