Economic Policy Reforms 2023

India

See more data for India on the related dashboard.

Product and labour markets functioning

Performance gaps

• Recent reforms reduce government participation in the finance sectors, allowing greater foreign participation in insurance, as well as defence, petroleum and natural gas, and telecoms. However, in the last few years private conglomerates have increased their role in the economy, with negative consequences for competition.

• Despite the reduction in non-performing loans and the creation of an asset reconstruction company (so-called ‘bad bank’), resolution procedures remain slow.

Recommendations

• Enhance resilience in the financial sector by accelerating the Insolvency and Bankruptcy Code process, managing nonperforming assets, and providing appropriate government’s supervision.

• Further promote structure reforms in the financial sector by reducing government ownership of banks and insurance companies.

• Further liberalise FDI by removing remaining restrictions and simplify the government approval system.

• Promote the creation of quality jobs by modernising labour regulations and skill development programmes.

Digital transition

Performance gaps

• Despite high mobile telephony penetration and the success of public policies promoting digitalisation of government services finance, education, and health, as well as delivery of social services, large digital divides persist by location, gender, age, income and wealth, and firm size.

Recommendations

• Enhance access to affordable and secure high-speed broadband networks and service in rural areas and for micro, small and medium enterprises (MSMEs), and poor households.

• Boost digital literacy and skills development through education and training, including among women and marginalised groups.

Inclusiveness, social protection, and ageing

Performance gaps

• Both monetary and multidimensional poverty rates have declined, at least before the pandemic. Inequality of opportunities and social protection remains a challenge, with migrant workers and women (notably widowers) being particularly vulnerable due to poor competencies and skills. The 2022 Right to Education Act introduced the obligation to provide free and compulsory education for all children from age 6 to 14, but actual coverage is lower and quality is lagging behind.

Recommendations

• Enhance social mobility by widening access to social services and infrastructure, especially ensuring equal access to high quality education to all children at least from 6 to 14 for the successful implementation.

Climate transition

Performance gaps

• India has committed to reduce greenhouse gas emissions and increase the share of renewable energy. Nonetheless, the energy mix is still highly dependent on fossil fuels and coal, the import bill has increased, and energy efficiency is low.

• Air pollution, extreme weather episodes, and droughts are becoming increasingly problematic.

Recommendations

• Further increase the share of renewable energy by facilitating long-term investment in clean energy development projects.

• Improve the performance of state-owned distribution companies (DISCOMs), so as to reduce the risks faced by private firms entering the renewable energy market to sell to DISCOMs.

• Incentivise private sectors to adopt more energy efficient and less carbon-intensive measures through carbon pricing, subsidies, technology dissemination, training, and capacity building.

• Provide additional government’s support to shift household cooking fuels from biomass-based to less-carbon intensive sources.

Overall performance