New govt faces huge task of structural, financial sector reforms

With the country struggling through slowdown, the new UPA government will face the mammoth task of carrying out further structural and financial sector reforms, including those in infrastructure and insurance, economists say.

"The agenda of the government should be to kick-start infrastructure development as quickly as possible. The reforms in the financial sector like opening of the insurance sector for 49 per cent FDI should be carried out soon," Omkar Goswami, leading economist and chairman of CERG Advisory said.

A Bill to amend existing insurance laws was tabled last year in Rajya Sabha to raise the FDI cap from 26 per cent to 49 per cent. The bill was referred to the Parliamentary Standing Committee.

He said the prime minister should carry out the Bharat Nirman Programme and promote schemes like rural electrification and road building.

Elaborating on the immediate economic agenda for the new government, ICRIER Director Rajiv Kumar said the new government should now focus on structural reforms as they are needed to improve the economy of the country.

"There should be immediate governance, finance and investment and export reforms. The government should try to arrest the decline in export by focusing on export promotion," Kumar said.

Down for the sixth month in a row in March, exports could manage just 3.4 per cent rise to USD 168.7 billion in the entire 2008-09, failing to achieve even the truncated target of USD 175 billion.

Kumar added that the country also needs education reforms and the government should make participation of the private sector in the education sector much easier. At present, the private sector has to undergo too much of licensing, he said adding, these licensing requirements should be removed.

"There is a shortage of schools and this should addressed," he said.

Laying down the economic agenda for the new government, Mahesh Purohit, director Foundation for Public Economics and Policy Research said the government must ensure that fiscal deficit of the country, which is set to exceed 10 per cent in this fiscal, does not impact the economy.