“The main reform we need is the privatisation of banks, ” he said, adding that the country had in the last 20-25 years undergone through two cycles of non performance asset and then the government had to step in to clean up. “And each time we did the cleanup, we got the growth spurt,” he pointed.
The first cleanup happened under the Vajpayee government, and after that beginning in 2003-04, we began to grow about 8% in real terms, he said, adding that a lot of the macro reforms and micro reforms were done, but the banks by then had been in very good shape. “Private banks were okay even if they got a little bit of these NPA’s and they took care of it themselves,” he said, point out that the government did not have to invest taxpayers’ money. “I think it is a very important part of the reform that’s required, ” he said. He also emphasised the need to give more space to the private sector in the economy. “In spite of the expansion of the private sector, the overall economic activity in manufacturing remains heavily in the public sector,” Panagariya said at launch of ‘India@100’, a book authored by K V Subramanian, Executive Director, International Monetary Fund (IMF) organised by FICCI. “And the capital is not being efficiently used by the public sector,” added Panagariya.
Panagariya said that among factor market reforms, which includes land, labour and capital, reform related to land was the most difficult to implement, but land acquisition has to be made easier in the country.
The four labour codes also need to be implemented for the Indian economy to grow rapidly. He said even if 4-5 states implemented these it will accelerate the growth of the Indian economy.